How To Trade Cryptocurrency: Steps And Tips

Cryptocurrency is a relatively new concept in finance, and transacting and trading in it has yet not become a piece of common knowledge. Still, investors have been jumping on the crypto bandwagon, principally because of the good returns that it offers.

 

Dissimilar to trading in shares and debentures, which is governed by government bodies like the central banks and Securities and Exchange Boards, that safeguard the interest of investors, commerce in cryptocurrency is free from any third party control.

 

Crypto market operations are controlled and governed by the crypto community itself. Though returns on investment in cryptocurrencies can be high, the market is also highly volatile and transactions once initiated, cannot be reversed.

 

To kick off trading cryptocurrencies, you should first gain adequate knowledge of the subject. And, it is also important to know the associated risks as well as the laws that may apply to you based on your jurisdiction. Let's take a look at the steps to trade cryptocurrency.

 

 

 

First of all, you’ll need to make an account with a crypto brokerage like Coinbase, Gemini, and eToro. Just like with a stock brokerage, to open an account with a crypto brokerage you will need to provide personal identifying information like your Social Security number, date of birth, address, and email address.

 

From the investment point of view, a crypto exchange is just like the stock market. You would like to know that Crypto exchanges function 24 hours and don't have an opening or closing times like normal stock exchanges.

 

Top exchanges as per coinmarketcap: 

 

 

 

 

To fund your crypto brokerage you'll need to connect it with your bank account. Majority of the crypto brokerages offer bank funding via debit cards and wire transfers. Wire transfers are usually the most cost-effective way to fund your account. Wire transfer is free on Coinbase and Gemini.

 

After having your account at a brokerage, now you need to pick the coins you want to invest in. Some of the most popular ones include Bitcoin, Ethereum, Cardano, Binance Coin, Tether, XRP, and Dogecoin.

 

Adhering to experts' opinions as well as your own learning is very important before expanding the investment in cryptocurrency. Beginners should always start with small investments and observe the market carefully instead of blindly following anybody's advice.

 

Also note, a lot of smaller coins do not have pairs with fiat currencies. If you want to buy or sell these, you will need to purchase via another asset, usually Bitcoin or Ethereum. To do this, first, you will need to purchase BTC. Then you can make a new trade, using Bitcoin as one half of the pair and your coin of choice as the other. The exchange will be concluded at the current coin-to-coin market rate.

 

 

If you actively trade your cryptocurrency, you can store your funds on the exchange to have access to them. But if you’re buying your coins to hold for the mid to long term, then you should get a cryptocurrency wallet.

 

There are two kinds of cryptocurrency wallets software wallets and hardware wallets. Both provide security, but hardware wallets offer more security because they store your crypto on a physical device, offline.

 

If you have good experience in trading, you may already have strategies you use to trade stocks. Stock trading strategies do commonly also apply to cryptocurrencies. A popular trading strategy that many investors use is Elliott Wave Theory.

 

 

 

It isn’t easy to separate genuine cryptocurrency projects from scams. When you’re confronted with a lot of information and hype about a cryptocurrency, just don't go with it without researching the project on your own.

 

You should try to look critically at the project and check things like how many users does it have, what problem does it solve, and does it really have any links with the industry. Avoid projects that promise things beyond the universe but haven’t delivered anything tangible.

 

 

Put limits on how much you invest in a certain digital currency and don’t be induced to trade with more money than you can afford to lose.

 

 

The majority of beginners do one common mistake i.e they buy a coin when the prices are low. The decision to invest in a crypto/coin should have less affordability and more with the market cap. It is better to use a coin’s market cap as the bigger scale to choose or decide to invest or not rather than using its price. Simply put, the higher a coin’s market cap is, the more stable it is for investing purposes.

 

 

 

Source: coinbase.com

 

 

Similar to stocks and shares, crypto trading also spread your money among different projects. It doesn’t pay well to have majorly invested in one single cryptocurrency.

 

A diverse portfolio saves you from the risk of being over-exposed should one of them plummet in value – because the market prices of these investments are highly volatile.

 

 

Prices in the crypto market do often rise and fall quite dramatically day to day, and new traders often get panic - and start selling when prices are low. Well, cryptocurrencies aren’t going to go away, and leaving your money in the market for months or years might offer you the best rewards.

 

 

Many startups offer the public an early chance to invest in their idea through a crowded sale - Initial Coin Offering. ICOs enable the public to get tokens at the lowest price to trade them at a higher price in the future. ICOs offered by a good team can be quite successful with regard to the records showing some tokens ended up over ten times the value of their projected returns. So it can be very fruitful to keep an eye on new projects and the team behind them as well as the assessment of their capacity to deliver on their promises.

 

 

Many cryptocurrency exchanges, including Coinbase and Gemini, offer you automated trading. Automated crypto trading platforms are software that trade crypto for you. Once you’ve opted for an automated trading platform, the program will buy and sell your crypto for you based on the algorithm of the software and the parameters set by you.

 

If you don’t have the time to trade and monitor the market automated cryptocurrency trading can be a great option for you.