Although crypto trading can be quite profitable, it comes with lots of ups and downs. It has numerous pitfalls that can render your effort and investment useless. Therefore, if you’re a beginner, it’s paramount to learn about what trading entails before you put your hard-earned money into it.
Cryptocurrency trading involves the exchange of digital currencies, such as Bitcoin, Ethereum, Dogecoin, and Litecoin. It is similar to options trading, forex trading, and bond trading. While cryptocurrency trading differs from cryptocurrency investing, which focuses on buying a particular digital coin to generate a profit, the two activities share some similarities.
Are you a beginner trying to learn the ropes of cryptocurrency trading? Here’s a simple guide with everything you need to do to start trading.
What’s cryptocurrency trading?
Cryptocurrency trading is a way to make money by buying and selling digital currencies. It is similar to other forms of trading, such as stock trading or forex trading, but instead of trading traditional assets, traders buy and sell cryptocurrencies.
Cryptocurrency trading can be profitable, but it also comes with risks. Like any other form of trading, it requires a certain level of knowledge and expertise to succeed. To begin trading cryptocurrencies, you need to choose a platform to trade on and open a brokerage account. You will then need to fund your account and choose the cryptocurrencies you want to trade.
Once you have chosen your cryptocurrencies, you need to develop a trading strategy. This will involve analyzing market trends, using technical indicators, and making informed decisions about when to buy and sell your assets. As you continue trading, it is also important to safeguard your assets by using a secure cryptocurrency wallet.
Cryptocurrency trading is somewhat different from cryptocurrency investing, which involves buying a particular digital coin with the goal of holding it for a long period of time in order to generate a profit. Cryptocurrency trading, on the other hand, is more focused on short-term profits and involves buying and selling cryptocurrencies frequently. Both activities carry risks and require knowledge of the market to succeed.
Steps to start cryptocurrency trading
As a beginner, you need to understand the right things to do to start trading. Follow the steps below to begin.
. Join a reliable crypto exchange
To exchange cryptocurrencies, you’ve to meet other traders and investors through a platform. This is where joining a reliable crypto exchange comes into the picture. Loads of exchanges are available; hence, you can’t struggle to find a reliable one.
While you can try any platform, it’s advisable to choose one of the popular options such as Kraken, Binance, Coinbase, Crypto.com, and Gemini. These platforms have numerous traders; hence, you can easily find people to transact with.
On any chosen platform, focus on registering a brokerage account for easy trading.
Fund your crypto wallet
Once you’ve finished setting up a crypto account on any of the selected platforms, put money in it. Depending on the exchange you’re using, wire transfers and debit cards can come in handy for funding your account. This can be done directly to the platform or via peer-to-peer (P2P). Notably, you’ll likely have to pay a transaction charge for funding your digital wallet.
Select the digital currencies you want
As long as crypto trading is concerned, the currencies you select will have a huge impact on your profitability. You can increase your portfolio significantly if you go for the right coins.
Since loads of digital currencies are available in different crypto exchanges, it can be herculean to select one. Dedicate some hours to learning about various cryptocurrencies. Also, check out expert predictions about each currency before buying it.
With good research, you should be able to buy the best digital currencies with great prospects.
Use a strategy
You can’t afford to start trading without having a strategy. Therefore, it’s time to learn about various crypto-trading strategies. The most common ones are scalping, day trading, swing trading, and position trading.
- Scalping is a type of trading that requires you to buy and hold digital coins for only some seconds or minutes before selling them. It’s a short-term strategy with small profits.
- Day trading requires a trader to keep a currency for several hours during a single day. You enter and exit the trade within a day. Technical indicators must be studied to understand what to transact.
- Swing trading involves buying and holding assets for many days or weeks. With this trading, you sell the assets when you notice that it’s profitable during your waiting days. Typically, holding can last for around 1-30 days.
- Position trading is the appropriate technique for people hoping to trade crypto for a long period. You have to spend numerous weeks and months analyzing trends and send when to buy or sell your assets.
. Safeguard your assets
As you continue trading, you need to keep your assets safe. Luckily, many digital wallets are available for this purpose. Make sure you choose a hardware or software crypto wallet with the best security features.
. Continue learning about the markets
The Crypto market is always changing due to its speculative nature. As a trader, you can’t afford to rely on outdated information. So, you’ve to continue learning and reading the markets. Take note of trends and patterns that can affect your trade. Also, apply them to your trading accordingly.
It is important for traders to remember that cryptocurrency trading carries significant risks. The market is volatile and prices can fluctuate rapidly, making it difficult to predict the best time to buy or sell. In addition, the lack of regulation in the cryptocurrency market can make it a breeding ground for fraud and other illegal activities.
As a result, it is essential for traders to be cautious and to know when to cut their losses. One way to do this is to set stop-loss orders, which automatically sell your assets if the price falls below a certain level. This can help to limit your losses and prevent you from losing more money than you can afford to.
Another way to manage risk is to diversify your portfolio. Rather than putting all your money into one cryptocurrency, consider investing in a variety of different coins to spread your risk. This can help to protect you from the volatility of the market and reduce the impact of any potential losses.
The key to successful cryptocurrency trading is to be informed, cautious, and disciplined. By following these principles, you can minimize the risks and maximize your chances of making a profit.