How to Trade Cryptocurrency – For Beginners: Part I
Beginners wanted! If you’re new to the world of Crypto exchange and want to start trading cryptocurrencies, this how-to guide is a match made in heaven for you. Our advice is to bookmark this article as you may need to return to it often.
In Part I, we’ll tell you why trading cryptocurrencies is a good idea, what you should know and do before you start trading, what is cryptocurrency trading, and which strategy to choose. We’ll also give you smart tips on what to look for and what to avoid as a beginner trader. Excited? Of course you are!
Why Trade Cryptocurrencies?
The answer is simple: trading cryptocurrencies comes with a set of pros.
First, the fees are cheap, and Crypto exchanges are fast. Here’s how it works. The cryptocoin exchange you’re using will charge a small percentage as commission for the service. Wait, how is that different from bank transfers or Forex? Well, the size of the fee is what really matters. The fees for cryptocurrency transactions are much cheaper than those of bank transfers, and generally cheaper than Forex, in case you’re wondering.
Secondly, Crypto buy sell exchanges are open 24/7. As you may already know, Forex exchanges operate within certain business hours and close for the weekend. Cryptocurrencies, on the other hand, can be traded on the go, anytime, anywhere.
Finally, extreme volatility. Sure, many see the extreme volatility of cryptocurrencies as their foe. We expect you to be wiser and think of it as a great opportunity to make big profits.
Things to Know About The Cryptocoin Market
Before you start trading cryptocurrencies, you must be aware of the risks related to their extreme volatility. Cryptocoins have been insanely volatile throughout 2018. Remember, not taking volatility seriously will inevitably result in losing money. That is gambling, not trading.
Be sure to do some reading before diving in and making your first deposit. You will be trading real money that you don’t want to lose.
What is Cryptocurrency Trading?
Trading cryptocurrencies – just like trading fiat money – involves exchanging an asset that you own for another asset, and then exchanging it back when the price changes. The idea is to do that for a profit, but we all know that there are both good days and bad!
Long story short, instead of selling and buying just fiat currencies, e.g. euros and US dollars, Crypto traders buy and sell cryptocurrencies, such as Bitcoin or Ether. Most exchanges currently only offer Crypto to Crypto exchange services, however CoinMetro’s platform enables Fiat to Crypto AND Crypto to Crypto exchange. Traders will look to deposit a fiat currency, exchange it for Crypto and then, at some point in time, back into the fiat currency.
How to Trade
The hardest part is doing some reading and deciding on which is the best Crypto exchange for you.
Once you’ve made a choice, you need to sign up for an exchange. The registration process should also include KYC (Know Your Customer) procedures, in which you are typically asked to provide a valid ID and bank statement, or proof of address. However, the KYC policy may differ from exchange to exchange, depending on the amount of money you’re operating with.
When your information is verified by the exchange and you become a user, from there it is as simple as filling out a form and waiting for the transaction to process.
Before You Start Trading
So, you’re ready to start trading cryptocurrencies. Here are the two things to consider before doing that.
- Being a beginner, you should start by choosing a reliable exchange with good reviews that offers a fast and secure operating platform and a wallet.
- You should also start by trading the ‘most popular’ coins. If you’ve done your research, and are evaluating Cryptos by their market cap, you should know that these are Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC) and Bitcoin Cash (BCH).
Types of Cryptocurrency Trading
There are two main strategies to follow if you’re a cryptocurrency trader: long-term and short-term trading. What do these include?
Long-term trading means buying and holding Cryptos over a long period of time. Let’s define long: weeks, months, even years. Point is, traders have time to study price trends and dips in value, which leads to making more informed decisions and avoiding losing potential profits when a dip wave hits the market.
This is the best strategy to follow for those who believe that the prices of cryptocurrencies will only rise, slowly but steadily.
Short-term trading is the opposite. What matters for the followers of this strategy are short-term price swings. Short-term traders buy and sell Cryptos over a few hours or a few days.
If you’re able to follow price swings closely during the day and take advantage of them quickly, this strategy is perfect for you.
More Tips for Cryptocurrency Trading
Finally, here are some important tips for you as a beginner cryptocurrency trader.
- Never invest more money than you can afford to lose. To be a successful trader, you need to realise that there’s no winning without losing. There will be both profitable and losing trades. That means only one thing – deposit as much money for every trade as you can afford to lose with no harm to your financial health.
- Setting up take-profit and stop-loss orders can help you do that, and avoid disappointment. These options are offered by the majority of cryptocoin exchanges.
- Closing trades in profit. By now, you should know very well that Cryptos are volatile assets. If you are a beginner and don’t know much about historical price trends, practise short-term trading and exit the trade when you see the price – and your profit – going up. Forget about making thousands in just a few trades! It’s better to start little by little to understand how the market works.
We hope you found this content interesting and useful. Stay tuned to our blog for Part II of this article and check out our other posts in the meanwhile!
Until the next blog post,
The CoinMetro Team