Monday, April 9, 2018

Trading Crypto


In my experience, trading is hardest in chop and low intraday volatility in the established markets is a key reason trading is hard. Cryptocurrency trading, which has exploded in the past couple of years has high volatility and affords new opportunities to traders but also new dangers.

The biggest risk in crypto trading is custodial risk. Exchanges can get hacked and lose all your coins. There is usually little recourse if this happens. Second, most of the platforms are substandard in performance, so when there is a huge volume, you may not be able to get your order in. There is also liquidity and slippage risk but that should not be unfamiliar to traders of CL futures.

However, opportunities are big. You can trade tiny size in some instruments and since fees are percentage based, it makes it very affordable to learn trading.

Technical analysis is a lot more simplified in a highly volatile 24x7 market. Many traders can simply switch to daily charts and trade small size with huge stops. Daily and hourly charts give higher quality signals and can be held for a larger duration. Moves are typically large and even with less than 50% of correct calls, you can do well with disciplined trading.

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