In recent years, the world of cryptocurrency has been gaining popularity even among celebrities and well-known business tycoons like Elon Musk. If you’re interested to explore this world, trade, and earn profit trading bitcoin or any cryptocurrency, for that matter, here’s a guide on how to trade cryptocurrencies.
1. Determine how you’d like to trade cryptocurrencies
Cryptocurrency trading is complicated, especially for newbies, who have just started trying their luck on it. So, how you would like to trade?
- Buying digital coins via an exchange
Buying is owning a cryptocurrency and storing it in a digital wallet and then earning profit from it if the bitcoin’s value, for instance, increases. However, you must register and open a wallet, and then a cryptocurrency exchange account. Depending on the crypto exchange, several or more steps can be involved.
- Trading with a CFD
You can trade using a CFD, a type of contract stating that you agree to exchange the price differences in the cryptocurrency from the opening to the closing of your position. So, you’re speculating on the market price, not taking the cryptocurrency’s ownership.
Let’s say, you open a long position, and the digital coin increases in value. In this case, you’ll make a profit. However, it is a different case when its price falls. In this situation, you’ll lose.
2. Study the market and learn how it works
Know that the digital coin’s wallet works differently compared to traditional financial markets. And just like trading in forex, you should learn about the different technical terms and jargon used in this industry. In short, make yourself familiar with it before trading.
3. Establish a trading plan or strategy
Developing and implementing a plan is one of the best ways to increase your chances to succeed in cryptocurrency investment and trading due to the market’s high volatility, which can make it both difficult to trade and attractive.
To get yourself prepared for what you’d face out there, you must establish a trading plan with risk management tools, goals, trade entrance and exit strategy, and the cryptocurrency to trade.
Speaking of a trading strategy, newbies, for instance, use different cryptocurrency trading courses. Additionally, there are mentors that trach especially newbie traders to teach them how to invest cryptocurrency. Are you a seasoned trader? If so, you might have already been using a strategy in trading, like that used in stock trading.
4. Learn fundamental or technical analysis
These are the two basic ways of analyzing the market. You might be feeling confused right now, but don’t worry. As you become familiar with trading, you’ll get to understand these things better.
Technical analysis involves the coin’s price movement and market trends. On the other hand, fundamental analysis reviews macroeconomic data and the varying external factors affecting the digital coin. Keep yourself updated with the market’s news because cryptocurrencies are so volatile that they can be directly affected by market sentiment.
5. Choose a cryptocurrency
There is no single type of cryptocurrency, so you need to select at least one that you want to trade. Also, cryptocurrencies have their use cases, which you have to consider before trading.
For many, they prefer bitcoin, which has a finite supply and widespread adoption. When selecting a cryptocurrency, ensure that it has solid team support. You might also want to read reviews, whitepapers, and other credible sources of information.
Once you have decided which platform to join and trade cryptocurrency in, fund your account either through wire transfers and debit cards, to name some. Start trading and grow your wealth. There are trading platforms that offer the automatic trading mode, which trades on behalf of the user.
Choose the cryptocurrency to invest in and trade, and these may include Ethereum or bitcoin, which are more predictable than the smaller altcoins. However, it may be best to trade with technical indicators, including price movements and market trends.
6. Compare and choose a cryptocurrency trading platform
One of the best ways of trading cryptocurrency is using a trading platform, which offers users, beginners or seasoned, a smarter way to trade and profit. Some even offer interactive charters and personalized trading alerts based on the user’s preferences.
Depending on the type of cryptocurrency you wish to trade, you can choose a trading platform that accommodates it so that you can open an account and start trading once your account is activated.
7. Store your digital asset
You might want to store the funds on the exchange if you’re constantly trading cryptocurrency, or in a wallet, if you’re holding or storing it. A cryptocurrency wallet can be a hardware wallet or a software wallet. Most traders prefer to store their coins on hardware wallets like a ledger. Alternatively, you can store your coins in a software wallet for android or iOS.
8. Enjoy trading!
Take it slowly as you’re learning the ropes of cryptocurrency trading. Assess your risk tolerance, consult your financial advisor, and determine the amount you’re willing and ready to invest in cryptocurrency trading. Finally, enjoy the process and soon you’ll be an expert trader.
Learning how to trade cryptocurrencies can be rewarding and profitable. However, reaping the rewards from trading does not happen overnight. It is why you should spend some time and effort familiarizing yourself with it. Invest in educating yourself with the technical terms, learning how to analyze the market, and consulting a mentor/advisor in trading, among others.
The world of cryptocurrency might sound very complicated for newbie traders. It is why you need to study it carefully before trading.
And again, determine how you would like to trade cryptocurrency, how much to trade, and what cryptocurrency to trade. Also, choose a cryptocurrency trading platform that is reputable and reliable. Read as many reviews and feedback from users and check for the site’s reputation.