This is a guest post for Skills You Need.
Want to contribute? Find out how.
Learn How to Trade Crypto:
A Beginner’s Guide
Cryptocurrencies let you exchange them for goods and services, just like conventional money, or trade them for profits. However, unlike conventional money which is issued and controlled by governments, digital currencies are decentralized and there is no single entity that controls their issue.
The first cryptocurrency to be created was bitcoin in 2008 by a mysterious person or group going by the name Satoshi Nakamoto. Bitcoin’s introduction was only the beginning of an influx of a myriad of cryptocurrencies, all launched with the aim of replacing bitcoin. All those other currencies that came after bitcoin are today known as altcoins - alternatives to bitcoin.
Today there are over 5,000 cryptocurrencies circulating in the market, and more will come up. After bitcoin, the second largest and popular cryptocurrency in the world today is Ethereum. Ethereum is especially popular because of its products such as decentralized finance (DeFi) and non-fungible tokens (NFTs).
Crypto investing vs. crypto trading
As you learn how to buy and sell these digital assets, you need to differentiate what is cryptocurrency trading and what is investing in cryptocurrencies. Which one is better? No matter the differences, in the end the goal is always the same: making a profit. However, the expected outcome times are quite different: in investing, the outcome time ranges from medium to long term, while in trading, it ranges from the short to medium term.
Cryptocurrency investors buy and hold their assets for a long time ranging from several months to years. On the other hand, cryptocurrency traders hold their positions ranging from a few seconds, to several weeks.
This article will guide you on how you can start trading cryptocurrencies as a beginner, according to Bitcoin Prime experts.
A beginner's guide to currency trading
The first step in cryptocurrency trading is to find a suitable cryptocurrency trading platform and create an account. Different cryptocurrency traders have different needs and goals when it comes to trading. Fortunately, there are a variety of trading platforms to choose from on the internet. There are various factors to consider before choosing a platform such as security, ease of use, number of assets supported and many others.
After selecting a reliable platform, the next step is to create an account. Most platforms will provide you with a registration form to complete. You will need to enter a valid email address, choose a strong password and then click register. You will then be required to verify your account: an email will be sent to your address with a code that you use to verify your account.
After successful verification, the next step is to deposit your initial capital and begin your cryptocurrency trading journey. There are several methods of depositing funds such as credit/debit cards, Skrill, bank transfer, etc.
Trading cryptocurrencies might sound simple. However, there are many factors that determine whether you will be successful or not. Cryptocurrency trading is not a get-rich-quick scheme, but a wealth building and income generating method that requires discipline, patience and skills. Here are some tips to help you become a good cryptocurrency trader:
Do your research
The crypto market is a vast market with different protocols of trade. Therefore, it would be best if you understood the market from your point of view. Your research should include the crypto exchanges, cryptocurrencies, and platforms for trade. Be wise to check the pros and cons of investing in such a diverse market. Once you are convinced with the information gathered, you can progress to trading.
Practice different trading strategies
The crypto market is volatile, and it changes daily. So there is no better way to understand the market than to start trading the same assets. Dummy accounts help with the practice of how the actual market operates. There are multiple dummy accounts online for different coins. Pick the tab that best serves your interest.
Pick a cryptocurrency and start trading.
There are about 7,000 cryptocurrencies in circulation in the current market. Pick a crypto coin based on the criteria of performance and its longevity in the market. You want to trade a currency that will offer you reasonable returns in the long run. As a beginner, avoid trading initial coin offerings (ICOs) because you do not know their success rate or how legitimate they are.
Diversify your investments
As the saying goes, "do not put all your eggs in one basket" and this rule applies in digital assets as well as stocks. Investing in digital assets can be lucrative but, likewise, the possibility of total loss come in equal measure. Diversifying across several altcoins helps you to cut your losses in case one cryptocurrency drops in price.
Don’t put all your life savings into trading
Like any other financial asset, cryptocurrencies can either be profitable or you can lose money. The crypto market is risky and, as an investor, it would be wise to only invest sums of money you can afford to lose. The current market crash was not predictable, yet it happened. There have been other crashes before, and likely more will occur soon. There is never a 100% guarantee that you will get back your money's worth even if you do everything according to the book.
There are internal and external prospects that lead to losses in investment. They include government interferences, hard economic times, malware attempts, and hacks. In addition, the market is volatile and easily susceptible to control. So please make sure not to invest all your savings and your retirement plan.
Avoid fear of missing out (FOMO)
Trading cryptocurrency has become a global phenomenon in recent times. Almost everyone is trading, and there is a human tendency to do what everyone else is doing. There is a version of trading in crypto known as day trading which is more like the stock market in traditional finance. If you decide to participate in day trading, watch out for fear of missing out, also known as FOMO, as it is the fastest way to lose money. You should also avoid trading when you feel pressured.
Keep yourself up to date with cryptocurrencies
The cryptocurrency market is evolving daily, and with it comes new aspects of the trade. To do well in investments, you should stay up to date on what is going on. Social media platforms such as Twitter, Facebook and Telegram, as well as cable news, are excellent channels to get reliable news. As the market changes, adjust your investments accordingly to ensure profits.
Learn trading methods and staking
There are two trading analysis methods used in the crypto market. They include fundamental analysis and technical analysis. Technical analysis shows the entire price history of a security, for example bitcoin, while fundamental analysis revolves around the current affairs that affect the price of a security such as news events. A combination of both methods works best to maximize profits. You can always start staking your crypto and earn passive income. This is one of the easiest methods to gain from crypto in the long term.
Mistakes do happen
Cryptocurrency trading is not a get-rich-quick scheme. It takes discipline, practice and skills to succeed in trading. However, even professional traders at times do make mistakes while trading and realize losses. Cryptocurrencies are volatile and risky and trading might result in the loss of capital. As such, learning skills such as risk management and trading discipline. And don’t lose hope when you, when mistakes happen. Learn from the mistakes.
About the Author
Jonathan Clark is a content writer who primarily focuses on writing useful articles for anybody interested in learning more about blockchain technology and major cryptocurrencies such as Bitcoin, Etherum and Cardano.