Cryptocurrencies are the harshest market in finance due to their inherent volatility. As assets tumble and react to every little piece of information or market movement, it can be hard for traders to consistently profit on their trades. Furthermore, there are several factors within trading itself that influence how much you actually gain from trades. To be a profitable trader, one must be stalwart, stoic, and patient. But apart from emotional qualities, a trader must also follow, sometimes hidden, technical factors.
In this article, we will show you some of the best ways to increase your profits while trading crypto. To do that, we will comment on several exchange-related elements that, to some degree, determine your success. While for the most part, you will have to work on mastering fundamental and technical analysis, there are still a few tips that shift you towards making more money.
At the very start, we will show you how fees determine your trading career and how influential they really are. Moreover, we will also guide you as to which measures you should take to minimize fees or even profit from them. So let us start with the first tip, inverse fees.
Inverse fees, also known as negative fees, are quite easy to understand. As the name implies, exchanges that have inverse fees reward a market participant instead of charging him. Since trading platforms are primarily motivated to attract more and more liquidity, they will integrate inverse fees to bring more users.
Traditionally, exchanges tend to charge fees to both makers and takers. Makers, or market makers, are individuals who provide liquidity to exchanges by creating orders. On the other hand, takers are individuals who fill these orders. Previously, exchanges motivated makers by charging them lower fees compared to takers. However, some exchanges have completely the tables by rewarding makers instead. In this case, we will use Coinuma as an example.
Coinuma is a Spanish-based exchange that primarily caters to investors from Spanish-speaking countries, but everyone from all around the world is free to participate. To reward traders for providing liquidity to Coinuma, the exchange implemented inverse fees. As we already noted, inverse fees help makers or order creators by rewarding them. Relatively new, the centralized exchange attempts to challenge decentralized exchanges during a time where the DeFi sector experiences high growth. Since they seek to bring liquidity from decentralized to centralized platforms, they will naturally use inverse fees. For an example of how this works in practice, we will use Coinuma’s fee structure.
Coinuma charges takers with 0.3% fees for filling orders while rewarding makers with 0.1% in inverse fees for creating orders. How much would the average investor earn by creating orders? Let us use the ETH/USDT contract to showcase the feature’s efficiency.
We have three factors, the amount of Ether, the price of Ether, and the fee structure. We also have a market maker who wants to create a 10 Ether limit order that will sell his assets at $400. On the other side, we also have a taker who is willing to fill the order at that price. Based on the information, we can see exactly how fees would play out:
Taker Fee: 100 x 400 x 0.3% = 120 USDT
Maker Fee: 100 x 400 x -0.1% = -40 USDT
We can see that Coinuma charged the taker $120 for filling the order. Meanwhile, the exchange rewarded the market maker with 40 USDT. If the trader were to make these trades daily, he would earn $40 per day. That would mean that he earns $1200 per month or $14600 per year just by trading. By participating in exchanges such as Coinuma, traders can increase their profits with the help of inverse fees.
Manage your leverage
Managing leverage on your trading setups can go both ways. While some traders struggle with high leverage, others are strictly risk-averse. Too much leverage can result in your trade being liquidated and not enough leverage can result in achieving lower profits. But trading is not all about leverage, entries are crucial as well.
One trader can double or triple his portfolio by entering, nicknamed ‘sniping,’ a setup which for a brief moment went significantly lower or higher compared to its neighboring candles. For example, if Bitcoin for a second jumped to $10.9k and later continued its downward trend to 10.8k, a user with 50x leverage would make a 50% return. Do note that this kind of trades is extremely risky as users are only a hundred dollars away from liquidation. We only recommend experienced traders to go this far.
Most of the time, traders should keep to ‘medium’ risk leverage. Depending on your portfolio or trading size, leverage between 5x and 10x would be perfectly safe with a great entry. If you catch a big move, like 10%, a 10x leverage would double your investment. If you do decide to experiment with leverage trading, we do recommend to prepare a well-planned trading setup before clicking the buy or sell button. To decrease risk, create a stop loss with a great risk/reward ratio to ensure that you will not lose all of your assets.
Set up alerts
Cryptocurrency markets are open 24/7. Like a beating heart, trading in crypto never stops. While this may in some aspects be great quality, most of the time traders will struggle with trading a market like crypto. Most traders will stick to their screens all day to monitor their trade and ensure that everything flows smoothly. However, you do not have to do that at all. With a few tools, you can ensure that you know everything going on in the market without even actively checking it.
By setting alerts, traders can ensure that they receive a notification every time an asset reaches a certain price. They can also set alarms that notify you if an asset like Bitcoin moves 3% down or up. By doing so, you can finally stop spending all your free time trading. It is more practical to be alerted whenever a big move happens so that you can step in at that moment rather than be glued to your screen. Apps that provide alerts are available on practically every platform. For smartphones, users can download Blockfolio to add alerts. Some exchanges even offer this feature in their trading app. Similarly, there are also apps for Windows, Linux, and Mac platforms that alert you.
A trader that uses alerts not only saves his time but profits more as well. First, you profit by spending less time on screens and being active. Secondly, you profit by saving your energy and having a clearer mind for trading. Thirdly, you ensure a great entry by relying on alerts instead of hopping into a trade the moment you log into an exchange. You can already see that there is not only one but several benefits when it comes to using price alerts. Since it is the simplest tip out of the list, you can instantly start practicing it to see what difference it makes!
There are multiple ways to increase your profits while trading crypto. As we first mentioned, inverse fees on exchanges such as Coinuma are a great way to earn passive income while trading. This kind of fee rewards you for placing an order that is not instantly filled since you bring liquidity to the exchange. Therefore, we have a symbiosis where traders earn by participating in a certain exchange while the exchange attracts more liquidity which helps them further develop the platform.
We also talked about leverage and the importance of managing risk. Leverage, or margin, trading is extremely risky. We recommend that users use low leverage to stay safe. Additionally, they can set a stop loss to prevent liquidation. Aside from risk, traders can earn more profits from leverage trading. By using leverage, investors trade with more than what they have. Therefore, they will earn more compared to simply buying spot.
Last but not least, we introduced the concept of alerts. By using price alerts, investors can receive notifications whenever big moves occur. This way, they save time and health by not staying glued to their screens. Additionally, they can wait for the perfect entry point to appear and make a trade the moment a market breaks down or up violently. We hope that this guide helped you in realizing how easy it is to stay more profitable in crypto markets. If you start practicing these tips today, you can make the first step towards earning more in crypto.