Monero trading for beginners doesn’t need to be intimidating. It’s true that dealing with cryptocurrencies is not as straightforward as buying and selling traditional assets like stocks, and it’s also true that some cryptos (as they’re often called) have experienced dramatic swings in price, but once you understand the basics you’ll be able to take part in Monero trading with confidence.
There’s no need to be put off by the technological nature of these assets either. You don’t need to be an expert on the underlying concepts to buy and sell them, any more than you need to be a metallurgist to trade in gold. It does help to know a little about them though, so just hang onto the basic concept of most cryptocurrencies, that they rely on a technology called Blockchain.
Blockchain is like a public ledger of every transaction that written in code and can’t be tampered with. It runs on computers all over the world, which means it doesn’t need a central controlling authority to oversee it. This was one of the major intentions behind the creation of cryptos, the notion that you could have a currency that wasn’t tied to any one country, or bank, in the same way that fiat currencies are. This new type of money would be independent of all the old influences.
As a Monero trader, you need to keep in mind that for all their advantages, cryptos aren’t yet legal tender in most countries. Still, that hasn’t stopped them from making a significant impact on the world of finance. They’re now an up and coming phenomenon that’s attracting more and more traders and investors, and the blockchain technology that underpins most of them is finding its way into areas as diverse as food supply chains and improved cybersecurity, too.
So, as we noted, crypto, and therefore Monero trading is not the same as Forex or Indices trading, and you’ll see that these new coins don’t respond to traditional influences. Being so new there are fewer correlating assets to affect price changes, and their decentralized nature also means that events like data releases, rate changes and political turmoil don’t affect them as much as they would fiat currencies. But crypto prices are influenced by events that have a direct impact on them, such as rumors of regulation, or disagreements about hard forks, so it’s good to remember that.
If you are scratching your head right now, a “hard fork” is a partial duplication of the currency, to create a new branch that has different features. These events happen when some members of the community disagree with the way the currency is going and want to send it in a new direction.
Other unwelcome news that can influence Monero trading includes hackers targeting cryptocurrency exchanges and revealing holes in their security, and rumors about potential crypto bans in certain countries.
There are a range of cryptocurrencies on the market, some better known than others and each with varying degrees of volatility.
Monero Trading for Beginners - The Privacy Coin
Monero trading has become popular because Monero is one of the top privacy coins. With other cryptos, it’s often possible to track who has been using them, but not so with this one. So, that’s why it’s popular; now let’s look at a Monero trading strategy or two.
We did an overview of the pump and dump trading strategy before, but Monero is not a short-term investment proposition. It’s one to hold onto as part of a diversified crypto portfolio because Monero trading is a long-term deal. Our society (and this applies to whichever country you live in) is continually adding more surveillance, so it’s a safe bet that privacy coins are going to be a big part of the future. It’s not hard to understand that with a global shift towards authoritarianism, privacy coins will always be in demand, and as demand grows, prices will rise, so your Monero trading strategy should be looking to the long-term.
Privacy coins like Monero allow both the senders and receivers of money to conduct their transactions anonymously, so nobody knows who they are or how much currency was sent.
Monero came out in 2014, so it’s reassuring to know that it is well established. Although Monero’s emphasis on privacy sets it apart from Bitcoin and others, it shares the same proof of work concept. Its codebase is based on the CryptoNote protocol though, and its mining algorithm is also different.
Many traders now rely on the Donchian Channel indicator, created by Richard Donchian in 1950 for traditional asset trading, it works just as well with cryptocurrencies. The Donchian Channel is very good for identifying trends and has proved itself over time. An upward trend is indicated when the price sits somewhere between the midline and the top, and a downward trend is evident when it’s between the midline and the bottom.
Monero Trading - Buy-Side Strategy
We think that the price should be trading between the middle and upper bands for 10 days in a row. That’s because before we can establish a new trend, we need to give the market time to develop so that we can be sure we have the right reading of what the price is doing.
Be aware that during this period the price shouldn’t drift below that central bank. Even if that should happen for just a short time, don’t set the trade up.
If you want to trade high probability setups, then the 10-candlestick rule matters a lot here.
Before going ahead with a trade, you need to know that one additional rule has been satisfied.
Inside the 10-day candlestick period, the price needs to consolidate within a range.
We also want all of its movements to stay within a tight rectangle.
When we see price consolidation or movement that’s limited to very precise trading ranges, this is usually telling us that those in the know are putting together their big positions. Naturally, we need to put this in the right context for a better idea of which way the breakout will go.
The rectangle pattern highlights the market’s never-ending battle between bull and bear. Used in the right way, the rectangle pattern helps us to see who has the upper hand, and once you’ve worked out who is on top at a given moment, it’s easier to anticipate the next swing wave.
When Monero satisfies our trading conditions and shows the same kind of rectangle pattern that often suggests a big shift is coming, we can go ahead and plan what the trigger condition for our entry strategy is going to be.
Another Monero Trading Strategy - Buy at the 11th Candlestick Opening Price
This next approach is fairly straightforward for the Monero trader. Just buy Monero coin at the market opening price at the 11th candlestick or wait and then buy when the price breaks above the rectangle resistance. This second approach is more conservative, but some Monero traders find this extra trade trigger to be reassuring.
Although Monero is currently trading below its all-time high, it’s still one of the top privacy cryptocurrencies and we think it’s still got potential. It won the industry accolade of Best Privacy Coin in 2017 and it still has much to offer despite competition from similar coins.
Where to Put Your Stop Loss
Stop losses are part of all sensible trading strategies, and they are just as important with Monero trading. Place your stop loss below the middle band of the Donchian Channel. If a bullish trend is developing, then the price shouldn’t pass below the middle band which is why this is such a good place to put your stop loss.
When to Cash Out
When you see the price dip and close under the middle Donchian band it’s time to take your profits. The middle band sits in between the bullish and bearish trends. The Donchian channel strategy helps you to ride the trend for as long as possible. When the price tips and closes below the middle band it’s a clear warning that the trend will soon be reversing, so it’s the ideal time to take your profits out.
Monero may well be the very best privacy coin. It has a dynamic block size that makes it very scalable and was the first privacy coin to achieve mainstream adoption. We hope that you understand little better how to trade Monero, and also that you appreciate the benefits of investing in a coin with a tangible use that will surely only grow in the years to come.