You may have been a financial trader in the stock market for a long time now, but doing it for cryptocurrency trading is a different process altogether. Cryptocurrency works in a digital space with virtual coins you can use to buy and sell goods, services, and other currencies in the same industry. It is an excellent opportunity to gain profit using another investment tool, as long as you have the right knowledge entering the trade. So, what is it you have to know about cryptocurrency trading?
Yes, you do not need to be a full-on expert right away, but you should be efficient enough on the basics. A developed strategy and game plan are a must to avoid unnecessary losses. As a new investor, it is good to play it safe, but there’s no harm with learning when to take calculated risks, too. In this article, you will learn the comprehensive basics before immersing on in cryptocurrency trading, including market cap, trade volume, strategic plan, and safe storage.
As of this year, there are more than four thousand cryptocurrencies available for exchange. The industry is more significant than it looks because news and media only cover a few people. However, the same coverage shows you the largest players in the cryptocurrency arena’s market capitalization.
The basic definition of market capitalization is a company’s size and asset price calculations. The formula goes like this: asset price is multiplied by the total number of available shares in the investment platform. Market cap lets you in on some of the most crucial trade details, like how much risk is up for grabs to gain high-profit margins.
When deciding to start cryptocurrency trading, checking the market cap of the target company entails thorough independent research. Generally, the market cap appears to be the most visible part of an investment’s profile, making its strength or weakness known easily. If the tokens have a high market cap and circulation in the industry, it is something to consider. That’s because the vulnerable nature of the cryptocurrency market is not likely to affect them.
The next important thing to know about cryptocurrency trading is how much it gets bought and sold at the average. It is best to check trade volume on a daily basis, so you have a closer analysis if you’re choosing the company or not.
Large companies like Bitcoin do not need to get this type of check, as their reputation speaks for itself. However, if you’re up for researching small-scale digital assets, an inspection of their transaction trends will be beneficial for you. The formula is straightforward: high trade volume is a go, and low trade volume is a no.
Higher trade volume will tell you that the cryptocurrency is very liquid and will make a run for your money. You only want to be connected to reliable and active accounts, after all. Those with low trade volume are struggling to penetrate the industry, compromising your assets.
Going on to the less technical part of cryptocurrency trading, developing a strategy for your digital assets is a task only you can perfect. A good investor is rational, systematic, and updated, so you can’t afford to rely on gut feeling.
Creating a game plan should always be on two extreme scenarios: when the trade is going up and when your investments are up for a considerable loss. You should be able to identify the target price for a profitable state and execute that accurately when given a chance. When the situation is on the challenging side, a stop-loss order will help you protect your digital assets. That’s because you’re going to sell the asset at a lower rate than the purchasing price.
It is essential to remember that the cryptocurrency trading industry is a very vulnerable market. If you cannot avoid a loss, ensure that it would be a tolerable one. When you push for a long-term investment, you will add more strategies to your list.
In a world where technology is too advanced for one’s sanity, there’s always a dark side to digital asset trades. Hacking and account breaches are common problems early on, making the progress of cryptocurrency trading slow down. Although there have been more secure ways to guarantee your investments’ safety, you should think long and hard about where to store them.
You can always opt to store your cryptocurrencies on your exchange account but limit it. You should only leave enough funds that you can handle losing. The risk of your assets getting in trouble is high because exchange apps rarely have this feature prioritized. When the amount is too significant for comfort, search for a reliable alternative.
Software wallets are now emerging to match the exchange apps. These wallets value your security precisely because they exist for that purpose. It allows an investor to get private and exclusive access to your cryptocurrencies using your handy gadgets. That way, you can manage your coins or tokens from the comfort of your phone, tablet, or PC.
A more traditional approach is getting a hardware wallet where you can store the assets offline, and you’re the only one with the key to it. Whichever you choose, be sure to weigh the consequences and have a back-up plan. Want more cryptocurrency trading tips? Check here!
Now that you’ve learned more about cryptocurrency trading, you realize it’s a balance of technical and practical factors. In both approaches, the common denominator is your commitment to making the best happen for your investments. The process does not have to dreadful and intimidating, but it entails a level of responsibility to monitor and speculate trends. Other traits you can indeed develop through time are risk management and quick decision-making. There, you’re on route to a successful journey!