How To Trade Cryptocurrency Effectively: A Beginner’s Guide
Cryptocurrency is becoming more and more popular, thanks to its unlimited potential. Anyone interested in this new online system knows the importance of trading. If you are interested in delving into the world of cryptocurrency, let this article be your guide. Here's everything you need to know on how to trade cryptocurrency effectively.
Types of Cryptocurrencies
Before learning the ins and outs of how to trade cryptocurrency effectively, we first need to understand the many faces and forms of cryptocurrency. Currently, there are a whopping 1600 and more cryptocurrencies being traded online. Overall, the market value costs about $289 billion. Bitcoin, one of the leading types of cryptocurrency available, costs about $210 billion. Thus, it makes investors more and more interested in its value and future potential.
Like Forex trading, how to trade cryptocurrency also involves various fiat currencies being exchanged against each other worldwide. So you can purchase cryptocurrencies from multiple countries and use them for buy-and-hold strategy or your daily or weekly up-and-down volatility trade. The potential profits from various trade strategies are unlimited. That's why more and more people are trying to learn and master the cryptocurrency trade.
How Trading Works
The first step on how to trade cryptocurrency starts with getting a verified cryptocurrency wallet and finding the right cryptocurrency exchange, depending on your selling and buying strategies. Some of the most popular crypto wallets are Atomic Wallet and Trezor. On the other hand, you can utilize Coinbase, Bittrex, or Binance as your crypto exchange platform.
The two types of trading are dollars to crypto and crypto to crypto. Trading dollars to crypto involves actual money and exchanging them for cryptocurrencies, such as Bitcoin or Ripple. The latter only involves the online trade of various cryptocurrency platforms. For instance, you can trade Bitcoin to Ethereum or Litecoin.
Various Trading Platforms
The success of how to trade cryptocurrency effectively depends on the platform you choose. One of the easiest to use is Coinbase. This all-in-one solution provides you with a wallet, an exchange, and a platform to trade your cryptocurrencies. Coinbase provides limited Bitcoin alternatives, so if you want an immense crypto asset, you can also utilize other cryptos for crypto trades like Bittrex, Binance, Bittrex, and Kraken.
Traders sometimes use more than one exchange platform to access various cryptocurrencies. They sometimes purchase Bitcoin or Coinbase and trade them for other cryptos and convert them back if they're ready to sell them. If you can't deal with other cryptocurrencies, here are some indirect options to do so:
- Use apps like PayPal, Square's Cash App, or Robinhood. These are apps ideal for newbies who want to start learning how to trade cryptocurrency.
- Solid choices like ETHE trust, GBTC trust, and ETCG trust.
- If you prefer long term investment, you can also try cryptocurrency IRA. However, be aware that this includes fees.
Other more experienced traders might use more technical trading alternatives. They sometimes use leverage, like Coinbase Pro or Kraken, and derivative platforms such as Bakkt, CME, FTX, or BitMEX. Although operating leverage might be too overwhelming for new traders, they have their advantages, especially for expert traders.
Making a Profit
Figuring out how to trade cryptocurrency effectively works just like that of the stock market. Your gains or losses are pretty much documented, and all other updates like a sale or trade. Speaking of gains, there are two main ways to profit in cryptocurrency exchanges; long term trends and trading volatility.
Although one of the most popular cryptocurrencies is about three years old, many traders still see its vast potential. Cryptocurrencies have skyrocketed in value since their launching; thus, many traders prefer to invest in long-term trends. Surprisingly, not many experienced traders do exchanges often.
One reality about cryptocurrencies is their volatility, especially on the aspect of short-term price exchanges. Even the most established cryptocurrencies still experience a roller coaster ride in the trading market. However, some traders prefer trading volatility since it promotes lesser risks compared to investing long term.
Cryptocurrency is a volatile platform you have to master to minimize your losses. Here's a simple tip, learn about stop loss in trading. The term stop loss means you can buy or sell when the value reaches a specific limit. If you want to minimize your losses, you have to set a limit to control your trade.
Stop-loss is an important skill not many traders have acquired. It gives you a clear picture of how much you're willing to lose if values plummet. For instance, experienced traders who know the stop-loss order set their minimum based on their acquired coins. If you gained $500, you could set that as your limit so that even when the market value reaches its lowest, you will still have your initial asset to take home.
This is also the same when talking about gains. Set a minimum value for-profit, and when you reach it, you can get out and take it home. Given its volatile nature, coins' values might drastically change. So once you've reached your minimum expected profit, you can get out and take it home to prevent further losses. Discover more trade secrets in cryptocurrency here!
Cryptocurrency is as exciting as the stock market exchange. However, before jumping into the digital currency exchange world, you first need to equip yourself with the right knowledge. Learning the many processes involved in how to trade cryptocurrency effectively can help you minimize the risk and your possible losses. You also have to understand the various platforms involved in the digital exchange and the right strategy in terms of investments.
Cryptocurrency works differently compared to other financial and investment trading platforms you might have already have come across. It's far more volatile with complex predictability trends. So do understand how it works first to maximize your exchange and become successful in cryptocurrency trading.
UPDATED February 3, 2021
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