This guide from the Coin Candy Group for cryptocurrency beginners provides you with the necessary information
to start to understand some fundamentals of the cryptocurrency space and the basic knowledge and know-how you need to start trading.
What are the origins of cryptocurrencies and which problems does it solve.
The main applications of cryptocurrencies and the blockchain.
Wallets, transactions and security measures.
How to start making money (trading) cryptocurrencies (Technical Analysis).
Disclaimer: Investing and trading cryptocurrencies is extremely risky, possibly even one of the most risky investments there are. Never invest money you need for your basic needs. Before you start trading profound research on a daily basis is of the utmost importance. This course only provides you with some guidelines. If you fail to keep your knowledge up-to-date your investment could go up in smoke without you even noticing it.
October 2008, an anonymous person calling himself Nakamoto publishes a paper on the website Metwdowd where he describes a procedure to wire money anonymously without the needs of a third party that is trusted by both parties (like a bank). This paper was called “Bitcoin: A peer-to-peer Electronic Cash System” of which you’ll find the original copy below. He’d worked two years on this code and after getting some positive feedback he created a website/community called Bitcoin.org where he started scouting people to realise this project. It took them another two years to get the project up and running and the first ‘transaction’ was made on the 3rd of January 2009 with a text file referring to the head of the New York Times of that day. This first block was called ‘the Genesis Block’ and all other transactions were going to be linked to this one becausen that’s how you know your teansaction belongs to the bitcoin chain (more on that later). This file was received and the bitcoin was born and Nakamoto disappeared from sight not much after that.
How does Bitcoin work?
If you buy bitcoin your broker (the one who sold you the Bitcoin for USD, EUR,...) will write your wallet amount in the massive public blockchain file called ‘the ledger’. If you want to make a transaction another party will check in this massive file if you own the amount of bitcoin you say you have by checking this first deposit transaction and if they can find it the transaction goes as planned. But this massive (re)search is not something you do yourself of cours. you ask someone with a super powerful computer (processor) to do the research for you and send the other party a confirmation. These researchers are called miners. In return for their computational power they’ll get a reward or fee: a tiny bit of bitcoin, the stuff they are ‘mining’ for.
Why does Bitcoin exist?
The main reason is that they wanted to take the power out of the hands of the middle man or banks who can choose your transaction time, cost,...
2. What are some uses off blockchain technology you should know of as cryptocurrency beginners?
Meanwhile there are numerous applications for the blockchain. They span from making payments to securing files and proving the authenticity of a document like a contract or so. Below you’ll find an overview of the currently most important blockchain projects categorised by their main purpose. As cryptocurrency beginners you will probably find your first coin in the list below because these are the most loved coins at the moment. Exciting right?
It’s an unavoidable topic for cryptocurrency beginners. When it comes to Initial Coin Offerings (ICO's) cryptocurrency beginners will find out soon enough that every idea you have exist in the form of an ICO. This is a way for companies to have you invest in their project based on a plan called the white paper they publish. If you want to you can buy the coins before they even get traded on platforms. It’s a bit like Kickstarter. But there is a lot of danger involved. If a coin makes it to the exchanges like Bittrex or Binance they have been thoroughly investigated and you can be sure they have somewhat of a decent concept. With an Initial Coin Offering, you get your tokens (or coins) from the makers themselves and you have to assess if it’s a decent project or not (and there are a lot of bad ones out there). So here are some guidelines cryptocurrency beginners have to check before considering buying an ICO.
What is the project doing, obviously. This means: read the white paper and stay critical about promises etc.
Find out if there isn’t a project that already does the same thing by researching their main features ?
When and how do you receive the tokens? (some do it in differents parts split over a period of time)
Is the Developers team (well) known? do a background check and check their twitter to see if they haven't spotted any impersonators trying to sell and ICO.
Check if the Social Media community approves the coin (Facebook reactions, Twitter retweets,...).
WARNING: NEVER DEPOSIT CURRENCIES FROM AN EXCHANGE TO AN ICO.
DO THIS ONLY VIA A WALLET OR FOLLOW THE INSTRUCTION GIVEN BY THE ICO
OTHERWISE YOU WILL NOT GET YOUR COINS.
Trading coins is the tactical exchange of stocks or coins when their value rises or drops to make profit out of these fluctuations.
As cryptocurrency beginners you might want to really understand the phenomenon that makes prices move so we'll explain it in a nutshell. Imaging a bowl with $99 in it. you put $1 in it. so you posses 1% of the money in the bowl. now others add money until there is $200 in it. Now here is the deal: as a stock contains the information about much you put in compared to the total at the time you bought it you still posses 1% of the total (now 1% of $200) and have $2 (a profit of +100% of your initial investment woohoo!).
3. Wallets, transactions and security measures for cryptocurrency beginners.
A wallet or exchange is a place to store (and sell and buy them in case of an exchange) your coins (money). You can store them in a wallet by inserting your wallet address or your coins exchange wallet address as the destination of your coins when buying from a broker or withdrawing from another exchange. But don't worry we'll walk cryptocurrency beginners trough that slowly because this went fast. You need an account on a wallet (a website or little program you instal on your pc) where you can store coins or you can make an account on an exchange (Binance.com and Bittrex.com are the ones we use most) that sells the coin you found in the list above and where you checked the functions of and now want to buy it (keeping them on exchanges is less safe then a wallet as they are vulnerable to hacks). Then you have to create an address by clicking somewhere next to it on the ‘deposit’ button in the exchanges wallet (look for 'wallet' or a list called something like 'your funds' which you have to give to your broker (a website that sells bitcoin) or insert in the other exchanges ‘withdrawal’ window to send coins back to wallet again (it's quite logical).
You can also store them outside of an online wallet, online software or exchange on a hardware walletwhich is the safest option out there (we recommend the NANO LEDGER S) follow instructions carefully when you use such or any wallet. The cryptocurrency beginners should always check for instructions an follow them carefully at each step. But you'll do fine with this course, don't worry! And don't hesitate to ask questions here at all times!
IMPORTANT NOTE: every coin can only do transactions on its own network.
This means that you CAN ONLY SEND bitcoin to a bitcoin wallet address.
If you fail to send your coins to an address on the same network THEY WILL BE LOST.
4. How to start trading cryptocurrencies as cryptocurrency beginners (Technical Analysis).
Go to the tradingview website www.tradingview.com or download their app (IOS only), this is one of the options out there.
First of all we want to clarify to cryptocurrency beginners and more advanced crypto traders that there is no guaranteed way to trade coins, there is always a risk involved and the only way Technical Analysis helps is to make you more comfortable with the moves you make which on its turn should keep fear from letting you make fast decisions based on small price fluctuations. Before you buy a coin you should go through the same quality checklist as with an ICO.
Let's get started!
IMPORTANT NOTE: every coin can only do transactions on its own network.
This means that you CAN ONLY SEND bitcoin to a bitcoin wallet address.
If you fail to send your coins to an address on the same network THEY WILL BE LOST !
(cryptocurrency beginners write this down!)
This is where it all starts for cryptocurrency beginners, so lets go! These are the smallest price indication elements of your chart (it can also be a line but we recommend setting it to candlesticks as these have some handy features hidden in the shape of a candlestick, we'll look at that in u future course). By setting a time frame at the top of your chart one candle stick will express the movement of the price within that time frame in some ingenious way. Look at the picture below: ‘open’ is the beginning of the chosen interval and ‘close’ the end. For instance you set the time frame to 1 hour (1h) each candle stick will represent an hour of the day and ‘open’ will be 1PM and ‘close’ will be 2PM (or 1:59:59 to be exact). The ‘higher-’ and ‘lower shadow’ will represent where the price has been within that hour. When the hour finishes you’ll see a colored bar in between the opening- and closing time of that candlestick called ‘the body’ and the shadows will be presented as little sticks on top and/or underneath the candlestick.
Relative Strength Index (RSI)
Now that we have seen the smallest elements of the chart it's time to zoom out until we see a good amount of the chart equally displayed on our screen, and start analysing!
As we can see we have the 4 hour-per-candlestick chart of Bitcoin (BTC) here and we added an indicator called RSI (to add this search for 'indicator button' in the top bar on the web browser page of tradingview or tap the three lines with dots on them on the top right corner on the mobile version and click on indicators, search “Relative Strength Index” and click on it once). This indicator will show you how fast a price is moving in comparison with their previous movements (we will spare you the exact formula). This means you get a clear view of when a price is moving relatively fast upwards or downwards. Now: a price that goes up fast means people that bough before this movement are making money and that they are going to sell to take their profits by selling (makes sense right?). If the RSI goes out of the purple box it’s in you can be sure so many people will sell that the price will start to go down in the near future if not directly. We call the is spontaneous change of direction in price due to people taking profits a ‘correction’.
The RSI breaking out of the bar is a moment to sell your stocks in many cases. NOTE: The same counts for the rsi breaking the bottom of the purple bar. Then a upward correction is probably going to happen in the near future. Buying a stock when RSI is low could make you cryptocurrency beginners some nice small profits (2-5%) on short term. don't forget to sell when in profit and don't get greedy with RSI, when the psi goes back in the purple box it can stabilise or go down again very quickly as it isn't going downwards relatively quick anymore now it has gone down!
Trendlines for cryptocurrency beginners
These are drawn lines used by cryptocurrency beginners or the biggest pros out there on a daily basis.
You can draw on your chart that connect at least twohighs of lows of your chart. They give you
a general sense of ‘the bottom’ (also called support) and ‘the roof’ (called resistance).
When a chart break trough these trend lines a big change is most probably going to happen as you can
see below. These are moments you should sell or buy stock/coin. (to see trends it’s important to take
a large timeframe like four hours or one day as seen below.
This is also an indicator cryptocurrency beginners and pros should definitely add to their chart. It will present itself as all those bars at the bottom of the charts seen here. These indicate the amount of transactions there has been within the candlestick right above it. A large amount of transactions means there is the possibility for the price to move. Without transactions the price will remain the same (get it?). A large peak in transactions could be an signal to buy a stock.
(using volume also needs a timeframe of at least one hour)
Prices often move in stair-like patterns as seen on the right here. This is because a game played between the buyers (also called bulls) and the sellers (called bears). The bulls who bought the support of a step sell to take their profit when it goes up a bit and then bears start selling until some bulls want to buy again because the price looks interesting,...
Support and Resistance.
these are some of the most used terms between traders and a must-know for cryptocurrency beginners:
when a price doesn’t want to go any higher because more people are selling then there are people buying
we call this the resistance and when more people start buying then there are people selling and
the price changes direction again this is called the support. If a support (sup) or resistance (res) is
reached it’s really common to see a support of resistance being touched a few times before it breaks out
of the horizontal line the tops of the price created there.
The price of a stock is controlled by humans and we as humans are emotional creatures. Cryptocurrency beginners get sad if they lose money and happy if they gain some. The picture on the right show a patterns that is found on every chart where you can see a clear rollercoaster of emotions. Try to recognise these big pictures by doing research of how much media attention there is on twitter or FB and compare it to the chart. check out if you get greedy to buy because ‘so many people made loads of money’ and see if people are telling it will never going down because then you are in the new paradigm phase and its about to go down.
5. Budget management
Last but not least: As seen with the market cycles we need to acknowledge we have feeling that tempt us to go where the situation benefits us best. This means that when we make money we tend to want to make more money and when we lose whe tend to try to make up for it by investing some more money to redeem our losses. This is why we urge you to never invest more than 5% of the money you can lose in cryptocurrencies and never add more until your budget allows it. Be aware of your emotions and make a financial plan before beginning to invest.
We hope we helped you on your way with the basics, you can always contact us to ask questions, we are available 24/7 on Telegram
You can now start our second course on trading called 'shapes and patters' where you'll find the most common shapes and patterns that you'll find in the graphs.
and we'd like to add that we have an awesome professional team that provides you with the latest information, news and insider information that tells you when and why they buy stocks/coins. This is a paid service but take your time to consider it, it's not a must at all! click here
Credits: Kenzo Voets, Coin Candy Team.
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