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Playing Crypto Currencies Like Stocks

Introduction

Ever since Bitcoin has made it in to the spotlight, tons of people have been jumping on to the crypto currency train, usually in the hopes of making some quick cash with little to no work. While some have made this work out for them, the vast majority of people getting involved are not getting very far, or at least not far enough for it to matter. People need to face that we are no longer in the “early adopters” phase, although for all intents and purposes Bitcoin (and other currencies) are still somewhat in their infancy stage when it comes to the big picture.

Because the early adopter stage is already over, earning a lot of money off Bitcoins requires being a bit more involved in the community. In a sense, you can view the various crypto currencies as being like stocks. Each currency as a whole is like a company, and the coins are the stocks themselves. As such, the more you learn how to play the market, the more you can earn (much like in the real world). Through this article we are going to be looking at how to go about this, and how to get more involved with what is going on so you can gain more knowledge as to what the various currencies are doing and what their prospect is. Please note, however, that I am not going to be giving any investment advice; if you choose to invest in anything, that is all on your own. I am simply helping make you a more knowledgeable person when it comes to what is happening and what to expect.

Knowledge is Everything

You may have heard the statement before, “it is not about what you know, it is about who you know.” In the crypto world, this is somewhat true, although what you know means a lot more than who you know, being that most currencies are out in the public and are open source, so to speak. As such, you can easily find all the insider information right out in the open! There are a couple causes where this is not true, such as when people have planned “pumps” or “dumps,” but past that, the real meat of the information is easily found.

When I say that knowledge is everything, that is because when dealing with cryptos you are pretty much just competing with other people. While this may seem like a derogatory thing to say, that is exactly what it is. You are hoping that you can buy a stock (coin) for less than it is worth because someone does not know better, and that you can later on sell it for more than it is worth because someone does not know better. This is exactly the same thing that happens with stocks, though, so do not feel bad about it!

Keeping Up With News

If you want to maximize the potential value of your coins, you can not just throw money in to random ones (or mine random ones) in the hopes that they will eventually be worth something. Instead, you need to take a very active stance and become involved in the community. The more involved you are with the different coins, the more you will learn about them, what is going on with them and their direction. Along with this, it often allows you to have some direct input to help shape them differently in order to achieve maximum success. If you are invested in a coin because you think it is going places (or might), and then you help it become successful, you are increasing your own value at the same time. Often, this does not take too much time, either; even answering polls or throwing in input every once in a while can make a huge difference.

There are three places you want to be sure to hit up for news (although there are many more as well): exchanges, the official site and forums for the coin you are interested in, and forums like Bitcointalk. Let us go over why each of these are important separately.

Official Site and Forums

The official site and forums for your coin are important because they allow you to see what is happening from the developer and community side. Being that most, if not all, coins are open in their very nature, you can gather a massive wealth of information about what is being done to increase their value, what the developers need assistance with, any problems that are occurring, etc. While some of these things may not be of too much interest to you, there are some things to consider:

  • If a coin has a large following that is active in its progression, that is a great sign. This does not just include miners, either, but rather people that are willing to take the time to get the word out, enhance the coin's development, and other things to make it better
  • If a coin does not have official forums or a site, it is really iffy. I do not wish to put down any specific coin, because we should all know by now that just because there is not a single point of contact does not mean that a coin will not be successful. With that said, those that do have both of these things are often viewed as being more professional, so more people will trust them
  • If a coin does not have any active developers, it is probably not a good sign. Sometimes when a developer drops off a coin and then takes off, another person will take over and “fork” it in order to keep it alive and continue the development on their own. The problem with lack of developers is that crypto currencies are still pretty new, and every day new things are learned about them and new exploits arise. Not having a developer that can help counter the problems leads to disaster
  • An official site and forums is also a great way to keep up with news specifically about that one coin. It is much easier to find the related articles when others from the community are posting them, as opposed to having to keep sifting through news looking for stuff for a specific coin

As you can probably see, these two resources are very important. They help see what is going on from the inside, rather than just what is happening from the outside. Being able to see the direction and problems that a coin is going through will help immensely with making informed decisions on when to invest and divest.

Bitcointalk

While there are other forums out there, Bitcointalk is by far the most popular. These forums are important because they give information from the outside of the coin, rather than the inside. For example, the developers of a coin may think things are going great and that they are going to be very successful, but from the outsider point of view it could be the opposite. And as you can probably guess, a coin only has value if someone is willing to buy it; if outsiders dislike the idea, they will not invest and the coin will not go anywhere.

While you are able to put quite a bit of weight on a coin's success based on what you learn from these forums, there are some things to consider as well:

  • People are more prone to making posts when they are unhappy than when they are happy
  • One of the things many people in the community attempt to do is discredit people. This is not always a bad thing, though; there are tons of scams and such that are outed because people do their due diligence and warn everyone else before they get caught up in them
  • Most people making posts on these forums are not part of the coin's community, so they may not realize that they are sharing incorrect information (especially when it comes to recent changes)

The best thing to do when surfing the forums is to take everything you read with a grain of salt (it is the Internet, after all). At the same time, though, people will sometimes bring up great arguments for and against a coin that can help shape your opinion. Even if they do not change how you feel, they can change how other people feel, and it is important to keep in mind that you care not just about whether or not you think a coin has promise, but whether or not others do as well. You could think a coin is the best thing in the world, but if others are not following suit it will never have any value.

Exchanges

Exchanges give a piece of information you can not get from anywhere else: how much people are buying and selling the coins for. On the exchanges, you can easily see the prices people are willing to pay, how much is being requested, and the volumes of trades over a period of time. This lets you see the true value of the coins, although it leaves a lot of room for speculation.

The best way to utilize the exchanges is to look at the performance of coins relative to what is going on with them. For example, if you see an increase in value, you should be able to figure out why it is going up on the forums for that coin. If it is going down, there should be news related to that as well. This is important because you want to be aware of the various swings, which are going to happen regardless of how old the coin is or how successful it is. You want to be able to capitalize on these swings to increase your person holdings, and therefore also your worth.

Increasing Your Holdings (Worth)

Now that we have taken a look at where to get solid information on coins from, it is time to start looking at how to increase your holdings. This is the process of building up, via things like trading, in the hopes of coming out with more coins than you started off with. Keep in mind that there is always some risk here, regardless as to how confident you are in the information you have gathered. Things can go up or down at any point; your goal is to try your best to minimize that effect.

Holding

One of the ways to increase your worth is by holding coins. This requires nothing more than just investing in to some or mining them, followed by allowing them to sit safely in your wallet. What is important to realize here, though, is that while you are not risking the loss of the coins themselves, you are risking the value of them. Having a hundred coins worth nothing is still worth nothing.

To make this work for you, investing in coins that you think are going to go far should be the plan. You want to find cheap coins that are just starting to do something great, or are about to, as that will usually increase their value. Things like partnerships, new websites based on them, being added to exchanges and markets are all important and can all go a long way with their value. Of course, even with these things, the value could tank, though the chances are much lower.

What you do not want to do is buy in to a coin just because it is cheap, and then hold on to it in the hopes that at some point is obtains some value. While this has worked with a few coins in the past, it is a risky decision and really should be avoided. If nothing else, you need to be even more careful with how much time and effort you invest in to coins like this so that if they do tank, you have not lost everything.

Long Term Investing

If you want a way to invest with minimal time required, you can go for the long term. This is where you pick a coin that should be going up in value at some point, but not necessarily right now. Invest in to these and then hold on to them until they boost in value, then divest. This is a lot like the holding scenario, though with this you are doing due diligence first and are making informed decisions based on what the goals and direction of the coins are. For example, you may find that a coin supports projects you agree with, and that you think others will as well. These are what make the good investments.

It is important to realize that when we say long term investing, we do not mean a week or two. It could be months or even longer before the value goes anywhere. These are basically the investments where you try doing the “set it and forget it” method, where you invest in, then move on with your life and return later in the hopes that you have earned more than you put in. As such, you never want to put money in that you may need at some point; the short term value could go down and you do not want to divest at a loss just because some circumstance comes up that you were not prepared for.

Short Term Investing and Day Trading

Short term investing and day trading are where you make an investment prior to what you feel is going to be a jump in price, then hop back off as soon as it happens. This could be multiple times a day, and sometimes even multiple times per hour. Your goal here is not to pay attention to how much you earn off each individual trade, but rather how much you are increasing your worth over time. For example, you may only be earning a little bit from each trade, but if you are doing frequent trades you can make a decent amount of profit.

The big things to keep in mind here are:

  • If you rely on this, being very attentive to the market is important. You are looking for any swing that will lead to higher value, without getting yourself caught up in a downward one. It is very easy to lose all of your profit in a couple of bad trades. To make the most informed decisions, keep up with a few different coins (rather than all of them) and follow their news closely
  • Watch for the trading fees! While the fees are pretty low usually (around 0.2%), they will add up over time. When you factor in the fact that you are paying fees even on losses, you can probably see that these can be a problem. Never take a trade that will net you less than the fees in profit, or even just a little more (unless you are planning to divest completely). You can easily go through major losses, even though you “profit” on your theoretical trading

Making it Work for You

When dealing with these types of investments, you have to constantly evaluate the risk vs. reward. The more you are willing to risk, the more your potential reward is, but of course you could lose everything as a result as well. Usually investments will come in three different tiers (sometimes people will add more tiers that are mediums between these): low risk, medium risk and high risk. Each person is different in how much they are willing to risk and at what risk level they are willing to accept. What is more important than any of that is to realize that no matter how low risk your investments are, they are still risky! Never invest more than you can afford to lose, regardless as to how good the deal appears to be or how much of a “sure thing” it is. You never know what will happen until it does. With Bitcoin related things it is even more risky, as the governments are still trying to figure out what their involvement is, and businesses and such are still trying to find their place as well. While things look like they are still going up the hill (and down to a point) we have no idea what is around the next corner.

Conclusion

Through this article we looked at crypto currency investments and how you can make the most informed decisions on when (or even if) to invest and divest in them. We also looked at various warnings along the way, including the fact that there is no sure thing when it comes to them; anything that is invested could be lost at any point.

Should you choose to make investments in to coins, be sure to make the most informed decisions you can. Keep up with all the news you are able to and be sure that you have a strong feeling about one before you jump on it. Never make decisions right on the spot, as you need to thoroughly evaluate what you are doing, why, and what you are hoping will be the outcome from it. While all of this does not protect you a hundred percent from the risks involved, they help ensure that you understand what you are getting in to and help you make the best decisions you can.

Investing


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