WEBVTT 00:05.640 --> 00:11.120 In this video we'll dive into how the cryptocurrency market works as well as what effects the price 00:11.120 --> 00:13.100 of crypto currencies. 00:13.160 --> 00:18.830 This information is very useful as it helps you develop a strong mindset so you can easily maximize 00:18.830 --> 00:22.280 your profit while lowering your risk. 00:22.280 --> 00:28.170 So how does the cryptocurrency market actually work similar to other asset classes. 00:28.220 --> 00:35.480 The price of crypto currencies is driven mainly by two main factors the supply and demand and the greed 00:35.630 --> 00:39.410 and fear of investors. 00:39.410 --> 00:45.290 Now let's talk about the supply and demand first at a basic level the price of crypto currencies is 00:45.290 --> 00:52.190 driven by its availability the scarcer crypto currency is the higher its price levels. 00:52.250 --> 00:59.130 On the other hand a cryptocurrency with an abundant supply will likely experience lower price levels. 00:59.180 --> 01:01.800 So what can we learn from this experience. 01:04.200 --> 01:09.080 Before buying any digital currency you should first look at its maximum supply. 01:09.120 --> 01:15.300 If you look at bitcoin for example there are around 16 million bitcoins and there will never be more 01:15.300 --> 01:22.860 than 21 million Bitcoins because of a hard coded limit by Bitcoins inventor so because of the scarcity 01:23.010 --> 01:28.590 the price of bitcoin has reached so high and there's a high chance that its value will keep going higher 01:28.650 --> 01:30.600 and higher in the future. 01:31.460 --> 01:39.930 Just look at another coin such as Dejah bite or DGP be its maximum supply is over 21 billion coins. 01:39.930 --> 01:43.880 Well you can expect this coin to reach $10000 per coin. 01:44.120 --> 01:48.120 As you can see there's no scarcity here as everyone can have it. 01:49.200 --> 01:53.330 Now let's take a look at the top 10 crypto currencies on the market right now. 01:53.640 --> 01:59.070 If you do the math you'll find that if a coin wants to be in the top 10 its market cap must account 01:59.070 --> 02:03.000 for at least one percent of the total market cap. 02:03.010 --> 02:08.620 So how can we use this information to predict the future price of a coin that we want to invest in. 02:11.030 --> 02:18.170 For example if you want to invest in a coin such as D-G bite just do the simple math first calculate 02:18.170 --> 02:20.560 1 percent of the total market cap. 02:20.660 --> 02:24.540 For example the total market cap is now $500 billion. 02:24.800 --> 02:28.030 So one percent of it is $5 billion. 02:28.980 --> 02:34.300 Now let's find the maximum supply of D-G byte which is 21 billion coins. 02:34.530 --> 02:39.000 You can easily find this information on coin market cap dot.com. 02:39.160 --> 02:44.650 Then you just need to take the 1 percent of the total market cap and divide it by the maximum supply 02:45.560 --> 02:51.750 $5 billion divided by 21 billion coins is about 24 cents. 02:51.890 --> 02:55.370 The price of DG By now is about 3 cents per coin. 02:55.370 --> 03:02.330 So if this coin can reach the top 10 as an investor you can expect its value to increase to 24 cents 03:02.330 --> 03:03.270 in the future. 03:05.830 --> 03:12.020 The second factor that can affect the price of crypto currencies is the greed and fear of investors. 03:12.040 --> 03:17.290 The most common mistake that many inexperienced investors and traders make is that they tend to trade 03:17.290 --> 03:19.990 on emotions rather than on logic. 03:20.850 --> 03:24.570 When these people make a profit they feel more and more greedy. 03:24.570 --> 03:28.360 They think that they'll sell their coin when its value goes a bit higher. 03:28.620 --> 03:34.380 And when its price reaches a new high they keep thinking that it will continue to go up even higher 03:34.380 --> 03:40.900 and higher when the price starts to drop these people start panicking and they try to get out of the 03:40.900 --> 03:42.500 market as soon as possible. 03:43.410 --> 03:49.300 You see their investment decisions are influenced by their emotions their greed and fear. 03:50.120 --> 03:54.580 Disciplined traders enter into a trade with an exit strategy in mind. 03:54.650 --> 03:59.660 They know when the position should be exited and profit and when they should curtail their loss if the 03:59.660 --> 04:03.590 position moves otherwise. 04:03.670 --> 04:07.520 After several years of being a swing trader a value investor. 04:07.660 --> 04:10.620 Here's what you can learn from my experience. 04:10.780 --> 04:17.410 In most cases the price will not go up in a straight line but a series of spurts with retracement in 04:17.410 --> 04:23.010 between the price tends to keep bouncing between support and resistance levels. 04:23.010 --> 04:28.520 And if there's an uptrend it will create higher highs and higher lows. 04:28.530 --> 04:32.070 So when the prices going up and then suddenly starts to drop. 04:32.250 --> 04:33.650 Don't panic. 04:33.660 --> 04:36.650 Chances are it will go up and reach a new high. 04:37.440 --> 04:43.020 If you have no idea about support and resistance Don't worry we'll get into that later in the following 04:43.020 --> 04:46.410 lectures. 04:46.420 --> 04:48.740 Now just to make sure we're on the same page. 04:48.820 --> 04:50.790 Let's take a look at a quick example. 04:51.530 --> 04:58.930 The price of your coin will not go up in a straight line like this but it will keep bouncing between 04:58.930 --> 05:01.240 support and resistance levels. 05:01.240 --> 05:06.570 And if there's an uptrend it will create higher highs and higher lows. 05:06.580 --> 05:11.380 So when you buy a coin and then its price suddenly drops don't panic. 05:11.380 --> 05:17.340 Chances are it will go up and reach a new high. 05:17.350 --> 05:21.430 From my experience the crypto currency market is very volatile. 05:21.460 --> 05:26.140 The price of your coins can drop by 50 to 80 percent in one day. 05:26.140 --> 05:30.120 Just don't panic if the drop is out of your control. 05:30.160 --> 05:34.260 Maybe because of some bad news you have nothing to worry about. 05:34.360 --> 05:39.040 The drop is just temporary because other investors were panicking and they sold their coins to get out 05:39.040 --> 05:41.200 of the market as early as possible. 05:41.500 --> 05:47.560 What you could do in this case is buy more at the dip and make a huge profit when the price recovers 05:47.560 --> 05:49.160 in the next few days. 05:49.970 --> 05:56.570 You see if you trade on emotions just like other inexperienced investors you'll hardly make a profit 05:57.460 --> 05:58.450 in the next lecture. 05:58.550 --> 06:04.100 I'll teach you my profitable cryptocurrency trading strategies so you can easily make a good profit 06:04.190 --> 06:05.370 from your investments.