So you want to start buying crypto currencies, but you don’t know where to begin. In what seems to be a million projects to look into, how can you tell the good from the bad? Here is a simple guide to help you buy cryptos that will make you money over the course of your time as an investor.

One of the first things I consider when investing into a new project is participating in the community. These are the people who have first-hand experience with the token, and they often leave bread crumbs behind to further research articles, events, developments, and any other tidbits of useful information. Coingecko.com is a great tool to help quickly identify which social media platforms (Twitter, Telegram, Reddit, Discord, etc.) the cryptocurrency is a part of. Typically, if nothing appealing to my interests is available in these communities, then I don’t proceed much further into my research.

If I have turned up good leads in my initial search through the community, the next step I take is looking into what kind of developments have been made so far, and what kind of developments are planned for the future. Cryptocurrencies are essentially a utility used to help a business grow and are similar to stocks only instead of owning “shares”, you are actually owning the token which has use case (dependent on what the business wants their token/coin used for). As with any other trading/investment strategy, if your sole interest is making gains and trading, then the use case of the token may not be of real importance to you, however, this is a big determining factor on the HODL ability of a token. More use cases mean more utility means more price increase, typically.

It is imperative to understand some of the more commonly used words in this diverse cryptoworld:

  • HODL = Holding on for dear life or a long-term hold. This term is used when strong faith and conviction about a project are found, and there is good faith this token will continue to be a strong project

  • FUD = Fear, Uncertainty, Doubt. Haters are gunna hate, let them hate. If you like the project and believe it is strong, then it is best to ignore the FUD.

  • FOMO = Fear of missing out. If it is in the news, usually the price is rapidly increasing. Often times newcomers will buy the news and sell the FUD. This often results in negative gains.

  • CEX = Centralized Exchange (where you “buy” your tokens)

  • DEX= Decentralized Exchange (where you “swap” your tokens)

  • DYOR = Do your own research. Simple enough right?

  • DMOR = Did my own research.

  • ELI5 = a simple explanation that an average five-year-old would understand

  • Staking= Storing your tokens on a platform that allows rewards/returns to users and also helps the network advance development

  • APY/APR= Annual yield/returns of investment by staking.

  • LP = Liquidity Provider

  • TVL= Total Value Locked

  • Bags = reference to owning a portion of a token

  • Pump = Volume of token is moving heavily in one direction or another (+/-)

  • Mooning = The price is anticipated and or is currently substantially and rapidly increasing in price.

  • Rug pull = This s**t sucks! However, it is part of the game, this term means that the developers shut down the project and made gains off you. It is more or less a sophisticated scam

  • Buy the Dip = Buying a token when it has come down from a higher market price to make a better entry point.

  • Bullish = price is moving up or the project has good developments coming soon

  • Bearish = price is moving down or the hype has worn off and the token is steadying out

  • Whale = a person who owns heavy “bags” and usually capable of influencing the price movement of a token.

  • Ape = Buying into a project heavily with little to no research in anticipation to make quick gains

  • Altcoin = any coin that isn’t a major token i.e., Bitcoin or Ethereum

  • Stablecoin = a token with a pegged price which lessens market volatility

A good place to check what developments have been made is by looking at the roadmap (plans of the past and future) of the coin/token on the company’s main webpage. Often times, the company will add “completed” or check marks, which signal that the particular development is completed. Knowing this helps discover if the company is on track for completing goals on time and as promised by the development team. These maps will often expand into the future showing the goals that the team is currently working towards. A good roadmap is a solid identifier of the coins ambition. As with any business, a good CEO/ team is imperative to success. Some good traits I consider of a CEO/team are as follows:

  • Openness about project updates, future goals, and even short-comings.

  • Integrity- How do they present themselves to their customers, competitors, and supporters?

  • Activity- How frequently does the CEO/team deliver news updates or interact on social media/ main stream media?

History- How long have they been a CEO? What other projects were /are they involved in.

  • What is the community’s general impression of the team/CEO?

If most or all of these traits check out positively, odds are it is a project with good value and worth looking into further. In other words, do I see myself using this in the future? Does it have real value to ME, the investor?

We’ve made it this far. We like the community vibes; we’ve done some research on the project developers, and are enticed with the direction of where the projects future is heading. The next suggested step is to look into the economic strategy, or “What is the general intention of this project?” One of the best advantages to cryptocurrency versus traditional fiat currencies is that there is often a fixed sum of coins minted at origin, and that is all that will ever be. There are some projects that offer an “infinite supply”, however, there is usually a fixed rate of coins that are to be minted per specified time range (usually once a year). For example, a platform may initially mint 20 million tokens, and each year after, only an additional million annually. With this being known, it is important to check to see how those tokens are being distributed i.e., what percentage is available for the general public, team, development advances, fundraising, liquidity providers, rewards etc. It is good to know where those tokens will be going, because if it isn’t fairly distributed, it will likely leave little room for growth.

Another thing to consider along with total number of tokens available is the Market Capital of the coin. The market cap is primarily valued by an IPO or Initial Public Offering. An IPO is determined by an investment bank and offers a suggested value of the company. Based upon this valuation, the company may then decide on how many coins to mint. So, if a company is initially valued at 100 million dollars and the company decided to mint 100 million coins, this would make the market cap of the coin 1$. Here is a formula: $100M÷100M coins=1$ IPO. From here, the price will fluctuate based upon supply and demand of the market. Having this knowledge is important because it is a big indicator on how much room for growth the project has to increase in price. One more thing to consider is the total amount of liquidity the coin has. A high liquidity means that the coin is being used frequently thus signaling good trade value or HODLbility.

When the coin is valued, and ready to be released, it will be obtainable on an exchange or vendor. This is important to know because the more exchanges the coin is accessible, the more available it is to trade, buy, and sell. If the coin is offered in many exchanges, it is probably a popular coin that has been around for a while. In some instances, tokens will be “Airdropped” (given to you) to help promote market movement. This noticeably influences the supply and demand of the token, which will cause price action either negatively or positively depending on the market’s behavior towards that coin.

If we have made it this far in the process, it is very likely that we are considering making a purchase. There are a few more things to consider at this stage of the buying process. Firstly, it is important to understand the significance of Dollar Cost Averaging or DCA. This method is used to slowly scale into an investment over a period of time. For example, if you want to invest $1000 into a particular coin, it would be more beneficial to buy into the token in increments of say $100 or so at a time. This technique is beneficial because the price is typically in constant fluctuation which allows for different entry points. The lower the price, the more tokens you can buy. The higher the price, the less tokens you can buy. By scaling in at different price ranges, you will be purchasing the most for your money. Another useful tip is to consider a profit: loss margin or a technique called average profitably per trade (APPT). This idea helps determine if you are losing money or gaining money on trades. It is essentially a practice of keeping track of your gains and losses during trades and averaging out the sum to find if your trading strategy is profitable or not.

A great way to analyze the price movement is by looking at a price chart which is a linear line graph that measures the trend of the value. Learning to read charts takes practice, but recognizing bullish or bearish patterns is a great way to determine entry points and/ or selling points. Some useful tools to use here are dextools.io and tradingview.com. These sites allow users to closely gage price movements of specified cryptos, use tools to draw on the charts, and find other useful tricks to help determine market trends. A good rule of thumb here: buy the red, sell the green. This means when we view a price chart: if trends (patterns) of green or red lines are showing congruently, then the chart is correspondingly at a high or low (the best times to buy/sell) and would be better off waiting for the opposite to trend to appear to find a better price to buy in or sell out.

If you are a beginning investor and are looking to start buying and trading for the first time, you will need to find a CEX. Some of the most popular CEX’s are: Binance Exchange, Coinbase, KuCoin, or Bittrex, to name a few. REMEMBER: If you buy cryptocurrency on a CEX, you MUST send your funds to an external wallet. These are some of my favorite wallets, and here is a guide on how to safely and securely send transactions between wallets. Once your funds are off of the CEX and securely into your wallet, they are considered safe. DO NOT SHARE your private keys with anyone, I cannot reiterate this enough. As long as you are the only person who knows the password, your funds will be nearly impossible to steal.

Another thing to consider while trading cryptocurrency is transaction fees. Since all cryptocurrencies are digital assets on blockchain technologies, they must be computed. These computations require energy to be spent in order for transactions to be pushed through successfully. These fees are known as “gas fees” on the Ethereum network and it is calculated as a denomination of the total price of ETH. As the price of Ethereum increases, so too does the price of GWEI or “gas”. As more transactions are being processed on the network, more energy is required to send your transaction through, and this also calculates into the price of the gas fee. What this means is that if you plan on trading during busy hours while the price of Ethereum is high, you’d better have a nice chunk of Ethereum handy in your trading wallet to cover the expenses. At the time of this writing, Ethereum is the most populated blockchain network housing the majority of cryptocurrencies. There are several competing blockchain companies working on creating their own solutions to make trading more accessible, however, for now this is what we have.

If this seems like a lot of information, you are not alone. When I first came into this space, I knew pretty much none of it. I would have benefitted greatly from a simple guide for buying cryptos. It is my hope that this article will help you become the best trader you can be. If you are ready to take yourself a little bit deeper into this world of cryptocurrencies, I believe this guide will allow you to make the more logical and efficient trades.

Disclaimer. I am not responsible for your investments, do your own research and invest at your own risk. This is a guide to help you find what you are looking for.

TreeLyfeNBD is a community member and contributer of DeCent Times! Check them out here