Cryptocurrency Trading for Beginners – Learn the Basics
This article is all about cryptocurrency trading for beginners. The world of crypto is fun and exciting. But its fast pace and complicated charts can make things seem really difficult. If you’re finding it hard to get up to speed, you don’t need to worry. We’re here to help!
In this guide, you’ll learn the basics of cryptocurrency trading for beginners. What it is, how it works, and the strategies for success. Stay tuned!
The Basics of Cryptocurrency Trading
To really understand crypto trading, you should know what trading is.
What is trading?
Trading is the buying and selling of assets for profit. It involves acquiring an asset in order to profit from its change in value. There are many types of assets that are involved in trading. They include securities like shares, bonds, real estate units and stocks.
These also include commodities like gold and oil, as well as currencies like USD, Euro etc. These assets are usually traded on exchanges such as stock exchanges, commodity markets and forex platforms. People trade these assets to make money off price movements in the asset. But what about cryptocurrency?
What is cryptocurrency?
Cryptocurrency refers to digital assets that run on blockchain technology. It is one of the types of assets that can be traded. Cryptocurrencies are a store of value, much like money. But unlike money, they are decentralized – meaning they are not issued by a central authority, such as a national government. They are often called coins, tokens or just crypto.
Cryptocurrencies are intangible assets. They only exist as a shared record of ownership on the blockchain. Blockchains are a technology that holds a shared digital register of crypto transactions. This can make crypto trading transparent and secure – with most blockchains, all transactions can be traced and are public.
What is cryptocurrency trading?
Crypto trading involves the exchange of crypto assets. Just like other assets, crypto tokens are traded on exchanges called crypto exchanges. You go to a crypto exchange to find people like you who want to make money from digital assets. But there are many things that are unusual about crypto trading. Let’s look a bit more into these next.
How Does Cryptocurrency Trading Work?
Crypto trading is a bit special, compared to trading other assets. One reason for this is the incredible volatility of crypto assets. Volatility refers to rapid, and sometimes sharp, changes in value of an asset. It is normal for some crypto assets to rise or fall by more than 50% in hours, days or weeks. Changes of several hundred percent are commonplace as well.
Another reason is crypto trading is fairly young. Unlike trading in other assets which has existed for hundreds of years, crypto trading is less than a decade old. In fact, the oldest crypto asset – bitcoin – was only launched in 2009! Due to these reasons and more, crypto trading is a bit unique. Here’s how it works.
The Mechanics of Crypto Trading
Firstly, you probably need an exchange to buy crypto. There are OTC options and peer to peer marketplaces out there as well. Your first fiat onramp could be an exchange, why not CoinMetro (we have the lowest fees). After you buy your first crypto, you can then start to trade crypto for crypto. You can find these crypto assets in trading pairs. Trading pairs let you exchange one crypto for another.
The goal of crypto trading may be one of two things. You either trade for short-term gains, or for long-term profit. There are many popular short-term trading strategies that are also popular in crypto trading. They include day trading, swing trading, margin trading and copy trading.
These strategies can make you a lot of money very fast. But they can also be very risky. To reduce the risk, people use many tools to gain insight to the market. These include market data tools, market charts and diagrams, and cryptocurrency trading bots.
All these tools let you know if the market will move, and when.
What Moves Crypto Markets
When the crypto market moves, it means there’s a chance to make money. Or lose it. This is why traders pay close attention. Some of the factors that may affect crypto include the supply of tokens and their market capitalization.
How crypto is reported in the media and major events in the crypto world, like regulatory updates, also have great effect. Major economic events like the global depression caused by COVID-19 are also a big influence.
There’s a lot to learn about cryptocurrency trading for beginners to really get up to speed. You can check out our article on cryptocurrency trading and practical cryptocurrency trading guide for more information.