What Is Cryptocurrency Trading All About? – Covering The Basics
The traditional and established foreign exchange and stock markets have found a newcomer in the trade: cryptocurrency. This emerging platform opens up a more convenient way of investing your assets because every step of the way is digitally processed. Another valuable asset is its capacity to provide more yield for your investments. Curious to know what is cryptocurrency trading all about? You’re in the right article.
Cryptocurrency trading works like forex trading, but it requires you to exclusively buy and sell digital currencies. The industry is fast-paced, volatile, and decentralized. That might be too much to take so that you can go about it one by one. It is fast-paced because too many crypto companies compete to make beneficial returns for their traders. Because it exists in a digital platform, the trades are expected to change within hours or seconds rapidly. That's why it's volatile. Lastly, it's decentralized because no government or institution backs up the system.
For starters, your cryptocurrency journey begins by creating an exchange account.
The only way you can purchase crypto coins is by choosing an exchange platform and registering an account. There are too many brands out in the market today, so make sure you find something with a reputable image and clean track record. You can check the top list of exchanges through research and narrow it down to the one you're more comfortable to operate with. Factors like liquidity, user-friendly navigation, customer service, reviews, news articles, and their availability in your location matter as well.
The registration process is like any other account process, but the verification part is more intricate and demanding. It should be the case because your assets will be at stake here. You may have to wait for several days to get verified, but once you’re in, the rest will follow. You can now fund the exchange account and start trading.
If you want to opt for another way to be in the community of cryptocurrency, you can take a CFD or contract for difference trading. This method helps you venture into the process without owning the coins. You only need to deposit a small amount called margin and strategize based on the price trends.
Studying market movements
The cryptocurrency market's volatility is a lot of work for you because of the required adjustments and constant monitoring. But, you can also take advantage of the rapid price changes and seek an opportunity to yield huge gains. That means you have to develop two critical skills: risk management and quick decision-making.
Once you make an account for exchange, the next thing to take care of is a crypto wallet. It can either be a website or an app where your crypto coins are safely stored. Most cryptocurrencies have their version for the wallet, but there are also ones that cater to many currencies. When you have the wallet in place, install all possible security upgrades as hackers are highly skilled in stealing money.
All your transactions are recorded through a system called blockchain technology. It covers data security and anonymity for all your trades, giving an intruder a hard time altering the information. In blockchain technology, your new transaction is a block that goes at the front of the chain when the transaction is complete.
Knowing the considerations
You have the sacred duty of taking responsibility for the way your investment portfolio would look like through the strategies you implement. Take a look at these factors and keep an eye on them whenever you are in the process of cryptocurrency trading:
Just because a coin has attractive discounts and offers does not mean it is a perfect choice. It would help if you found a stable currency based on the historical charts and transactions it went through before. That way, you know it's liquid enough for your investments.
There is a simple formula to identify market cap: multiply the company's available assets by the asset price. A shorter version is checking the list of top players in the cryptocurrency trading market. Typically, those are the ones you should put your investments in.
A crypto coin should be flexible enough to connect to other payment systems. It will make no sense if the investment is hard to trade. It would be best if you also had an easy time navigating through the system's services and features.
News and major events
Believe it or not, media exposure plays a vital role in the price movements in the cryptocurrency market. Always monitor financial-related news as it will guide you on your next big trading move.
Acquainting with the operational terms
During your cryptocurrency journey, you will encounter some generally understandable terms but have a different context in cryptocurrency trading. You need to understand them in-depth as it will give you a significant advantage. Check these terminologies:
- Spread – It is the difference between the buying and selling prices of a crypto coin. When you know the spread, it is easy for you to decide whether to buy a cryptocurrency or sell it. Go long if you want to buy the coin for a higher rate, or go short if you wish to sell the currency at a lower rate.
- Leverage – It is when you do not pay the full volume of a trade immediately but give a margin instead.
- Margin – It is the small deposit you make to sustain a position in the trade.
- Lot – It is the term used for the standard trade size of a crypto coin.
You might be loaded in finding out what is cryptocurrency trading all about, but it will surely guide you in the process. It can be overwhelming at first, but narrowing your focus and sticking to a plan leads you to greener pastures. Sooner or later, you won’t notice how much money you are making!
UPDATED April 6, 2021
By: Owen Landry
Each of us strives to get what we want in life. And to buy some of our needs, we need money to do that.
UPDATED April 5, 2021
By: Lance Richards
With the hype of the cryptocurrency industry today, so many people rave to be part of the community.
UPDATED April 1, 2021
By: Owen Landry
It is every invested trader to get one thing and one thing only: profit! Whichever platform they opt to put their assets to, their ultimate goal is the get as many returns as possible