Trading Monero is not that dissimilar to trading let’s say Bitcoin. The field of cryptocurrencies is developing rapidly and different cryptos and tokens are popping up left, right and centre. Thanks to ICO sales as well, it may seem difficult to keep track of what is what anymore. If you are mining Monero, you will need to find a way of turning it into profits. You can of course just use Monero if that works for you, but at this point, it is still not that widely accepted.
Monero, however, has been around for a while now and is increasing in popularity very fast. The price of Monero has gone up over 500% from the start of 2017. As trading is mainly affected by the psychology of the traders, the more the price rises, the higher demand it creates. This then turns into a feedback loop, pushing the price up even more.
What is Monero?
Before we get into the trading, let’s quickly go over what Monero is and what it is all about.
Monero (XMR) is an open-source cryptocurrency that is privacy-oriented. Its core idea was to solve a problem that Bitcoin deliberately did not. Bitcoin is pseudo-anonymous which means that even though your name is not linked to the transactions, all of your movements on the blockchain can be traced.
Monero is based on the CryptoNote protocol, hence it is not a derivative of Bitcoin. Similarly to Bitcoin, CryptoNote currencies use a public address that consists of pseudorandom numbers and letters that are derived from user’s public keys. Addresses serve as users’ public ID. However, unlike Bitcoin, CryptoNote transactions hide the connection between the sender’s and the receiver’s addresses using ring signatures.
What is the point of this and why is true anonymity at the core of Monero?
One of the two core team members of Monero that has decided to reveal his identity explained this pretty well at one of his talks in Coinfest 2015, Tallinn. He explained that nowadays it is not safe to reveal how much money you have. Yes, Bitcoin is great and has brought a new sense of transparency to the world. However, if you don’t know exactly what you are doing, it is very easy for a tech-savvy person to trace on the blockchain how much money you have sent and where.
If for example, you have at some point sent money in Bitcoin to your neighbour and you’ve done it from the same address that you regularly use to receive and send funds, he can very easily work out how much money you may have on your wallet. Not trying to say that using Bitcoin is as sinister as that, but this is his reasoning behind it and yes, it does kind of make sense.
It is still transparent in the sense that no coin can be sent twice causing the double spend problem. But on the other hand, you can be sure that your transactions are private.
How to Trade Monero
Just like most other cryptocurrencies, Monero is very volatile. It has seen a huge jump in price this year — just over 500%. One tactic is to hold some amount long term, assuming that the price will go up even further. If we compare the rise in the price of Bitcoin and Ethereum to Monero, one would assume that there is still room for the price to grow a lot further.
The other tactic is to day trade on the short-term price movements. This would need a bit more insight into trading. As cryptocurrencies are still in their infancy, they do not act quite as predictably as let’s say ForEx. You can still look at the price movements and predict where it may go next.
Some of the tactics are:
Support and resistance levels
As prices tend to move in waves according to where traders have set their buy and sell orders, it almost always seems to appear to move in a price corridor. What does this mean? Price tends to bounce back from the same levels until it breaks through. The “floor” is called support and the “ceiling” resistance. Once the price breaks through either of these levels, it is assumed that the price will continue to rise or drop even more depending on which way it is going.
Support and resistance is a commonly used tactic by new and also more experienced traders. Why is this? Because collectively people act in a rather predictable way. If the price is heading up and has broken the previous level of resistance, we assume that it will go up more. This will make people buy more and it acts as a self-fulfilling prophecy. Same happens when the price drops below the level of support.
How do I know where these support and resistance levels are? There are no “set levels” for these. But you can visually determine them this way – find a level where the price has bounced back 3x or more. You can see this more clearly when zooming out a longer time period on price charts.
This is another way of making profits trading cryptocurrencies. This means not exactly getting profits from the price changing but reaping profits from price differences on different exchanges. If you find a few places where the prices differ, you can then keep buying from an exchange that has a lower price and selling on the one where it is higher. For example, you could turn Monero into Bitcoin and then make your profits go even further by selling Bitcoin at a markup on a Bitcoin marketplace.
There are multiple ways how to make money with cryptocurrencies like Monero. If you have a miner, it is a good idea to connect to a MinerGate mining pool to get higher rewards on your computational power. Once you are getting a constant supply of Monero mined, you can then choose what tactic you would like to go with. Go long and wait for the prices to go up exponentially, day trade to create more Monero out of the amount you had initially or just sell for immediate profits at market price.
Hope you liked these tips on trading. Let us know what you think in the comments.
Disclaimer: Any type of trading is risky and may result in losing some or all of your funds. This is not investment advice.