Crypto Trading Strategies

75 Pages·2017·2.44 MB·English

by  Lin Chieh Sheng

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Table of Contents

1.0 Glossary

2.0 Bitcoin: What It is and How It Works
2.1 The Bitcoin Blockchain in 250 Words or Less
2.2 Buying Bitcoin
2.3 Inflation and Forks

3.0 Other or “Alt” Currencies or “Coins”
3.1 Ethereum
3.2 Ripple
3.3 Dash
3.4 NEO
3.5 Litecoin
3.6 Iota
3.7 Monero
3.8 NEM

4.0 Wallets
4.1 Considering the Safest Options
4.2 Bread
4.3 Mycelium
4.4 Exodus
4.5 Copay
4.6 Jaxx
4.7 Armory
4.8 Trezor
4.9 Ledger Nano S
4.10 Green Address
4.11 Blockchain.info

5.0 Exchanges
5.1 Important Initial Considerations
5.2 Shapeshift
5.3 Coinbase
5.4 Gemini
5.5 Cex.Io
5.6 Poloniex
5.7 Kraken
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6.0 Technical Trading
6.1 Technical Trading’s Potential
6.2 How to Read a Chart: The First Teeny Baby Steps
6.3 Common Analytics
6.3.1 Simple Moving Average
6.3.2 Exponential Moving Average
6.3.3 Moving Average Convergence Divergence
6.3.4 KDJ Indicator
6.3.5 Bollinger Bands
6.3.6 Relative Strength Inex
6.3.7 Bias Ratio
6.3.8 Williams % Range
6.3.9 Fast/Slow Stochastic Oscillator
6.3.10 Volume Moving Average
6.4 Common Trading Patterns

7.0 Introduction to Patterns
7.1 Gaps
7.2 Head and Shoulders
7.3 Triple Bottom
7.4 Double Bottom/Top
7.5 Saucers
7.6 The T-30

8.0 Understanding Derivatives

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Welcome to the world of cryptocurrencies, the next step in the evolution of the means of value exchange. This is
the part where many authors would veer off into the fascinating history of money. Though that is or at least can
be interesting, it’s ultimately a side note — and one that, frankly, isn’t going to make you any richer.

Instead, this book will begin with and focus on what you need to know to participate in and potentially profit
from this white-hot frontier investment space. With that in mind, we’re not going to begin at the beginning and
regale you with tales of humankind’s early currencies or some such; instead, we’re going to take the leap off the
high board and start to teach you right away about the now and the newest computer-based currencies.

So while the glossary is, properly, often placed in the back of most books, it’s in the front of this one. That’s
because the world of cryptocurrency has its own language; and it’s a jargon that everyone buying bitcoin or other
digital currencies must be fluent in. There’s just no way around the need to recognize and begin to truly
understand these words.

Whether you read it straight through or simply refer to this glossary often, this new vocabulary can rightly be
described as the coin of the realm in the new borderless international financial empire. This, coupled with other
detailed explanations of cryptocurrency — in plain English, the way normal, non-financial people talk — will set
you in good stead to pursue bitcoin and altcoin profits. And, hey, there are the first two words you can start with.
Enjoy.

Address. A unique alphanumeric string of characters from which bitcoins or altcoin may be sent to or sent from.
This address, much like an email address, can be shared with anyone to initiate a value exchange. In this way,
cryptocurrency is said to be synonymous rather than anonymous — it is ultimately traceable.

API. “Application programming interface.” Cryptocurrencies whose code allows for API can run separate apps so
as to increase functionality. Bitcoin does NOT have API. Some see a lack of API as a serious drawback.

Bits. Bits are smaller bitcoin units that make up a whole, just like pennies make up a dollar. A bitcoin is made up
of a million bits.

Block. An aggregated series of verified transactions that have taken place during a set time period, usually 10
minutes.

Blockchain. A large data file that contains THE definitive record of every bitcoin transaction. Anyone can look
at the blockchain. It is not considered anonymous but synonymous.

BTC. Bitcoin’s ticker symbol. Always be sure when looking at any chart that you are viewing the correct security.
Every crypto has a ticker symbol, just like a stock or a mutual fund. Some cryptos will quote in fiat currency,
typically dollars, euros or pounds, and many will also quote in other cryptos. Be sure to understand what stands
for what, and always double- and then triple check your conversion calculations.

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Distributed computing. Spreading a bunch of computing tasks over a large network to process simultaneously
in lieu of running all tasks through one central processor. Cryptocurrency is “distributed.”

Decentralized. A network-based workflow system not managed by a central processing authority. Bitcoin and
altcoin are decentralized because the work typically done by a huge mainframe computer, like at a bank or credit-
card processor, is distributed in little jobs to tons of smaller machines that are connected by the Internet.

Centralized. A hierarchical organization with a main processing unit that is “in charge” of all operations and
actions within a network.

Cold Storage (or “cold wallet”). Keeping coins’ private keys offline — not connected to the Internet. These can
take the form of a portable USB drive, a computer without an online connection or an actual printed copy of the
private key (without which the coin cannot be used). The Ledger Nano is a form of cold storage.

Confirmation. A bitcoin transaction is considered unconfirmed until it has been included in a block on the
blockchain, at which point it has one confirmation. Each additional block is another confirmation. It takes three
confirmation to etch a bitcoin transaction into the stone of the blockchain.

Cryptography. The use of complex mathematics to safeguard information. Cryptography create currencies,
wallets, allows transactions to be digitally signed and to verify transactions on the blockchain.

Hash. A unique transaction identifier or an arithmetic function that miners perform on blocks to make the
network secure.

Hot Wallet. A Bitcoin or altcoin wallet that’s based on a device (such as a phone) that’s has an online connection.
A wallet installed on a desktop computer, tablet or phone is usually a “hot” wallet. Because everything electronic
is theoretically hackable, a hot wallet is seen as less secure than a cold wallet or cold storage, which takes place
on a device or other storage method that is not connected to the Internet.

Know Your Customer. Banking rules that require financial institutions to verify their customers’ identities. If
someone asks you about about KYC, they aren’t looking for a bucket of chicken and some cole slaw.

Ledger. An electronic log book detailing transactions and balances. The Bitcoin blockchain was the first
distributed, decentralized, public ledger. Most cryptocurrencies have some sort of public ledger at the heart of
their coding.

Miner. A computer (or, in some cases, a group of computers) that add transactions to blocks and verify blocks
created by other miners (or “nodes”) in the distributed network. Miners are rewarded with a transaction fee for
their effort and expense. Mining requires powerful computers — and quite a bit of electricity to keep their
ultrafast computer chips firing on all cylinders.

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Multi-Signature. Also referred to by the shorthand “multisig.” It describes a bitcoin or altcoin transaction that
requires electronic signatures from more than one party to be carried out. Multisig is an effort to strengthen
cryptocurrency’s security.

Node. A participant in a network. Nodes each have a copy of the blockchain (the public ledge than records ALL
transactions). Nodes share information, relaying new transactions to other nodes for verification and completion.

Open Source. Software code that is publicly available and that can be distributed to anyone for free. Bitcoin is
open source. Linux, for example, is an “open-source” computer operating system.

Paper Wallet. Just what it sounds like: A (cold storage) piece of paper where private crypto keys are printed.
Considered the safest form of storage.

Peer-to-Peer is sometimes abbreviated P2P. It’s a distributed networking term that simply means nodes on the
network talk to each other rather than communicating via a top-down hierarchical (“centralized”) computer
system. Bitcoin is P2P, as are most flavors of altcoin.

Private Key. A string of alphanumeric characters that must be used to “unlock” bitcoin and other
Cryptocurrencies before they can be spent. Keys are associated with an address.

Proof of Importance. A software protocol that advances some transactions to the front of the line for processing
by miners, typically because of their size, the account holder’s total number of coins, or both.

Proof of Work. A piece of data that requires a significant amount of computation to create but requires a
minimal amount of computation to be verified as being correct. Bitcoin uses proof of work to generate blocks.

Public Key. A string of letters and numbers that is derived from a private key. A public key allows one to receive
transactions.

QR Code. These are big square barcodes that can contain information and be scanned with a digital camera to
be used inside an application. This was a sort of Internet fad about five years ago, to the point where some stores
were even putting them on signage to direct you to their app or website. While the fad has mostly abated, the
technology is extremely useful and has found a niche in the bitcoin space, where they are used to store public
and private keys.

Signature. An element of a transaction that proves that the owner of the private key has authorized the
transaction.

Satoshi. The smallest divisible unit of one bitcoin. There are 100 million satoshis in one bitcoin. Named for Satoshi
Nakamoto – the Japanese version of “John Smith” – who is said to be the inventor of bitcoin. His or her identity
remains unknown.

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Transaction. An entry in the blockchain that describes a transfer of coins from address to address. Each Bitcoin
transaction can encompass several inputs and outputs, leading to hundreds of billions of potential combinations
that miners must unlock as they post and verify transactions.

Transaction Fee. The amount of bitcoin or altcoin that is paid to miners as a fee for performing the tasks on the
bitcoin network. A typical bitcoin fee amount might be 0.0001 BTC.

Wallet. A software program, piece of hardware or even a piece of paper that contains the private keys that unlock
cryptocurrency.

Cryptocurrencies with Greater Than $100M in Capitalization
Ran
k Name Market Cap Price Supply Daily Volume

$68,281,610,66 $4,135.8 $2,240,110,00
1 Bitcoin 6 2 16,509,812 0

$28,416,910,22 $1,004,300,00
2 Ethereum 0 $302.19 94,036,878 0
3 Ripple $6,086,586,429 $0.16 38,343,841,883 $106,986,000
4 Bitcoin Cash $4,976,055,009 $301.70 16,493,388 $102,895,000
5 Iota $2,649,409,352 $0.95 2,779,530,283 $57,330,000
6 NEM $2,323,890,000 $0.26 8,999,999,999 $9,739,960
7 Litecoin $2,308,171,641 $43.99 52,468,582 $122,558,000
8 NEO $2,277,725,000 $45.55 50,000,000 $196,370,000
9 Dash $1,676,431,196 $223.66 7,495,411 $57,736,000
Ethereum
10 Classic $1,370,292,994 $14.49 94,587,115 $63,861,700
11 Qtum $847,594,000 $14.37 59,000,000 $63,050,800
12 OmiseGo $820,245,727 $8.34 98,312,024 $156,284,000
13 BitConnect $721,094,172 $111.72 6,454,304 $7,455,380
14 Monero $710,351,589 $47.54 14,943,539 $9,329,870
15 Stratis $630,710,102 $6.40 98,505,357 $20,043,200
16 TenX $489,240,340 $4.67 104,661,310 $36,468,800
17 Waves $470,044,000 $4.70 100,000,000 $3,414,580
18 EOS $458,564,419 $1.60 287,396,695 $24,787,600
19 Zcash $421,551,367 $213.56 1,973,906 $16,073,400
20 BitShares $368,113,691 $0.14 2,597,930,000 $24,063,600
21 Tether $319,871,924 $1.00 319,501,302 $140,994,000
22 Steem $278,403,581 $1.16 239,608,560 $1,055,590
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23 Iconomi $258,194,843 $2.97 86,900,350 $1,489,350
183,246,354,93
24 Bytecoin $251,540,439 $0.00 9 $2,067,440
25 Veritaseum $244,030,507 $121.38 2,010,533 $375,905
26 Lisk $241,804,168 $2.18 110,997,245 $5,552,720
27 Golem $224,920,306 $0.27 833,032,000 $3,559,700
28 Augur $224,625,500 $20.42 11,000,000 $1,280,750
29 Siacoin $221,270,556 $0.01 28,637,654,550 $13,048,300
30 Byteball $216,435,233 $411.22 526,327 $1,943,310
31 Populous $211,893,812 $5.14 41,252,246 $711,425
32 Civic $206,719,320 $0.61 340,000,000 $10,642,300
33 Stratus $205,059,781 $0.06 3,470,483,788 $13,603,300
34 Basic Attention $203,541,000 $0.20 1,000,000,000 $3,024,240
35 Stellar Lumens $201,439,405 $0.02 11,039,771,873 $9,722,620
36 Gnosis $199,867,828 $180.94 1,104,590 $1,471,170
37 Bytom $196,056,171 $0.30 664,126,673 $22,095,800
110,672,589,21
38 Dogecoin $194,384,229 $0.00 5 $4,602,640
39 MaidSafeCoin $180,829,988 $0.40 452,552,412 $2,750,560
40 Factom $163,141,627 $18.66 8,745,102 $2,785,970
41 Ark $159,405,463 $1.64 96,930,122 $20,045,400
42 DigixDAO $157,640,000 $78.82 2,000,000 $791,473
43 MCAP $151,699,328 $2.09 72,433,345 $310,243
44 Metal $148,410,747 $7.69 19,300,994 $1,186,010
45 Decred $137,973,273 $24.85 5,552,066 $1,806,300
46 GameCredits $134,301,871 $2.10 63,847,164 $4,049,290
47 Ardor $132,621,179 $0.13 998,999,495 $1,400,740
48 DigiByte $130,187,893 $0.01 8,742,253,657 $14,774,000
49 Komodo $128,296,696 $1.27 100,945,510 $801,592
50 Binance Coin $124,747,000 $1.25 100,000,000 $25,543,800
51 ICO $124,158,000 $1.24 100,000,000 $19,112,200
52 MobileGo $117,703,285 $1.20 98,028,887 $1,265,040
53 Bancor $109,843,337 $2.69 40,772,871 $3,132,300
54 Nxt $109,638,250 $0.11 998,999,983 $10,051,600
55 PIVX $106,948,244 $1.98 54,061,774 $794,284
56 Storj $101,840,979 $1.37 74,526,878 $6,583,300
SOURCE: CoinMarketCap.com, Aug. 16, 2017

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2.0 Bitcoin: What It is and How It Works

The story of digital payments begins with an international man of mystery: A heretofore unknown computer
programmer, referred to only as Satoshi Nakamoto — the Japanese equivalent of John Smith1 — devised a
unique methodology for digital payments.

The year was 2008. In the wake of the subprime mortgage bubble, the pillars of the global financial system stood
askew, threatening collapse. Consumer trust in government, banks and fiat currency – that is, those little bits of
paper emblazoned with engraved portraits of presidents, statesmen and monarchs issued by central banks –
evaporated.

The notion of a secure, transparent means of exchange resonated and quickly gained traction on Wall Street as
well as on Main Street. This was the state of a world ready for something new — ready for Bitcoin.

In those days, bitcoin actually had no monetary value. It wasn’t worth anything. It was just an idea to see if the
concept would work. Well, not to ruin your day, but sure that was a great time to get in… Because today, the
value of a single bitcoin is several thousand dollars. But take heart, because even with bitcoin’s rise to date, there
is still plenty of money to be made.

The worldwide cache of these digital golden nuggets is worth some $50 billion, or roughly half of the total market
value of all cryptocurrencies. Bitcoin is the 400-pound gorilla that can’t be ignored, so we might as well use it as
the starting point for understanding this new frontier. Let’s be clear, though, this is a frontier that could put the
power of currency into the hands of investors – sorry, “the people” – instead of governments.

It’s an idea whose time has come. Worldwide global conflict and a decline in longstanding institutions, particularly
of the financial type, has created the perfect conditions for digital currency to begin to enter the mainstream.
Some houses on the market are even being priced in bitcoin right now. That’s the good side.

The trouble with any currency is that the dark side of human nature tends to take over and mess up a perfectly
good thing: Bitcoin is also what hackers have started demanding from corporations as payoffs not to torpedo
their computer systems. What’s more, any time any item of value is created, society eventually must deal with
theft and counterfeiting and other potential means of defrauding someone of their property.

One rather elegant solution, then, is to reward transparency and honesty. This is what bitcoin is built on. It takes
the weakness of stealable and fakable old greenbacks and turns them into a strength. If there is no reward for
dishonesty, most people won’t be dishonest.

1 No one really knows who Satoshi really is. (Really!)
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