1 August 2020
With the rise in cryptocurrency popularity, the market has become highly liquid, giving you plenty of opportunities to trade cryptocurrencies. Crypto trading can be a bit confusing at first, due to the differences from trading on a fiat exchange and the differences in cryptocurrencies compared to fiat.
With a bit of knowledge, it is easy to shrink the learning curve associated with trading cryptocurrencies, so you can start making the most of these digital currencies.
Choose Where To Trade
The first thing you will want to do before you begin trading cryptocurrency is choosing what exchange you wish to trade on. There are dozens of exchanges to select from, so you will have to do some research to determine this.
Before you choose an exchange, take a few minutes to read some reviews about it. With so many exchanges, not all of them are created equally. You can get a good sense of whether an exchange offers good rates and has favorable policies from reviews.
CONFIRM IT FITS YOUR NEEDS
Of course, you will also want to make sure that the exchange you choose to trade cryptocurrencies fits your needs. In other words, make sure it has all the cryptocurrency pairs that you will likely want to trade. Most will have the most popular cryptos, like Bitcoin and Ethereum. However, you are likely to want a few more options.
As you choose an exchange, you should also compare the Bitcoin price and other pricing information. Some exchanges will charge more than others for trades, and there are several pricing models.
You also want to make it a point to choose a crypto exchange with strong security measures in place. This will prevent you from losing any funds you have on the exchange via hacking.
Choose A Wallet
While you will want to leave some funds in your account on your chosen cryptocurrency exchange, you should store those you are not actively trading in a separate wallet. This limits the risk of losing your crypto in a hacking attempt.
When choosing a wallet, think about security, support for the currencies you plan to use, and whether you prefer a desktop, hardware, online, mobile, or paper wallet. Of course, make sure it supports the cryptocurrencies you plan to hold in it.
Consider Short-Term Vs. Long-Term Trading
You can divide trading cryptocurrencies into two categories: short-term and long-term. Short-term trading typically involves holding digital currency for just a few days, weeks, or months. It is also known as day trading. Long-term trading is when you keep a cryptocurrency as a long-term investment.
If you opt for just long-term trading, you will not use a cryptocurrency exchange too much. You would mostly just use the exchange to get funds in your cryptos of choice, then move them to a secure wallet.
By contrast, if you opt for short-term trading, you will be active on the crypto exchange. Short-term trading lets you capitalize on all types of movements in the market. In contrast, long-term trading is ideal for cryptocurrencies that you think will dramatically rise in value over time.
Understand Risk Management
The cryptocurrency market is highly volatile, so you should have a firm grasp of risk management techniques before you get too far in trading. Risk management will help you minimize your losses since you cannot realistically expect to profit from every single trade you make.
Learn Basic Technical Analysis
Technical analysis is a useful skill for all types of trading, including cryptocurrency trading. There are advanced technical analysis techniques, but you should at least learn the basics before trading crypto.
Learn how to view information on charts and use technical indicators.
This will not only let you analyze crypto market movements yourself but also help you understand any expert recommendations that you read.
Consider Paper Or Practice Trading
If you are entirely new to trading cryptocurrencies, it is wise to practice first with paper trading. Think of paper trading as a demo account that lets you test your skills without actually risking your money or cryptocurrencies. Paper trading will help you confirm that you understand the market and basic techniques for both risk management and technical analysis.
What To Do When You Are Ready To Trade
Once you have completed all of the above steps and feel ready to start trading cryptocurrency, you will need to open an account on your chosen exchange. The amount of personal information you need to supply depends on the exchange and the amount you are trading. You will also need to fund your account.
Then you can start trading crypto!