How to Place Trades

New to the online cryptocurrency scene and want to learn how to place trades? If so, the process is a lot easier than you think. With that said, making a mistake by placing the wrong crypto trading order can be fatal – so this guide is a must-read.

Within it, we walk you through the end-to-end process of how to place trades at a top-rated cryptocurrency broker in a risk-averse manner. Not only does this include buy and sell positions, but risk-management orders, too.

How to Place Trades at a Crypto Broker – Quick Guide

If you’ve got your finger on the pulse and wish to place your first crypto trade right now – follow the quickfire guide outlined below.

 

  1. Choose a Top-Rated Crypto Broker: In order to place trades, you will first need to find a suitable broker. eToro is a good option for newbies, as the platform offers lots of digital currency markets at super-low fees. Plus, the platform is really easy to use.
  2. Open an Account: You will need to open an account with your chosen crypto broker. Simply follow the on-screen instructions by entering your personal information and contact details.
  3. Deposit Funds: It goes without saying that you will need to deposit some money before you can start placing trades. eToro, for example, supports debit/credit cards, Paypal, Neteller, bank transfers, and more.
  4. Search for Crypto: You can now search for the cryptocurrency you want to trade.
  5. Place a Trade: Finally, you will need to choose from a buy or sell order to place your trade – depending on whether you think the cryptocurrency will rise or fall in value.

And that’s it – you’ve just placed your first crypto trade! However, there’s a lot to discuss before you go and trade with real capital – especially when it comes to risk management. As such, we would suggest you continue to read to rest of this guide before proceeding.

Step 1: Choose a Platform to Trade Crypto

The first – and perhaps most important step in learning how to place trades is choosing a suitable platform. Otherwise referred to as a broker or exchange, cryptocurrency platforms sit between you and your chosen market. That is to say, irrespective of whether you want to trade Bitcoin, Ethereum, EOS, Cardano, or any digital currency for that matter – you need a broker to execute your orders for you.

In choosing the best platform to trade crypto – there are a number of key metrics that you need to cross off.

This includes:

  • Safety: Most cryptocurrency exchanges are unlicensed, which is why we suggest using a regulated broker. This will ensure that you are able to trade in safe, fair, and transparent conditions. Some of the most reputable financial bodies that license regulated crypto brokers include the FCA, ASIC, and CySEC.
  • Markets: If you’re looking to learn how to place trades, you also need to think about which cryptocurrencies you want to speculate on. For example, if you want to trade Ripple against the US dollar – you’ll need to ensure the platform supports XRP/USD. We cover crypto trading pairs in more detail later on.
  • Fees: When you place trades at your chosen crypto broker, you will be charged a fee. This might come in the form of a trading commission that is multiplied against the size of your stake. Some platforms – such as Paragon Traders, Binance and Coinatmos– allow you to trade digital currencies without paying any commission. Instead, it’s only the spread you need to cover.
  • Payments: Another drawback of using an unregulated cryptocurrency exchange is that you won’t have access to fiat currency facilities. Instead, you will need to fund your account with a digital asset. As regulated platforms have the legal remit to accept fiat money deposits – you can often choose from a debit/credit card, e-wallet, or bank account transfer.
  • Features and Tools: It’s also worth ensuring that the platform offers tools and features that can enhance your trading experience. For example, if you are a newbie, you’ll want access to educational materials, a demo account, and even a copy trading facility. If you’re an experienced trader, you’ll want technical indicators, advanced order types, and pricing charts.

Step 2: Select a Crypto Market to Trade

Once you have selected a broker that meets our strict criteria, it’s then time to think about which cryptocurrencies you wish to trade. In a nutshell, there are almost 10,000 digital currencies in existence – so you will have access to an abundance of markets.

 

Of course, most of these crypto-assets won’t be worth your time, as they attract super-low trading volumes and thus – there are minimal levels of liquidity. Instead, you will probably want to avoid trading any cryptocurrencies that fall outside of the top-50 in terms of market capitalization.

 

Furthermore, and perhaps most importantly, you also need to think about how you want to trade your chosen digital asset. This is because cryptocurrencies are traded in pairs – much like the traditional Forex/Crypto scene. In particular, there are two different types of crypto pairs that can be traded – which we discuss in more detail below.

Crypto-Fiat Pairs

Most traders will elect to trade crypto-fiat pairs. This means that the pair contains a fiat currency like USD and a cryptocurrency like EOS. In this example, you would be trading EOS/USD. In the vast majority of cases, crypto-fiat pairs contain the US dollar – but it’s also possible to find markets with other currencies.

For example, major digital assets like Bitcoin, Ethereum, and Ripple can typically be traded against the Japanese yen, British pound, euro, and Australian dollar. With that said, it’s best to stick with crypto-fiat pairs containing the US dollar – as these attract the most liquidity and thus – the tightest spreads and lowest fees.

Crypto-Cross Pairs

You then have crypto-cross pairs – which only contain digital currencies. A prime example of this is BTC/USDT. This pair would see you trade the exchange rate between Bitcoin and Tether. Other popular crypto-cross pairs include ETH/BTC, XRP/BTC, and BCH/BTC.

 

As a newbie, we would suggest avoiding crypto-cross pairs. The reason for this is that they are not priced in traditional currencies like the US dollar. For example, when trading a crypto-fiat pair like BTC/USD – it’s easy to perform research and technical analyses. After all, you can evaluate the price of the pair in USD.

However, when trading a crypto-cross pair, the price of the market is detonated in digital currency. For example, let’s suppose you are trading Ethereum against EOS (ETH/EOS).

 

At the time of writing, this pair has a buy price of 423.07. This means that for every 1 Ethereum, the market is prepared to pay 423.07 EOS. As you can imagine, unless you have an intimate understanding of both digital assets involved, trading crypto-cross pairs can be challenging.

Step 3: Choose From a Buy or Sell Order

When learning how to place trades in the cryptocurrency scene, you will notice that some orders are compulsory while others are optional. In the case of buy and sell orders, these fall within the remit of the former. This is because in order to place a trade, you need to enter the market with either a  buy or sell order – depending on whether you think the pair will rise or fall in value.

  • Buy Order: If you think the crypto pair will rise in value – place a buy order
  • Sell Order: If you think the crypto pair will fall in value – place a sell order

There are two important things to mention when placing buy and sell orders. Firstly, all trading platforms charge something called the ‘spread’. This is the difference between buy and sell price of the respective crypto pair. The buy price will always be higher than the sell price and the difference between the two in percentage terms is the spread.

 

If the spread amounts to 1%, you are paying an indirect fee of 1%. This is because you are paying 1% more than the current spot price. This is why we stressed earlier the importance of choosing a crypto platform that charges low spreads.

 

Secondly, when you place a trade with a buy order, you will need to place a sell order to close your position. If you enter with a sell order, then you’ll be placing a buy order to close it.

Step 4: Choose Your Entry Price

Once you have decided on a buy or sell order, you then need to determine how you wish to enter the market. For example, you might decide to place your trade instantly through a market order. In doing so, you will get the next best available price – which will be slightly above or below the price you are being quoted at the time of the trade.

 

For example, let’s suppose you are trading Uniswap against the US dollar – which is currently priced at $26.50. In placing a market order on this pair, it might be executed at say $26.49 or $26.51. Either way, the gap in pricing (known as ‘slippage’) will be minute.

On the other hand, seasoned traders will rarely enter a position with a market order. Instead, they prefer to specify the exact price that the trade is placed at. In order to do this, you will need to opt for a limit order. For example, while UNI/USD might be priced at $26.50 right now – you might want to enter the market when the pair hits $27.00.

 

All you would need to do is select a limit order and enter the respective price. If your price level isn’t matched by the markets, it will remain pending. You can cancel your limit order at any time.

Step 5: Set Up Risk Management Orders

At this stage of our guide on how to place trades, you can proceed to place your orders and thus – the broker will execute this on your behalf. However, assuming you are looking to make consistent gains over the course of time – it’s crucial that you also deploy stop-loss and take-profit orders. These two order types are optional – but fundamental nonetheless.

Here’s why:

Stop-Loss Order

As the name suggests, placing a stop-loss order on your crypto trade will cap your potential losses. In other words, you can ensure that you do not lose more than a specific amount. For example, you might decide to go long on EOS/USD – meaning that you think the exchange rate will increase.

 

But, of course, there is no guarantee that this will happen – so you deploy a stop-loss order at 1%. This means that if the price of EOS/USD falls by 1% – the broker will automatically close the position on your behalf. As a result, the most you can lose is 1%.

 

In terms of where to place the stop-loss order, this will depend on whether you are long or short on the pair. For example, if you are going long, then you place the stop-loss price above the entry price. For example, if the pair is $25 and you want to limit your potential losses to 2% – you’d place the stop-loss order at 2% above $25. If you’re going short, then you place the stop-loss order at 2% below the entry price.

Take-Profit Order

In addition to mitigating your potential losses, you also need to think about locking in your gains. Otherwise, you will need to sit at your trading screen for hours-on-end waiting for your desired profit target to be matched by the markets.

 

But, by deploying a take-profit order, your broker will close the trade for you automatically when your specific price is triggered. For example, if you want to target gains of 5% – simply place the take-profit order 5% above or below the entry price – depending on which way you think the markets will go.

Step 6: Stakes and Leverage

To recap, you should now have an order box that has the following:

  • Buy or Sell Order
  • Limit or Market Order
  • Stop-Loss Order
  • Take-Profit Order

It goes without saying that you will also need to specify a stake. In most cases, all you need to do is enter the amount you want to risk in monetary terms – for example, $50. However, you need to be a bit more systematic when it comes to deciding how much to stake. In fact, we would suggest adopting a bankroll management strategy.

This will see you allocate a percentage of your current account balance. For example, you might elect to restrict your stake size to 3%. This means a $1,000 balance would allow a maximum stake of no more than $30. After the completion of each trade – your balance will go up or down depending on whether the position resulted in a profit or loss.

 

As such, this will also impact the value of your next stake. For example, if your balance goes up to $1,500 – a 3% bankroll management strategy would allow a maximum stake of $45.

Leverage

If you want to trade cryptocurrencies on a regular basis but you don’t have access to a large amount of money – it’s worth looking into the pros and cons of leverage. This is a tool offered by a number of leading cryptocurrency platforms and it essentially allows you to trade with more than you have in your account.

 

For example, let’s suppose that you stake $50 on a Bitcoin trade. At the same time, you apply leverage of 10x. This means that your stake has been amplified from $50 to $500. We should mention that leverage will also boost your losses when the trade goes against you. As a result, keep your relationship with leverage modest.

Step 7: Confirm Orders and Place Trade

All that is left for you to do now is to confirm the order. By installing a stop-loss and take-profit order, you can allow your crypto trade to play out. That is to say, if your target price is triggered, then the take-profit ordered will be executed and your gains locked in automatically.

 

If the unfortunate happens and your trade doesn’t go to plan, then the stop-loss order will be executed. Either way, your trade will be closed when one of the two orders are triggered.

How to Place Trades: The Bottom Line

This beginners guide on how to place trades has explained the importance of getting orders right. Not only do you need to choose from a buy or sell position, but also the most favourable way to enter the market. In many cases, this will be achieved by opting for a limit order.

 

Additionally, we have also covered the fundamentals of risk-management tools – namely, stop-loss and take-profit orders. And of course, it’s also a crucial step to choose a cryptocurrency broker wisely. This will ensure that when you place trades – you will be doing so in a safe, cost-effective, and user-friendly manner.

Learn How to Day Trade Crypto

Cryptocurrency trading has become popular in the global marketplace. Many cryptocurrency enthusiasts now read up on different tokens in an attempt to understand their price movements. This is because the volatility of cryptocurrencies is highly suitable for short-term trading. 

 

Day trading cryptocurrency means that you enter and exit numerous positions within 24 hours. To do this, you must have some experience with digital tokens and learn how to day trade crypto like a pro. As such, when day trading digital assets, you need to have a research-based strategy and stay updated with the market.

 

This will ensure you know when to enter and exit trades. In this guide, we will walk you through all you need to know to effectively learn how to day trade crypto from the comforts of home. We will also discuss the relevant considerations you have to make when trading cryptocurrency on a short-term basis.

Learn How to Day Trade Crypto: Quickfire Walkthrough to Day Trade Crypto Under 10 Minutes

Day trading is an effective way to make impressive returns in the cryptocurrency market. You can get started in under 10 minutes if you follow this quickfire walkthrough.

  • Step 1: Choose a Trading Site: For you to day trade cryptocurrency, you’ll need to get an efficient broker. As such, you should consider the credibility of the broker before getting started. A broker like eToro is a great option owing to the fact that it’s regulated and has a low-fee structure.

 

  • Step 2: Open An Account: The first step is to choose a broker. Following that, you’ll need to open an account so you can day trade crypto with the broker. You’ll have to go through a Know Your Customer (KYC) process after which you’ll be granted access to the crypto markets.

 

  • Step 3: Add Funds To Your Account: Before you can trade, you need to have the capital in your account. On eToro, with $200, you can make the minimum required deposit and get started. You can do this using your debit/credit card, bank account, or Paypal.

 

  • Step 4: Choose a Market: After adding funds to your account, you’ll need to choose a trading pair for your desired crypto token. Here, you simply need to locate the token through the search tab. 

 

  • Step 5: Place Your Trade: Once you get to the token’s page, decide the order you intend to use to enter the market. This could be a buy or sell order. Additionally, you’ll have to indicate the amount you intend to stake. Once done, complete your trade to enter the crypto market. 

There you have it. You have simply entered your chosen market with the above steps. Since you’re day trading, this means you’d be executing your trades based on favorable price movements.

Due to the frequency of this, you might also consider day trading CFDs. We will explain this soon enough, but before then, let’s consider the best brokers you can use to day trade crypto online.

What is Crypto Day Trading?

In learning how to day trade crypto, you must consider what the concept precisely entails. Cryptocurrency trading is pretty much like investing in any financial instrument. When you make an investment, your goal is to generate monetary gains.

 

As such, you have to sell at a higher price than the commodity’s buying value. In the same manner, when you day trade crypto, you’re speculating that there will be a price increase on the token.

Therefore, when this token’s price increases, you sell it and secure your returns. The major difference with day trading is that this buying and selling process happens within a short period and multiple times in a day. 

  • For instance, suppose a token such as Algorand is priced at about $1.05.
  • You enter the market at that price and sell when the token hits a price of $2.50.
  • Based on this trade, you’ve gained a profit from the token’s 95% increase.
  • Your profit on this trade is essentially 95% of the amount you stake. For instance, if you risked $100 on the trade, you would have made gains of $95.

You should note that cryptocurrencies are traded in pairs. This means that the token you’re day trading is paired against another asset. Consequently, your chosen token is valued based on that other asset which can be USD or BTC among other options.

 

So, as a crypto day trader, your task is to predict whether your chosen token will increase or drop in value. Based on your speculations, you then open a position. The interesting thing about day trading is that you don’t have to wait too long to make returns. You simply look towards maximizing the constant price movements of the market.

Choosing a Broker to Day Trade Cryptocurrency

As the cryptocurrency industry grows in size, many new brokers continue to emerge every day. While these brokers give you access to the marketplace, not all of them can serve you adequately. This makes it important to consider certain factors when choosing a broker.

 

This is because the broker you choose determines your experience when day trading cryptocurrency. As such, below we have highlighted some of the key things you need to consider before choosing the best crypto day trading broker for your needs.

Regulation

One of the key things to consider when choosing a broker to day trade is whether or not the platform is regulated. A regulated broker affords you more security and credibility.

  • Often, these regulated brokers have certain guidelines to which they have to comply. This way, they cannot act beyond their scope of operations, meaning you enjoy a reasonable level of protection. 
  • For instance, eToro, Capital.com, and AvaTrade are all regulated. Capital.com is regulated by the FCA and CySEC while AvaTrade is licensed in more than seven jurisdictions.
  • eToro is regulated by the FCA, CySEC, and ASIC. 

Trading with brokers of this nature puts you in the regulator’s safety net. This is good for numerous reasons, one of which is that regulated brokers keep your capital separately from the company’s, meaning you always have access to your money when you desire.

Fee-structure

Brokers charge different fees during the execution of a trade. From making deposits to the point you close a trade, there are different fees you might have to pay. As such, you have to consider the fee structure of your desired broker to see how much the platform charges across different services. Most importantly, consider the commissions and spreads.

To day trade in a cost-effective manner, it will be smart to consider brokers that charge very low fees or even none at all. A good example is eToro – where you can trade on a spread-only basis.

Additionally, the broker has a low minimum deposit requirement of just $200 and you can start trading with as little as $25 per stake. Therefore, using such a broker means you can make meaningful profits on your short-term trades. 

Markets

It’s crucial to consider whether your broker supports the cryptocurrency you intend to day trade. While there are thousands of tokens that can be day traded online, this doesn’t mean that all brokers support these coins.

  • Therefore, if you’re looking to make a profit from small-cap projects, you must check to confirm whether there’s a market for it on your chosen broker.

 

  • In this regard, you may want to consider Capital.com, as the trading platform supports a wide range of cryptocurrency markets. In fact, there are over 200+ crypto markets on the platform – all of which can be traded with leverage. 

This includes crypto-cross pairs, fiat-to-crypto pairs, and numerous Defi tokens. Therefore, if you’re unsure whether your broker supports your chosen project, be sure to check this prior to opening an account.

Payment Methods

In learning how to day trade crypto, you need to understand the importance of payment options. When you use a leading broker like eToro, Capital.com, or AvaTrade, you get a wide range of payment options to make your deposits. These three platforms support debit/credit cards, e-wallets such as Paypal, and wire transfers. 

Preferably, use debit/credit cards or e-wallets to make your payments when day trading, as they are faster than wire transfers. Furthermore, these brokers ensure you can make withdrawals and get your funds quickly, which is a great perk for a day trader. 

Research Extensively

First, when you’re day trading crypto, it’s crucial to research adequately. This will inform your choice of projects and your trading strategy. Therefore, brokers that offer you the avenue to learn while trading are preferable. When you use these brokers, you get access to educational tools, charts, guides, and even courses. 

 

This long list also includes research tools and technical indicators that you can use to analyze cryptocurrency market updates. Having these tools at your chosen broker makes it more convenient and seamless for you to day trade crypto.

How Does Crypto Day Trading Work?

We earlier mentioned that cryptocurrencies are traded in pairs. We will give a more detailed explanation here. When you’re day trading, you have to choose between fiat-pairs and crypto-pairs. 

 

This means that you’ll be pairing your chosen token with either of the two options, whether fiat money like USD, euros, or any cryptocurrency such as BTC and ETH. Each pair has an exchange rate, which changes every second because it’s affected by the forces of demand and supply.

Therefore, if more people are buying the pair, the price will increase. On the other hand, if more people are selling that particular pair you’re day trading, the value will drop.

Here are the two pair types you can day trade explained in more detail:

  • Fiat Pairs: This is one of the two pairs you can go for. Here, you’ll be choosing a pair that comprises a fiat currency and a digital token. In most cases, the fiat option you’ll get is USD, as it’s the benchmark currency in this industry. Therefore, examples of crypto pairs are ETH/USD and BTC/USD. Furthermore, using this pair type to day trade crypto offers you access to more liquidity and tighter spreads.
  • Crypto Pairs: You can trade a token against another competing digital asset. For instance, you might trade the value of Algorand against that of Bitcoin. In that case, you’ll have your pair appear as ALGO/BTC. However, while crypto-cross pairs are an option for you to day trade, you should stay away from them as a beginner. This is because you need to have in-depth knowledge of both digital tokens in the pair. 

Now that you understand how day trading crypto works, the next thing is to understand the different orders by which you can enter the market. You have to decide whether you’re entering the market with a “buy” or “sell” order. 

  • You use a “buy order” when you are speculating that the token will witness a price increase.
  • On the other hand, you use a “sell order” when you predict that there will be a drop in the token’s price.
  • However, this is not all you need to learn how to day trade crypto. You also have to know what order type to use and why.

Concerning this, there are two order types for you when day trading. 

  • You can use a “market order” when you want the broker to execute your trade at the next available price.
  • On the other hand, you use a “limit order” when you have a specific entry price when you intend to enter the market. 

When you’re day trading crypto, limit orders are preferable. This is because as a day trader, you’re looking to profit from constant price movements, meaning you readily have entry and exit prices in mind. Therefore, using a limit order allows you to instruct the broker to enter and exit the trade automatically – at your desired prices.

Best Cryptocurrency Day Trading Strategies

To make impressive returns consistently in your crypto day trading journey, you need to understand the different strategies at your disposal. Seasoned crypto day traders leverage many strategies to make profits and have a more in-depth understanding of the market they’re entering. 

 

Therefore, if you want your returns to become substantial, you’ll have to follow this trend. Here are some of the most popular strategies you can use when day trading crypto.

Market Corrections

The market constantly moves in different directions. This means that a market that’s currently on an upward trend can suddenly take the opposite position. This often happens when investors sell off their assets to make a profit. However, when this happens, especially for a well-established asset, it doesn’t mean that such a token won’t increase anymore.

Essentially, market alterations are often temporary, meaning the token will likely still witness an upward trend. Therefore, as a smart crypto day trader, it might do you some good to enter a buy position when the token’s value is down. That way, you get to make a profit when the coin’s price increases later on.

RSI Indicator

As earlier mentioned in our Learn How to Day Trade Crypto Guide, investors make use of indicators to analyze the market.

  • The RSI indicator, in particular, is used to determine the status of a token, whether it has been oversold or overbought.
  • If the asset has been oversold, this could mean that new buyers are set to enter the market.
  • In that case, you can enter and exit the market to make quick profits.
  • On the other hand, if the token is overbought, this is often an indication that the token is in a “bear” market.
  • If you anticipate that a correction might happen soon, you can enter the market to take advantage of the reversal before it occurs.

The RSI is just one of dozens of useful technical indicators that you should explore when you learn how to day trade crypto for the first time.

Market Research

Beyond indicators, learning more about a project is a smart strategy. The best crypto day traders are those who understand the trajectory of the coin they are looking to buy or sell. When you understand the historical data of a token, you’re likely to make a more informed decision when placing a trade. 

 

Therefore, you should not underestimate the importance of researching thoroughly and creating an effective strategy before day trading.

Benefits of Crypto Day Trading

You may still be skeptical about day trading crypto. This is not out of place, especially if you’re a beginner in the digital asset market. To help you further understand how things work, we have highlighted some benefits of day trading crypto.

Long or Short-term Trading

Although the focus of this Learn How to Day Trade Crypto Guide is on short-term positions, it’s pertinent to consider the perks of holding tokens for a longer period. When you engage with long-term trading, you’re essentially buying a coin and holding it for a lengthy period until the price increases and is profitable to sell. 

 

This strategy is referred to as “buying and holding.” In this case, you can take ownership of your tokens and store them in a wallet. However, you may not want to go through the stress of transferring your tokens to a wallet. In that case, you can simply use a broker like eToro that offers you an in-built wallet to store your digital assets. 

Leverage

When day trading with a broker like eToro, AvaTrade, or Capital.com, you have the option to apply “leverage.” Day trading with leverage means you can open large trades when you don’t have as much money as you need. 

  • That is, suppose you intend to place a buy order of $1,000, but you only have $100 in your trading account.
  • In this case, you can apply leverage of 1:10. 
  • In doing so, you get to open a position worth $1,000, meaning the broker will essentially loan you the rest. 

You should, however, note that although leverage is an effective way to maximize your returns, it’s also a risky venture.

Trading Around The Clock

A significant advantage of day trading crypto is that you can do so anytime you desire. This is unlike trading with traditional markets, where you cannot buy stocks or shares once standard trading hours have closed. This is limiting and doesn’t favor you as a trader that intends to open and close numerous positions across the day.

Risks of Crypto Day Trading

Ordinarily, the cryptocurrency scene involves high risks and different levels of uncertainty. However, when you’re day trading crypto, you have to contend with even more risks.

 

We consider the risks of crypto day trading in the sections below.

High Volatility

Cryptocurrencies can increase and decrease in value within the space of a second. This might not be an issue if you’re trading long-term and will only sell your assets after they have increased significantly in value.

 

However, when day trading crypto, you have to constantly monitor the market because you’re looking to gain a profit from ever-changing movements.

across the day.

Therefore, it’s important to use your take-profit and stop-loss orders smartly. These are effective ways to hedge your risks and maximize your returns. Essentially, as a crypto day trader, you must be ultra-aware of market updates. 

Unregulated Exchanges

If you’re unwilling to go through a KYC process, you may look to use an unregulated exchange. While these platforms will allow you to day trade crypto anonymously, they expose you to a lot of risks. Preferably, you should day trade with regulated brokers as they are more credible. 

They help you mitigate your risks and generally put you in a better position to day trade in a cost-effective manner. This is why it’s smart to use licensed brokers such as eToro, Capital.com, and AvaTrade. 

Learn How To Day Trade Cryptocurrency — Detailed Walkthrough

At the beginning of this Learn How to Day Trade Crypto Guide, we provided a brief explanation of how you can get started in this industry. The explanation we gave might be sufficient for a cryptocurrency expert.

However, if you’re just getting started at crypto day trading, you’ll need a more thorough explanation. Below, we have provided a detailed walkthrough on how to place your first crypto day trading order in less than 10 minutes!

Step 1: Choose a Trading Site

We have stated why it’s important to exercise some care when choosing a broker. This is because your broker determines your day trading experience. However, selecting the right broker can be difficult, so you should look out for a few core metrics.

This includes whether the broker is regulated, has a low-fee structure, supports numerous payment options, has a low minimum deposit requirement, provides plenty of cryptocurrency markets, and has a simple user interface. When you consider these things, you’ll likely choose the right broker. 

To help you out as a beginner, we have done some research on the best brokers and found three leading platforms you can use. As a newbie crypto trader, you can use any of eToro, Capital.com, and AvaTrade to enter and close different positions across the day. 

 

While the first latter two platforms specifically deal in CFDs, eToro allows you to trade these derivatives as well as invest in the actual crypto asset itself. 

Step 2: Open a Trading Account

You need to set up your account before you can start day trading. Since you’re using a regulated broker, you have to go through a KYC process. This means that you have to submit some personal details and upload a government-issued ID. 

 

Additionally, you’ll also have to provide a document that validates your address. This can be your utility bill or bank statement. Once your account is verified, you start day trading.

Step 3: Add Funds to Your Account

You cannot day trade with an empty account even if the platform allows you to apply leverage. Therefore, you must consider the broker’s required minimum deposit and then add funds to your account accordingly. For instance, on eToro, you need to deposit a minimum of $200. 

 

On Capital.com, eToro, and Ava Trade, you can add funds to your account using either your debit/credit card or an e-wallet. You can also use a wire transfer. However, this is not your best option, as the process is often slow.

Step 4: Choose a Trading Market

Here, you’re required to select the trading pair of your desired token. Suppose you intend to day trade ALGO, you simply need to locate the search bar and look for the token by inputting its name. 

Step 5: Open Your Trade

Once you get to the respective token’s page, specify the orders you will be using. That is, create a buy or sell order at the prices you desire for each.

Following that, enter the amount you intend to stake and click “Open Trade” to get started. Once you do, you’ve now kickstarted your day trading journey!

Learn How To Day Trade Crypto — Bottom Line

If you’re looking to make a profit from the constant price shifts in the cryptocurrency market, day trading will likely interest you. While this form of trading comes with more responsibilities, you can navigate the market easily once you understand the best strategies and subsequently do your own research. 

In this How to Day Trade Crypto Guide, we have shown you all you need to know about the subject. Once you choose the right broker and you understand the market you’re entering, you’re good to go.

FAQs

How do you day trade crypto?

You can get started by opening an account with a regulated broker. Once you do, fund the account and decide whether to place a buy or sell order on your chosen crypto pair. This should be based on your research of the project you intend to day trade. 

 

Where can I day trade crypto?

There are numerous brokers and exchanges for you to day trade crypto. However, the best options for you are eToro, Capital.com, and AvaTrade. They all allow you to trade cryptocurrencies in a cost-effective way.

 

Can you day trade cryptocurrencies with leverage?

To do this, you need to choose a broker that supports leveraged CFDs. Capital.com, eToro, and AvaTrade all do.

 

How can I make money from crypto day trading?

If you want to maximize your returns from crypto day trading, you need to use effective market strategies. This includes taking advantage of market corrections and using technical indicators. You also need to research adequately and know when to go long or short.

 

What is the best cryptocurrency pair to day trade?

The most day traded cryptocurrency pair in the market is BTC/USD. This pair comprises Bitcoin and the US dollar. Day trading this pair lets you enjoy the largest liquidity levels and the tightest spreads.

How to Read Pairs – Beginners Guide on Reading Crypto Pairs!

Whether you are planning to take advantage of our quality crypto signals or wish to trade on a DIY basis – you need to have a firm understanding of how to read pairs before getting started.

 

Much like in the world of Forex/Crypto Trading, crypto pairs consist of two competing assets. The pair will have an exchange rate that moves up and down on a second-by-second basis – so your job is to correctly predict whether this will rise or fall.

 

In this guide, we cover the ins and outs of how to read pairs and walk you through the process of placing a trade from the comfort of your home.

What are Crypto Pairs?

In a nutshell, irrespective of whether you are a long-term investor or a short-term trader – the cryptocurrency markets are priced in pairs. Each pair will consist of two competing assets with an exchange rate that fluctuates throughout the trading day.

 

The most popular crypto pair in terms of trading volume is BTC/USD – which will see you speculate on the future value between Bitcoin and the US dollar. For example, if BTC/USD is priced at $39,500 – you need to determine whether this is likely to rise or fall.

It is important to note that there are two main types of crypto pairs that you need to be aware of. This includes fiat-to-crypto pairs and crypto-cross pairs. We explain the difference between the two in the sections below.

Fiat-to-Crypto Pairs

The most traded digital currency markets are fiat-to-crypto pairs. As the name implies, each pair will contain a fiat currency and a digital currency. For example, the previously mentioned BTC/USD is a fiat-to-crypto pair, as this contains the US dollar (fiat) and Bitcoin (digital). Other popular fiat-to-crypto pairs include ETH/USD, XRP/USD, and BCH/USD.

 

You might have noticed that the vast majority of crypto-to-fiat pairs contain the US dollar. This is because the US dollar acts as the benchmark currency for the digital asset industry. This is no different from the global commodity trading scene – with the likes of oil, natural gas, gold, silver, wheat, corn, and soybeans all quoted against the US dollar.

With that being said, it is also possible to access fiat-to-crypto pairs that contain an alternative fiat currency. For example, some cryptocurrency brokers will also offer pairs that include the euro, British pound, Japanese yen, or Australian dollar. These pairs attract less liquidity and trading volume, so you might find that the spreads on offer are much wider.

 

We cover how spreads and crypto pairs are related shortly in this guide.

 

Before moving onto the second pair type – let’s conclude this section by giving you an example of how a fiat-to-crypto pair can be traded.

  • You want to trade Ripple against the US dollar – which is represented by the pair XRP/USD
  • The price of XRP/USD is currently at $0.4950
  • You think that XRP/USD is overvalued, so you place a sell order
  • A few hours later, XRP/USD is priced at $0.4690
  • This represents a decline of 5.25%

As per the above example, on a stake of $100, you would have made a profit of $5.25.

Crypto-Cross Pairs

The second pair type that you will likely come across when trading digital currencies is a crypto-cross pair. Unlike the previously discussed pair type, this will never include a fiat currency. On the contrary, crypto-cross pairs contain two different cryptocurrencies.

  • For example, the crypto-cross pair BTC/XLM would see you trade the exchange rate between Bitcoin and Stellar Lumens.
  • At the time of writing, this pair is trading at 91,624.
  • This means that for every 1 Bitcoin, the market is prepared to pay 91,624 Stellar Lumens.

Crypto-cross pairs that contain major digital currencies – such as Bitcoin, Ethereum, Ripple, Binance Coin, EOS, and Tether, attract lots of liquidity at online exchanges. But, if you decide to trade a crypto-cross pair that contains a less-liquid digital coin, this will result in low trading volumes and wide spreads.

 

With that said, the biggest challenge when attempting to trade crypto-cross pairs is that there is no way to price the position in fiat currency.

For example, if market sentiment on Bitcoin is strong, you know to go long on a pair like BTC/USD or BTC/EUR. However, when trading crypto-cross pairs, you essentially need to know which of the two competing digital currencies is favoured by the markets.  Taking this into, when learning how to read pairs for the very first time, it’s best to stick with fiat-to-crypto markets.

 

Nevertheless, before we conclude this section, let’s run through a quick example of how a crypto-cross pair might work in practice.

  • You want to trade Bitcoin against EOS – which is represented by the pair BTC/EOS
  • The price of BTC/EOS is currently at 5,754
  • You think that BTC/EOS is undervalued, so you place a buy order
  • A few hours later, BTC/EOS is priced at 6,470
  • This represents an increase of 12.4%

As per the above example, on a stake of $100, you would have made a profit of $12.40.

Quote vs Base Currency

As we have established thus far in this guide on how to ready pairs, two competing assets are always in play. If that’s a fiat-to-crypto pair, this will consist of one digital asset and one fiat currency.

 

If it’s a crypto-cross pair, this will consist of two digital currencies. Either way, in order to differentiate between the two assets, we refer to one side of the pair as the ‘quote currency’ and the other as the ‘base currency’. If you have previously traded Forex/Crypto, then you will already know how the quote and base currency works. If not, the good news is that this is pretty straightforward.

  • The asset on the left side of the crypto pair is known as the ‘base‘ currency
  • The asset on the right side of the crypto pair is known as the ‘quote‘ currency

For example, let’s suppose that you are trading ETH/USD. As per the above, Ethereum is the base currency while the US dollar is the quote currency. This makes sense, as ETH/USD is currently being traded at $2,560. As the US dollar is on the right-hand side of the pair, this is why it is quoted in USD and not ETH.

 

If you were trading a crypto-cross pair, this is where an understanding of the quote and base currency is really important. This is because you won’t have the assistance of a fiat currency like USD or EUR.

For example:

  • Let’s suppose that you are trading ETH/BTC
  • The pair is currently trading at 0.0708
  • As ETH is on the left-hand side of the pair, Ethereum is the base currency
  • As BTC is on the right-hand side of the pair, Bitcoin is the quote currency

As per the above example, for every 1 ETH – the market is prepared to pay 0.0708 Bitcoin

Buy and Sell Price of a Crypto Pair

When trading cryptocurrency online, your chosen broker or exchange will always show you two different prices on each pair. This is the buy (bid) and the sell (ask) price of the market in question.

This gap between both prices ensures that the trading platform always makes a profit no matter which direction the market goes. Known as the ‘spread’, you will want this gap to be as tight as possible. This is because the wider the spread, the more you are paying to your cryptocurrency broker. 

For example,  in the screenshot above, you will see that on BTC/USD, Capital.com is offering a:

  • Buy price of $36399.35
  • Sell price of $36249.35

The difference between these two prices amounts to 0.41%. Make no mistake about it, a spread of 0.41% in the cryptocurrency world is extremely competitive. This is especially the case when you consider that Capital.com allows you to trade cryptocurrencies without paying any commission.

 

It is important to note that the buy and sell price of your chosen crypto pair will fluctuate every second. The competitiveness of the spread is dictated by market conditions.

 

For example, if you were trading a major pair like BTC/USD when both the US and European markets are open, you’ll get some of the best spreads in the cryptocurrency industry. However, if you were trading a less liquid pair like EOS/XLM outside of standard market hours, the spread is going to be much wider.

Ticker Symbols

It is also important to ensure that you know the correct ticker symbol for the pair in which you wish to trade. At one end of the scale, the likes of Ethereum (ETH) and Bitcoin (BTC) are relatively easy to decipher.

 

However, pairs like Stellar Lumens (XLM) and Ripple (XRP) might appear confusing to a newbie trader. To be 100% sure that you are viewing the correct ticker symbols for your desired pair – it’s best to have a quick look on CoinMarketCap.

How to Read Pairs and Place a Trade Today

You should now have a firm idea of how to read pairs when trading cryptocurrencies online. To conclude this guide, we are now going to show you a live example of how to read and trade crypto pairs.

Step 1: Open an Account With a Crypto Broker

Before you can start trading pairs, you will first need to join a top-rated crypto broker. There are hundreds of such providers to choose from in the online arena, so spend some time thinking about what your priorities are.

The most important metrics to consider are:

  • Fees: How much does the broker charge in trading commissions, spreads, and transaction fees?
  • Safety: Is the crypto broker authorized and regulated by at least one reputable body
  • Markets: How many crypto pairs will you have access to? Does this cover fiat-to-crypto pairs, crypto-cross pairs, or a combination of the two?
  • User Experience: Assuming that you new to reading crypto pairs, you’ll need to ensure that your chosen broker offers a great user experience
  • Customer Support: What level of customer support does the crypto broker offer?

If you don’t have time to research dozens of crypto brokers right now – you might want to consider Capital.com. The platform offers a significant number of crypto pairs – all of which can be traded at 0% commission and tight spreads. Plus, you will have access to a free demo account – so you can practice reading and trading pairs without needing to risk any money!

Step 2: Fund Your Crypto Trading Account

If you decided to sign up with Capital.com – good news – as you can easily deposit funds with a number of everyday payment methods. This includes debit/credit cards issued by Visa and MasterCard, e-wallets, and bank transfers. On the other hand, if electing to use an unregulated cryptocurrency exchange, you will need to deposit funds with a digital asset.

Step 3: Browse Crypto Pairs

Now that you have made a deposit, you are ready to start trading crypto pairs. If you know which pair you want to trade, you can search for it. For example, if you want to trade Cardano (ADA) against the US dollar (USD) – you can search for ADA/USD.

Or, you can browse what pairs are available by scrolling down the list of supported markets.

Step 4: Buy or Sell Order

Regulated cryptocurrency trading platforms like Capital.com allow you to choose from a buy or sell order when entering the market. A buy order means that you think the crypto pair will increase in value. A sell order means that you think the crypto pair will decrease in value. Based on your own research (or our crypto signals) – choose from a buy or sell order before moving on to the next step.

Step 5: Enter Stake and Place Crypto Trade

Finally, you will need to enter the amount of money that you wish to stake on the trade. This is usually determined in US dollars across most platforms – including Capital.com.

 

If you are planning to execute stop-loss and take-profit orders (which you should), enter your desired price points.

Step 5: Enter Stake and Place Crypto Trade

Finally, you will need to enter the amount of money that you wish to stake on the trade. This is usually determined in US dollars across most platforms – including Capital.com.

 

If you are planning to execute stop-loss and take-profit orders (which you should), enter your desired price points.

Check all of the information entered and confirm the order to place your cryptocurrency trade!

How to Read Pairs: The Bottom Line

Finally, you will need to enter the amount of money that you wish to stake on the trade. This is usually determined in US dollars across most platforms – including Capital.com.

 

If you are planning to execute stop-loss and take-profit orders (which you should), enter your desired price points.

Step 5: Enter Stake and Place Crypto Trade

This guide has taught you how to read pairs – which is a crucial element when trading cryptocurrencies like Bitcoin. We have also explained the difference between fiat-to-crypto and crypto-cross pairs, and how to read and assess the spread.

 

All that is left for you to do now is place your first crypto trade. For this, we like Capital.com – as the platform is heavily regulated, supports plenty of everyday payment methods, offers dozens of crypto pairs, and charges 0% commission.

We’ve rightsized a few legacy Flagship holdings

We’ve trimmed our holding in Apple (AAPL) and added to our position in Disney (DIS) for clients in Titan’s Flagship strategy.
We believe these moves accomplish two key things for clients:
  • Taking profits in a long-term winner; and
  • Increasing our exposure to what we believe to be a positive risk/reward name.
  • Taking profits on a General

    We’ve held Apple (AAPL) for clients in Titan’s Flagship portfolio since inception. AAPL is, in our view, one of the great consumer companies of all time and recently became the first business to have a market value above $3 trillion.
 
AAPL, along with a handful of other “Generals” like Flagship holdings Microsoft (MSFT), Amazon (AMZN, and Alphabet (GOOG), has been a safe haven for many investors throughout the recent growth sell-off. However, our work currently shows AAPL is trading at a premium relative to what we believe may be its growth trajectory.
 
AAPL shares currently trade at 29x next year’s earnings against the stock’s 5-year historical average of 20x. In other words, we believe the business is expensive for a company that is expected to generate mid-single-digit annual earnings growth through 2025.
 
Though we’re reducing the size of our position in AAPL, the stock is still nearly a full-sized position within our Flagship strategy given our strong expectation for the 5G cycle, the potential upside from virtual reality adoption, and Apple possibly stepping into the electric vehicle market.
  • Adding juice behind the Happiest Place on Earth

Using the proceeds from trimming our AAPL position, we have increased our investment in Disney (DIS). Our work currently suggests DIS may be able to deliver a 20%+ average annual return, net of fees, through the end of 2024.
 
 
In recent years, investors have focused on the growth of Disney+ after decades of living and dying on box office numbers and theme park attendance data, and for good reason. With 118 million global subscribers, the Disney+ subscribers base has grown to roughly half the size of Netflix in just over three years.
 
Disney management recently stated they plan to launch 340+ local original titles in international markets over the next few years, and given the breadth of upcoming content for the service we see a long runway for growth. Some believe the streaming wars will result in a winner-takes-most market. However, our research suggests that households may average 3 paid streaming services, and multiple players could be able to generate recurring revenues and favorable unit economics.
 
Given Disney’s IP, brand awareness, and track record of producing quality content, we believe that Disney+ may cement itself as a top 3 Subscription Video on Demand (SVOD) player globally, generating substantial cash flow for shareholders long-term.
 
We also believe Disney’s Parks business may come out of the pandemic stronger than ever, as we expect spend per guest to significantly exceed pre-Covid levels. Near-term, we expect the Parks recovery to strengthen in 2022, with our research indicating attendance continued to grow through December 2021 despite increased Covid cases

Looking back at 2021, looking ahead to 2022

 
 
Titan has two main objectives: attempt to grow your capital at a high rate of return over a long period of time and to help make you the smartest investor you’ve ever been.
If you’ve heard us say it once, you’ve heard us say it many times: we’re in this for the long run. We don’t lose sleep over a month, quarter or year of underperformance because we’ve seen it before, but this should never be confused with an acceptance of underperformance over any period of time.
In 2021, we underperformed the benchmarks in 3 of our 4 portfolios. Our 2021 returns, as well as returns since inception (after fees) in each strategy, are as follows:
returns
Since launching each portfolio, we have outperformed the benchmark in 3 of 4 portfolios on an after-fees basis, but again, we’re in this for the long run.

Quality 🤝 Growth

As long-term investors, there will (unfortunately) inevitably be years where we underperform our benchmarks. Any investor who tells you this can be avoided should be viewed with extreme skepticism.
 
At Titan, we consider ourselves “quality growth investors.” Our goal is to grow our clients’ capital at a high rate of return over a long period of time by investing in what we believe to be high-quality compounders.
 
Let’s take a minute to dissect what “quality growth investor” means.
 
As bottom-up fundamental investors at Titan, we define quality companies as businesses that are highly profitable or have a clear path to becoming so, in our view. Our investment team attempts to be able to conservatively underwrite a 15%+ annualized return over a 3+ year period for us to consider building a position. We’d rather be a little late to a great party, than the first ones to a lame party.
 
We define growth companies as businesses we believe may reinvest their current profits to fuel future growth. A metric my team lives and dies by is Return on Invested Capital, or ROIC. Over time, a company that generates a mid-to-high teens ROIC generally finds its market cap growing at a similar rate. If it sounds simple, that’s because we believe this concept is.
 
In the short term, however, Mr. Market may not always value fundamentals over technicals, sentiment, macro factors, or other flavor-of-the-moment market dynamics.

Back to the future

By March 2020, global equities had dropped roughly 30% from their prior highs. 
 
Stocks appeared extremely oversold to us at the time. We believed 30% of all future corporate profits had not been wiped out by the impacts of the pandemic. We believed the sell-off was overdone and advised our clients to remain invested. We’re thankful that ~99% of our clients remained invested through the market’s lows.
 
Eventually, the market caught its breath. An unprecedented amount of stimulus was pumped into the economy by Congress and the Federal Reserve, the next financial crisis appeared unlikely to materialize, and soon stocks caught a bid. But not just the high quality growth names that we believe populate Titan’s strategies — every stock seemed to be in rally mode. 
 
In 2020, our Flagship and Opportunities strategies outperformed their benchmarks, net of fees, by double-digits. As 2021 began, a strong move higher for growth assets took hold and our portfolios reflected this move. However, our year was about to get significantly more challenging.

Transitory proves transitory

A recovery in the U.S. economy fueled by economic stimulus, Covid vaccinations, and a surge in hiring, among other factors, created an explosion of demand for goods, services, and risk assets. The “meme stock” rallies of the winter and summer of 2021, a record year for IPO markets, and a new wave of crypto enthusiasm created a loud and chaotic environment for long-term investors. 
 
In the background of these financial market distractions, the economic recovery was surfacing a risk that investors had not faced in a generation: inflation. Initially expected by many policymakers and economists to be a “transitory,” or short-lived, phenomenon in markets, rising prices for consumers and businesses have stuck around. 
 
Inflation can have many impacts on the investing landscape, but the most significant impact from the persistent rise in prices we’ve seen over the last several quarters has been a major shift in Fed policy and resulted in rising interest rates.
When 2021 began, many investors believed we may not see the Fed raise interest rates until 2023. As we write this letter in early January 2022, markets are now pricing in as many as four interest rate increases in 2022. These expectations for rising interest rates pressured long-duration assets, or anything investors are buying today in hopes of realizing profits tomorrow. And many of the fastest-growing names in our strategies fell into this camp. 
 
In response to this shifting environment, we’ve increased our portfolios’ exposure to healthcare and industrial companies while reducing our exposure to tech stocks. We believe companies like Thermo Fisher, Avantor, and Safran exhibit the characteristics of businesses we hope to own in our portfolios — durable competitive advantages, growing secular industry backdrops, best-in-class leadership teams, and attractive valuations. We also raised cash in each of our equity strategies, reduced exposure to some high-growth software names, and added to some existing portfolio holdings we believed had been unfairly punished amid this market regime change.
Could we have done some things differently in 2021? Yes, but hindsight is 2020 (no pun intended). Looking back, we may have overstayed our welcome in a handful of stocks whose valuations surpassed what may have been justified by their fundamentals. But for many other names, we continue to believe in the long-term earnings potential and may gladly stomach near-term underperformance in an effort to realize gains over the long run.
 
Our investment philosophy is centered on owning a select number of stocks that we believe can outperform highly diversified indices over time. Being concentrated does not come without volatility. Is it painful while volatility happens? You bet. Is it expected? You bet. But we believe long-term investors have the ability to stomach volatility in the short term in order to outperform over the long run.
After an active second half of the year, we believe our decisions may help mitigate downside risk and reduce portfolio volatility in the short term, while also providing our strategies with additional “dry powder” that can be used to seize opportunities during the current market dislocation.
 
If we can be invested in companies trading at what we believe to be attractive valuations that are growing earnings organically upwards of 15% or 20%+ per year, we believe we can weather any storm while outperforming our benchmarks over a 3-5 year investment horizon.

On the horizon

Looking ahead to 2022, we expect the recent bout of market volatility may persist amid a number of uncertainties. But we believe volatility can also lead to the moments of greatest opportunity, especially to those investors with a long time horizon.
 
How many rate hikes can we expect? Will inflation prove transitory? If so, when? If not, how high can it go? Will there be another Covid variant? Will it slow economic growth? Midterm elections? China? The list of macro questions goes on…
 
Nobody can answer these questions with certainty. And if someone says they can, we don’t believe this person is being honest with you.
 
We believe reining in our risk exposures to certain sectors and factors enables us to prepare for, but not predict, these unknowns. 
 
And with these risk and portfolio management frameworks in place, our team is able to focus on what it does best: find long-term quality compounders with idiosyncratic upside.
 
We believe we are well-positioned across our four strategies today, and as opportunities arise we may start to gradually leg back into higher quality growth investments that have fallen sharply — sometimes up to 40% or 50% — in recent months using the cash positions we’ve built in each portfolio.

Impossible without you

Over the last four years, we have built a community of over 50,000 investors that have trusted us with some portion of their hard-earned capital, and we don’t take this responsibility lightly.
 
I started this letter with our two objectives: grow your capital at a high rate of return over a long period of time and to make you the smartest investor you’ve ever been. Core to us achieving these objectives is earning the trust and patience of our clients who enable our process to play out. 
 
We’re thankful to have an avenue to speak directly to our investors and plan to keep this line of communication open as we navigate these choppy waters. 
 
As always, thank you for the trust you’ve put in our team, and we’re optimistic about a strong 2022.
 
Best, Clay

Three Things (1/13)

“In Wall Street, the man who does not change his mind will soon have no change to mind.” —W.D Gann
 
1) HR software startup Justworks delays IPO, citing turbulent market conditions following record debuts in 2021
  • The company had sought a valuation of up to $2 billion in its IPO process.
  • Including SPACs and traditional IPOs, 1,000 new issues hit the market in 2021, the most in a single year on record.
  • Of companies that completed an IPO in 2021, excluding SPACs, two-thirds were trading below their offer price at year-end.

Titan’s Takeaway: In our view, the IPO market can offer a window into how much risk investors are generally willing to take on. And while we’ve seen some stabilization in beaten-down parts of the market, it seems IPOs are still signaling caution at the beginning of 2022.

2) Robinhood offers permanent remote work to most employees as delayed office returns become permanent
  • Tech peers including Titan Flagship holding Coinbase, Twitter, and Shopify are among those to go fully remote since the pandemic started.
  • Robinhood says some teams may need to live within a “commutable distance” to an office for regulatory reasons.
  • The company remains headquartered in Menlo Park, California.
Titan’s Takeaway: As we approach the start of year three of remote work arrangements for many companies, we see time and again temporary arrangements becoming permanent. In our view, this reshuffling of worker and employer expectations is only beginning to be understood across the economy, with these impacts likely to reverberate across the labor market for many years to come.
3) Inflation rises 7% over last year in December, the most since 1982 as pricing pressures persist throughout the U.S. economy
  • “Core” inflation, which excludes more volatile food and energy prices, rose 5.5% over last year in December, the most since 1991.
  • The cost of shelter and used car and truck prices were the largest contributors to December’s price increases.
  • Energy prices rose 29.3% over the prior year in December, the most of any category, but fell 0.4% from November to December.
Titan’s Takeaway: The last several months of inflation data have made clear price increases across categories have been more persistent than many predicted in early 2021. The market’s muted reaction to Wednesday’s data, however, suggests investors believe they understand how the Fed is likely to respond to this development in the coming months.

Our latest thoughts on the crypto market

As we write this update, Bitcoin is currently trading at ~$44K after recovering from the recent lows near $40K earlier this week. $40-$42K is a critical support line that we’re monitoring, but we currently believe the current risks may be skewed to the upside.
Below are a few key trends I’m watching in the Bitcoin market (as a proxy for broader crypto market health) and some thoughts on the altcoins:
  • On-chain analytics suggest that short-term traders have largely been flushed out. Data such as “dormancy flow” — which tracks the average age of coins relative to market cap — suggest that the majority of coins that are sold (mostly at a loss) are young coins, with the ratio reaching a local bottom (“buy zone”). This bottoming signal has only been flashed five times before in Bitcoin’s history.

 

  • Futures long liquidations dominance reaching historically high levels. Since December, long traders have been trying to catch the knife and have been consistently on the losing side, representing ~70% of total liquidation volume. Despite this, leverage remains high, which suggests that short traders remain aggressive and have not been punished for taking increased risk. In our view, this data suggests a scenario for a potential short squeeze.
  • We have hit the rare lows of 10/100 on the Crypto Fear & Greed Index (“Extreme Fear”). Bitcoin has only reached this level four times in the past, and each time the price recovered not long after and Bitcoin made new highs.

 

  • Funding rates have remained largely negative or neutral as price declined, indicating that long traders have finally stopped trying to “buy the dip,” and shorts are paying longs to hold their positions. As Bitocin’s price held the $40k support level, short traders were not being rewarded while their PnL was being eaten by funding fees. In our view, this may establish the conditions for a short squeeze.
  • We believe macro headwinds may be largely priced in. In the crypto market today, it seems you cannot go five minutes on Twitter without hearing about “macro,” “inflation,” the Federal Reserve, or the stock market acting as a headwind for Bitcoin or other cryptocurrencies. In our view, the number of comments and posts on social media suggests we may already be past the “peak frustration” period.

 

  • Long-term on-chain indicators show that fundamentals still look solid. Bitcoin supply shock ratio (illiquid supply / liquid supply) continues to trend up and make new all-time-highs. Whales also seem to be accumulating again after some distribution behavior in December.

On the altcoins

Venture funds poured over $30B into crypto startups in 2021, the growth of developers in Web3 has been record-breaking and fundamentals like the number of active wallet addresses and fee transactions continue to surge.
We’re seeing exciting developments within a few of these core holdings like Solana’s ($SOL) booming NFT ecosystem, Terra’s ($LUNA) decentralized stablecoin, and Avalanche ($AVAX) has cemented itself as one of the best EVM (Ethereum virtual machine) compatible blockchains, in our view.
Overall, we remain constructive on the outlook for the crypto market, and at this time we are making no changes to Titan’s Crypto strategy.
As conditions evolve, we’ll be sure to keep you in the loop on our team’s thinking. As always, let us know if you have any questions.
Gritt

What Is Value Investing? A Beginner’s Guide

Value investing is a strategy based on buying undervalued investments and holding on to them for an extended period of time. Learn about the principles of value investing.

 

A value investing strategy is based on buying undervalued investments and holding on to them for an extended period of time. Generally, value investors focus on strong companies with a long history of solid returns, and aim to purchase those stocks when they appear to be underpriced.

Though value investing takes time and patience, it’s a popular strategy among many well-known investors. Warren Buffett, for instance, considers himself to be a value investor. “Never count on making a good sale,” Buffett has stated. “Have the purchase price be so attractive that even a mediocre sale gives good results.”

That sentiment is shared by many value investors, who intend for their stocks to trend positively over the long-term, rather than trying to time the market or pick a growth stock that may (or may not) experience meteoric short-term growth.

 

How does value investing work?

In theory, value investors buy stocks with a significant delta between the current price and the stock’s intrinsic value. Over time, and as other investors notice this delta and purchase the stock, the price corrects. In turn, the investors’ portfolios gain value.

 

Value investing is a slower process, though. If investors can’t hold out long enough for that investment to correct—or that expected correction never comes at all—they may still find themselves losing money. All stocks are unpredictable, and there are no guarantees when it comes to investing.

 

5 value investing principles

There are five general principles of value investing: 

 

  1. The price is right. When it comes to choosing value investments, investors are looking for stocks that are underpriced compared to the company’s intrinsic value, and are likely to gain value over time.
  2. The companies are established. Seasoned value investors look for reliable companies with a history of steady growth, a solid financial structure, and a strong management team. Although none of that guarantees future growth, companies that have shown progress for years (or even decades) may be more likely to continue on an upward trajectory. 
  3. Dividends are (usually) offered. Value investing typically involves seeking out companies that consistently pay dividends, as dividends are generally associated with more mature and established companies. (Newer companies tend to reinvest in their business.) By paying dividends to investors, these companies indicate that they are moving out of the initial growth phase and feel financially stable.
  4. Growth is slow but steady. By definition, value investing stocks are most likely to provide consistent growth in the years to come, but they generally won’t involve explosive growth. Value investing instead focuses on buying stable investments at a good price, then holding onto them as they steadily (albeit, slowly) grow. 
  5. Diversification still matters. Regardless of the investments purchased, value investors still recognize the importance of portfolio diversification as a way to amplify growth and hedge against loss.

Growth vs. value investing

The value investment strategy is different from a growth investing approach.

With growth investing, investors try to find and purchase stocks that they expect to have explosive short-term growth. (Think stocks like Amazon or Tesla, which have seen unprecedented success in recent decades.) These are generally newer companies; although their assets and financial history don’t necessarily support their stock price, and may even seem overvalued, these investors believe the potential for growth warrants the risk.

 

Here are the key points of difference between value and growth investing. 

  • Typical stock price. Value investing focuses on stocks that are perceived to be reasonably or under priced, whereas growth investing focuses on stocks that may appear overpriced. 

 

  • Expected growth timeline. Value investing takes a long term view, whereas growth investing takes a short term view. 

 

  • Dividends. Value investing usually involves stocks that pay dividends, whereas dividends are uncommon in growth investing. 

 

  • Typical company age. Value investing focuses on older, established companies, whereas growth investing focuses on newer companies.

Some investors will choose value investing vs. growth investing (or vice versa) if it better aligns with their risk tolerance. Other investors may choose to balance their portfolio with a blend of value and growth stocks.

 

Choosing a value stock

To sift through potential value stocks, investors will typically do extensive fundamental research, including the following:

  • Examine the company’s history. Investors want to know: Does the company’s past indicate strong leadership, values, and a history of innovation? 

 

  • Consider the company’s assets and financial stability. Investors often analyze the company’s solvency, financial management, and asset stability. 

 

  • Scrutinize the company’s future plans and projections. Does the company hold patents or specialized technology that competitors don’t? Do they lead the industry in innovation or have other advantages?

 

  • Determine whether dividends are offered. Dividends are not required for a stock to be a value investment. They are frequently offered by mature, financially stable companies, however, which may signal value potential to investors.

  • Analyze the industry. Certain industries are cyclical by nature. Although the stock prices may rise initially, that growth may be lost further into the cycle.

The bottom line

Value investments are a common choice when it comes to promoting stable, long-term portfolio growth and potentially earning dividends along the way. They require patience and time, but remain popular among some of history’s most successful investors.

What Is the Price-to-Earnings (P/E) Ratio? Definition & Examples

A price-to-earnings ratio, or P/E, refers to the relationship between a company’s stock price and its earnings, or net income.

 

Is a stock a bargain or overpriced? This is a basic question for every investor, and there are any number of ways to answer it. But one of the best places to start is by looking at what is known as the price-to-earnings ratio, a yardstick that every investor should be familiar with and understand.

 

What is a price-to-earnings ratio?

A price-to-earnings ratio, or P/E, refers to the relationship between a company’s stock price and its earnings, or net income. It’s also referred to as the price-earnings multiple because the stock price will usually be several times more than earnings.

 

The P/E ratio answers this question: how expensive is the stock price, relative to the company’s profitability? The ratio is also used for sectors—companies grouped by same or similar industries—and for broader market indexes such as the Standard & Poor’s 500 and the technology-heavy Nasdaq.

How to calculate P/E ratio

Here is a simple example of how to calculate the P/E ratio: Company A’s stock price is $120, and its earnings for the most recent four quarters were $6 a share. The price-to-earnings ratio is:

120/6 = 20

This means that an investor is willing to pay 20 times the amount of Company A’s earnings to own a share—or said another way, an investor is willing to pay $20 to own a claim on a dollar of the company’s earnings. The price-earnings ratio, then, is investors’ collective opinion about a company’s profitability.

 

An investor uses P/E comparisons to determine how expensive a stock is, relative to other stocks, to the stock’s sector, or to broader market indexes. If Company B’s current stock price is $90 and its recent earnings were $3 a share, its P/E ratio is:

90/3 = 30

So even though a share of Company A nominally costs more, it’s less expensive than Company B from a relative price-earnings basis.

 

Inverse of P/E: Earnings yield

The inverse of a P/E ratio is the earnings yield—earnings divided by price in percentage terms—and investors sometimes use this comparison as well. For Company A, earnings yield is $6/$120 = 0.05 or 5%. For Company B, the yield is $3/$100 = 0.0333 or 3.33% . Company A again looks like a relatively better bargain. Earnings yield is merely an upside-down way of looking at the P/E ratio.

What’s a good P/E ratio?

The key word for answering the question, “What’s a good P/E ratio?” is it’s all relative. A price-earnings ratio in isolation means little. It must be considered relative to a number of other things. These can include: 

  • Other companies’ P/E ratios. For example, the P/E ratio of a company such as ExxonMobil’s could be compared with Chevron’s P/E.
  • Industry averages. Using the same company, an investor might compare ExxonMobil’s P/E with that of the energy sector’s average P/E.
  • Historical average. ExxonMobil’s current P/E could be compared with its historical average, giving an investor insight into whether the share valuation is higher or lower than in the past.
  • Markets. An investor could compare a company against the broad stock market—ExxonMobil’s P/E against the S&P 500’s ratio. Sector and index P/E ratios can be compared as well; the energy sector against the health-care sector, or the S&P 500 against the Nasdaq Composite.
  •  

Some companies may show N/A for price-earnings ratio, meaning not applicable, or a negative sign in front of the ratio. That means the company had no earnings, or that it reported a loss. Typically, N/A will appear, rather than a negative ratio. 

 

A company can have a bad year and then recover, restoring its positive P/E ratio. But repeated losses indicate higher risk because investors don’t know if the company will ever become profitable again. Then again, look at Amazon. Founded in 1994, it didn’t have a profitable year until 2003, when its stock price was about $50. 

 

 

Types of P/E Ratios

Investors can compare the ratios in several ways:

Current, using trailing 12-month (TTM) earnings

This usually refers to the last four quarters of reported earnings For example, if a company’s fiscal year is a regular calendar year Jan. 1 to Dec. 31, and the investor is considering an investment in August, she will add earnings for the third and fourth quarters of last year and the first and second quarters of this year, using this as the P/E denominator.

Future or forecast earnings 

This is called the forward P/E ratio. It can be based on a company’s forecast for future quarters or the year, or estimates among securities analysts. Investors study the forward P/E ratio because their investment decisions are forward-looking: earnings for the year ahead can matter more than earnings in the year behind.

 

A forward P/E that is lower than a trailing P/E suggests that investors and analysts expect a company’s earnings to grow.

Shiller P/E, historical earnings 

These also can be used to get a long-term picture of price-earnings valuation. The Shiller P/E ratio is the best known, and is used to evaluate market indexes and sectors, not individual stocks. The Shiller model, devised by Nobel Prize economist Robert Shiller and focused on the S&P 500, divides the index price by the inflation-adjusted average of index earnings for the past 10 years (40 quarters).

 

Professional investors use the Shiller ratio because it accounts for inflation and because it uses a 10-year period, enough to incorporate a full cycle of the economy—strong-growth and weak-growth years. A shorter time span might catch only one part of the cycle and thus produce a distorted P/E ratio. For this reason the Shiller ratio also is called the Cyclically Adjusted Price-Earnings (CAPE) ratio, because it smooths out the undulations of an economic cycle.

P/E ratios in 2021

As of August 2021, price-earnings ratios were near record highs, meaning that stocks were expensive by historical standards. The S&P 500, the most widely used benchmark for the stock market because the 500 companies in the index account for about three quarters of the U.S. stock market’s value, stood at about 31 in mid-August 2021. That is almost twice the index’s average P/E of the past century.

 

The Shiller ratio for the S&P 500, meanwhile, is the highest since the 2008-2009 financial crisis and the dot-com stock market bubble of the late 1990s. For the 141 years that Shiller has studied quarterly data, in only 4% of the quarters has the price-earnings ratio been higher.

These high P/E levels should prompt investors to consider forward-looking ratios. Because the forward P/E is the current stock price divided by future/expected per-share earnings, a lower forward P/E suggests higher future earnings. One estimate from a leading market economist sees a forward P/E ratio of 21 for the S&P 500. The Nasdaq 100 index, comprising the 100 biggest companies listed on Nasdaq, has a current P/E of 36, coming down from a peak of 116 in 2017; its forward P/E ratio is 29.

Another such measure, the price-to-earnings-growth (PEG) ratio, is used to assess whether stocks are undervalued or overvalued. It is the current P/E of the stock or index, divided by the rate of expected earnings growth. A ratio above 1 generally means overvaluation, and below 1, undervaluation.

The S&P 500 has a current PEG ratio of about 3.4 as of mid-August.

 

Looking ahead

Investors should remember a few things when trying to look ahead by examining forward P/E ratios:

  • The ratios are based on estimates. They are only best guesses, using available information.

 

  • Who is doing the estimating? Are earnings projections coming from the company, or from securities analysts and other outsiders? Different estimates can result in different expected ratios.
    Has the company been reliable in the past with projections? Have analysts’ expectations been close to the mark, or way off?
  • Company projections can be subject to manipulation. For instance, a company might underestimate earnings, making it easier to exceed analysts’ expectations when earnings are reported. 

Other useful ratios

P/Es ratios can be a useful guidepost for investors, but not the only one. A high ratio might look alarming at first; but it might be justified by the company’s earnings growth rate. And a low ratio might lure investors into a seeming bargain, a so-called value stock, only to discover there are reasons the stock has a low P/E multiple with little growth prospects, such as being in a stagnant industry.

Other ratios can be used in conjunction with price-earnings to assess the suitability of a company’s stock:

  • Price-to-sales ratio, which is the company’s total market capitalization divided by its total sales or revenue for the trailing 12 months. Useful for companies that aren’t yet profitable or that have temporary losses.
  • Price-to-cash-flow ratio, the company’s stock price divided by its operating cash flow per share. Useful for companies that have little or no net income after non-cash expenses for depreciation and amortization.
  • Price-to-book ratio, which is the current stock price divided by the per-share value of shareholders’ equity market value over book value. A ratio below 1 suggests the company is undervalued. This is suitable for evaluating capital-intensive industries such as energy and transportation; not suitable for companies with intangible assets such as intellectual property.
  • Profit margins. A basic way to evaluate whether a company is controlling costs while generating sales. Investors may use net income, operating profit or EBITDA (earnings before interest, taxes, depreciation and amortization) as the basis.
  • Return on equity, return on assets. These are considered particularly useful in measuring a company’s financial condition. They are expressed as percentages.
  • Return on equity (ROE) is net income divided by shareholders equity. Higher ROE means a company is making good use of shareholder equity in generating earnings. The long-term average return on equity for the S&P 500 is about 14%, for comparison.
  • Return on assets (ROA) is net income divided by total assets. Like ROE, it’s a measure of how efficiently a company uses its resources to generate earnings. Unlike ROE, it includes debt: total assets are debt plus shareholder equity.
  • Debt-to-equity ratio, and debt-to-total-capital. Debt-equity is a company’s total debt divided by shareholder equity. Debt-to-total-capital is total assets, debt plus equity.
 

The bottom line

Investors should remember that the price-earnings ratio is a good starting point for evaluating investment choices in stocks, sectors, and indexes, but it is not sufficient on its own. A company’s price-earnings ratio should be viewed together with other ratios — whether those are ratios linked to the market price or fundamental ratios derived from companies’ business performance — and other fundamental research.

Because the purpose of ratios is to compare investment choices, investors need to make sensible comparisons—apples to apples, not apples to oranges. Simply using price-earnings to compare a software company against a supermarket chain, for example, wouldn’t make sense. The two industries have very different dynamics. Similarly, ratio analysis will be quite different for a technology sector fund than a banking-finance sector fund.

P/E ratios are a key tool investors use to help them make decisions. But they are only useful as an indicator when used with other information to make comparisons—against other companies, other industries, indexes, as well as past earnings and expectations of future profitability.

 

What Are Liquid Assets & How Do They Work?

Liquid assets are a financial cushion. But they also give someone the ability to invest quickly and take advantage of new opportunities.

 

Financial liquidity is a simple concept: It refers to an asset that can be quickly converted into cash. The easier and faster an investor can exchange an asset for cash, the more liquid it is. 

Financial advisors often tell their clients that liquid assets are for unexpected events: A car breaks down, there’s an unplanned medical expense, a family breadwinner loses a job. Liquid assets are a financial cushion. But they also give someone the ability to invest quickly and take advantage of new opportunities.

 

Cash is, of course, the ultimate liquid asset. Money-market accounts, marketable securities, checking and savings accounts—all of these offer quick access to cash. Experts feel it’s important to have cash on hand or assets that are liquid enough to cover life’s basic planned expenses (mortgages, rent, household expenses), as well as assets that can be converted to cash.

 

But there’s a tradeoff: Greater liquidity can mean lost purchasing power as inflation erodes an asset’s value, especially cash. This is why investors often balance their liquid assets against investments that are less liquid but have greater potential for appreciation.

 

Examples of liquid assets

The financial markets can attach a value to almost every asset, but not every asset can be sold for cash quickly or without losing money on the sale (or incurring a withdrawal penalty). Here are some liquid assets examples. 

  • Cash. Cash is already liquid, whether it’s in the form of currency or sitting in a checking or savings account, a money-market account, or even in a peer-to-peer payment app. Because no conversion is needed, cash can be used to pay for things instantly and is therefore considered the most liquid of all assets.
  • Stocks. Stocks can be bought and sold on stock exchanges almost as quickly as cash can trade hands. Publicly traded stocks are a liquid asset, although an investor who sells an equity will likely wait for a few days to receive the cash from the sale. There also is the risk that they may only be able to sell for less than they paid.
  • Exchange-traded funds. Exchange-traded funds, or ETFs, are funds that track an index, sector, or other asset, but trade like stocks on public exchanges. Because of this, they’re relatively easy to sell quickly and convert to cash—although like stocks, if investors need to sell an ETF in an emergency, they may sell at a loss.
  • Treasury bills and Treasury bonds. Government-backed securities are sold at regular auctions by the U.S. Treasury. It’s easy to sell them for cash if an investor needs money before they mature. T-bills mature within four weeks to a year, while Treasury bonds have longer terms (as much as 30 years), but offer higher interest payments.
  • Certificates of deposit. Some people put cash in CDs as an alternative to savings accounts, because they can earn more interest. However, they’re not as liquid as savings accounts, because they come with various fixed maturity dates and investors incur penalties if they need to withdraw before that date.
  • Bonds. These assets are fixed-income investments in which investors loan money to a corporation, government, or agency until an end date, when the investor collects their principal and fixed interest. Many bonds are fairly liquid, because there’s a large secondary market for bond trading.
  • Mutual funds. Mutual funds, or managed portfolios of investments made up of different financial securities, are considered liquid because investors can readily sell their shares. They’re a bit less liquid than stocks and ETFs, because they trade only once a day.
  • Money-market funds. Money-market funds, a type of mutual fund that owns liquid assets such as cash, CDs, or bonds, are low-risk (but low-yield) investments. Investors can sell their shares and receive proceeds from the sale within a day or two.
  • Gold and silver. In theory, gold and silver should be as liquid as cash, because the metals trade on exchanges, much like stocks. And indeed, securities tied to the metals do trade freely, like other commodities, with value determined by what’s known as the spot price. But the physical metals themselves trade hands less frequently. An investor’s precious metal or coins can be less liquid than another kind of investment because of the time it can take to get them out of storage and exchange them through a dealer. 
 

What are non-liquid assets?

In contrast to liquid assets, non-liquid—also called illiquid or fixed—assets, can’t be converted into cash quickly. Depending on the asset, a sale can take months or even years to complete.

 

Non-liquid assets include tangible items such as equipment, land, real estate, art, vehicles, collectibles, and jewelry. These require both effort and time to sell and convert to cash.

 

Some less concrete assets are non-liquid as well, such as ownership in private companies, some debt instruments, and stocks that trade on over-the-counter markets.

 

Certain circumstances can contribute to the illiquidity of a fixed asset. A valuable piece of art or a piece of jewelry may hold its value over time. But these often have a limited pool of potential buyers, which lowers their liquidity.

Why asset liquidity matters

The financial crisis of 2007-09 and the COVID-19 pandemic highlighted the importance of liquid assets. They exist to give people immediate, or near-immediate, access to cash for emergencies. The amount of money people decide to keep liquid, though, is based on their own assessments of their job security; whether their house and cars are paid off; how much health coverage their insurance provides, and so forth. 

 

Liquid assets are useful for other reasons, too. For instance, securing a loan to buy a property may require a cash down payment. Holding large amounts of liquid assets also can help a borrower secure a loan more easily or on better terms.

 

FAQs about liquid assets

Assets vary in their degree of liquidity, and some are easier and faster to convert into cash than others. Here are some common questions about liquid assets:

Is gold a liquid asset?

Gold and silver coins are currency, and in theory are as liquid as any other form of cash (although almost no one uses them in this way anymore). Precious metals become less liquid when they aren’t used as currency; they must be removed from storage and exchanged for cash through a dealer.

Is a 401(k) a liquid asset?

A 401(k) is a tax-deferred retirement account typically offered through an employer. It’s less liquid than a taxable investment account because the tradeoff for the tax benefit usually includes penalties for withdrawal before age 59 1/2.

Is a house a liquid asset?

Real estate is considered a fixed or non-liquid asset, because a sale to convert the asset into cash can take weeks, months, or years. Some people choose to tap the equity in their property through a home equity loan or line of credit, but the home itself is still considered a fixed asset.

Is a checking account a liquid asset?

Checking accounts hold cash that can be instantly withdrawn via debit card, peer-to-peer payment apps, or by writing checks. They’re as close to cash as an asset gets. 

Is a savings account a liquid asset?  

Savings accounts are slightly less liquid than checking accounts. Federal Reserve Board’s Regulation D prevents account holders from making more than six withdrawals or transfers per month from a savings account. This same rule applies to money-market accounts. There are some exceptions, but the general idea is that savings accounts are liquid—just not as accessible as checking accounts or cash.