How To Do Cryptocurrency Trading? – A Quick And Easy Guide
Venturing into a new investment is not an instant decision. You need to review your current assets, research the new market, and consider your long-term plans. That's especially important when adapting to a new market scheme that operates in a digital platform, also known as cryptocurrency. Unlike traditional trading, you are dealing with digital tokens or coins that you can use to purchase goods, services, and other currencies. It only takes knowing how to do cryptocurrency trading efficiently, and you’re up for a fun journey.
For starters, you should know that the cryptocurrency market is a decentralized and very volatile system. This platform is not backed by a central form of government or any private authorities, which gives investors the liberty to gain more profit. The volatility is because of its continued development and market size. Therefore, it is crucial for you to join the trade with ample knowledge and strategies in place. Check this guide!
Getting in the trade
The first order of business is to join the cryptocurrency trading arena. There are two ways you can achieve this: using a contract for difference or CFD trading or buying and selling with an exchange account.
In CFD trading, you do not need to deposit a considerable amount of money. It only requires you to put in a margin, and you will get access to the market. The advantage of this option is that you can execute the forecasting of trends in cryptocurrency prices without the need to own the coins or tokens. That way, you can decide whether to buy a crypto value or go for a short position and sell if the market is on the downside.
If you want to purchase crypto coins and trade your assets, you can create an exchange account and fund it sufficiently. You may then study the market in-depth and decide what’s best for your investment’s health. Although this is a more technical process, a perfectly executed position will give you happy returns. Feel free to take short courses and do regular independent research to back up your decisions.
Familiarizing the terms
Cryptocurrency trading will take you some terms that may take some time to get used to. No worries, you will catch up through this article. It gives you an advantage as these terms will simplify some processes, too! Here’s the list:
When you hear or read the term spread, it is the difference between the buying and selling prices of a specific cryptocurrency. That's beneficial learning because it will lead you to a decision of whether to go short or long in your investment. A long position is when you decide to trade the buy price for a relatively higher rate, while a short position is when you trade the selling price for a relatively lower rate.
In cryptocurrency trading, leverage means having access to vast amounts of assets, but you do not need to pay the full value of the trade right away. It is another type of position, but the result depends on the maximum size of the trade. When you are familiar with leverage, that means you know the value of learning how to manage your risks already.
Highly related to leverage, the margin is the small deposit you make to maintain a market position. It changes based on the trade size required for a cryptocurrency value because it's a percentage of the investment position. For example, trading in an altcoin requires you to deposit at least 10% of the total value; that small percentage is your margin.
Lot is the term used when referring to a batch of crypto coins or tokens that standardize trades' size. It comes in several varieties, but most lots come in small numbers. Depending on the market's performance, some lots are more prominent.
Studying the market
The cryptocurrency trading system is a market that’s prone to vulnerable changes. Since its decentralized nature allows you to have higher potential gains, you have to understand that everything runs digitally through a pool of computer networks. Another app called wallets ensures that your crypto coins are stored safely and securely. That way, even the transfer of crypto units from one account to another won’t push through unless it’s verified.
All your transactions are recorded through a storage system called blockchains. Every single unit of crypto coins you’ve done will reflect here, which also traces the ownership it went through. A new transaction or “block” replaces the last in the front end of the chain.
Now that you know how intricate the process is, you can do your share in conducting constant independent research and subjecting yourself to educational crash courses. Always monitor the news for significant financial updates on the trade sector, which quickly affects the crypto industry. It also helps you come up with a strategy that will protect your assets.
Knowing the key factors
To make things easier for you to remember, here is a simplified list of factors you should look out for when checking the cryptocurrency trends and prices:
- Monitor the supply end of the process. That means all the crypto coins available and the rate they go through on a daily basis, or any specific timeframe relevant to you.
- Next, find out the market cap of a crypto company by multiplying the available shares by the asset price. It is essential to know this aspect as it will lead you to quicker investment decisions.
- Review all existing history, data, and the user interface of crypto investment. It should be user-friendly enough to make transactions within and outside of the crypto world.
- Lastly, never miss out on public information. The image and portrayal of a company in the press affect its performance in an instant. Discover more about cryptocurrency trading here!
Learning how to do cryptocurrency trading puts you in a better perspective. You have loaded yourself with the correct ways to handle your digital assets and lessen the risks of getting into a financial slump. It's time to take advantage and strike while the iron is hot!
UPDATED April 5, 2021
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