Crypto trading guide for beginners
Crypto trading guide for beginners
Crypto trading has reached new heights in recent months, with the advent of the whole world going online, it's no surprise that the currency shall do so too. And thus, this might be the perfect time to go ahead and grab your share of profit in the crypto market. But before that, there are a bunch of terms and behind-the-scenes things you need to know about if you want to make sharp investments, and this guide might be the one for you.
Choosing the trade medium
There are two approaches when it comes to crypto trading. The first is an exchange, which allows you to buy the coins and therefore taking the proprietorship of the cryptocurrency, and the second is through CFDs, short for a contract for difference, which involves a third party.
We shall discuss it in details for more extensive understanding:
A cryptocurrency exchange is an online platform that allows you to trade the cryptocurrency for fiat money or any other digital assets. Currently, coinbase, Binance, and GDAX are amongst the best crypto trading platforms. The coins you purchase will then require a wallet to be safely kept in, and most exchanges dispense their wallet for the buyer to use. Check the reviews of the exchanges you're interested in to know if it's safe or not and get a perspective of what it will offer you.
Unlike exchanges where you have the right to your share of cryptocurrency, CFD is simply a contract between the broker and the trader without purchasing any crypto asset. Here you're just surmising on the market price. The trader determines the asset offered by the broker and sets its specification and opening price, thus undertaking a contract. The profit or loss is leveraged here, so make sure to set it according to your requirements. When it comes to crypto trading for beginners using a CFD is a better choice.
If you happen to buy cryptocurrency, you'll need a wallet to store it securely. There are other types of wallets apart from the one provided by your exchange platform because those aren't entirely safe. Hence choosing the right version of the wallet is equally important.
They are of three types, hardware, software, and paper wallets. Software wallets are known for their ease of accessibility, while hardware ones are more secure. On the other hand, paper wallets are for those who'd like to store their assets for a long time.
Knowledge of the crypto market
The cryptocurrency market is based on what is known as blockchain technology, which results in a shared ledger that records all ongoing transactions. It records the transactions in blocks, and with every new transaction, the new block thus created is added to the chain.
This is how the market came to be decentralized, removing the need for a third party in any transaction. There are several merits of this technology, the first being its universal readability, which makes it transparent, and the second being its cryptography complex linking, both ensuring its safety. The more you educate yourself on this, the better your investments will fare.
Analyzing the trends
Currently, bitcoin and ethereum cover most of the market, with Ripple, Zcash, Dash, and monero also rising in value. Knowing the rise and fall in the prices that they have gone through before will give you an idea of the market's swing as to where you should put your money and what to expect.
The market is highly volatile, changes every passing moment, and needs to keep up with the news. Especially for short term traders, they should not miss out on relevant news to edge over the others. You can analyze previous price charts to predict more precisely.
Check how the government is trying to regulate cryptocurrency in your area. There may be new regulations in your country that affect your tax obligations, or the already established system may change to adapt to the evolving market, so make sure to keep your eye on that as well.
You can also first try your hands on a demo account, which will give you the chance to craft your trades for practice, correct mistakes, and trail the platform, all without risking your hard-earned capital.
Benefits of crypto trading
- Peer to peer transaction: Such networking cuts out the middleman, this leads to lesser risk of fraud, cheating, clarity with an audit trail, and increased accountability. This also protects your account from identity theft.
- Market volatility: While this particular trait is a double edged sword, for investors who play smart, it can yield high returns in profit due to the swift, substantial fluctuations.
- Faster trades: When it comes to international transactions, cryptocurrencies are not subject to various levies imposed by a specific country because of their decentralization and therefore provide smooth cross border transfers.