Cryptocurrency Trading Guide

If you had searched the phrase “cryptocurrency” on Google a few years ago, it would have pictured some currency. A currency that involves an underworld banking system where cloaked traders are sitting behind shady computers.

We now read about it in the business parts of daily websites or financial newspapers. Also, on their front page of those same media. They devote their news spice to topics like Bitcoin, NFT or Metaverse in order to stay on-trend.

Global authorities are scrambling to enact legislation and rules to have ease of conducting Initial Coin offerings (ICOs). Is the word “cryptocurrency” even correct? Should it be “digital currency” instead? What is “virtual currency”?

So, the issue we must now ask is, do cryptocurrencies – whatever we name them – deserve this much attention? Should we be so concerned? What will the long-term impact of cryptocurrency be?

Well again, what is it? We will see in this cryptocurrency trading guide!

What is Cryptocurrency Trading?

Before we get started with Bitcoin trading, let us understand trading. Trading is the economic notion of purchasing and selling assets. These assets can be exchangeable products and services between the trading parties. We are talking about the financial markets here, where traders exchange financial products. These can include equities, money, cryptocurrency, margin goods, and so forth.

Cryptocurrencies trading entails purchasing and selling cryptocurrency through a crypto trading platform or exchange. Binance, Coinbase, CoinDCX, and others are the most prominent cryptocurrency trading platforms.

The goal of cryptocurrency trading is to generate profits over a set period. Trading differs from investing, and in the next section, we will discuss its concept.

What Is the Difference Between Investing and Trading?

Investing is not the same as trading; trading involves making a profit in a short period but investing involves holding assets for the long term. 

Investment

When making any investment, we must look for long-term patterns and ignore short-term market swings. Let us understand it with an example of Bitcoin.

The primary purpose of Bitcoin investment is to acquire additional coins. For instance, if you buy four Bitcoins at a given price, the total investment value of your asset eventually will rise in proportion to the coin price after a few years.

Trade

Trading, on the other hand, is concerned with short-term swings. Thus, it is critical to comprehend the daily market while trading.

The significant purpose is to make money in dollars or other currencies. If you want to thrive in cryptocurrency trading, experts advocate understanding market patterns and short-term price movements.

It is more like buying low and selling high, and then the trends swing in your favor. To maximize your profit in bitcoin trading, you will need to dump coins often.

Crypto Trading Structure – How Trading Occurs With Cryptocurrency?

When you start trading cryptocurrencies, keep in mind that you must comprehend market movements to avoid massive losses. Because the crypto market is volatile, it is always best to invest what you can afford to lose.

In addition, if you are a beginner, you should analyze the elements that influence market patterns. For instance, as more individuals purchase a given item, the price generally rises. In contrast, when consumers sell more than they acquire, the price falls.

How Many Cryptocurrencies Exist? How Much Are They Worth?

CoinMarketCap.com, a market research website, stated that over 15,000 distinct cryptocurrencies are openly on trade (on the rise) these days.

On December 10, 2021, the total worth of all cryptocurrencies was 2.3 trillion, down from an all-time high of more than $2.9 trillion a few weeks earlier.

Among them, they estimated the overall value of Bitcoins (the most prominent online currency) at $932.4 billion.

Cryptocurrency Trading Steps – How To Buy And Sell Cryptocurrency?

Step 1: Open an account with a cryptocurrency brokerages

Unless you already have cryptocurrencies, you will need to open an account with a cryptocurrency exchange or a broker.

Gemini, Coinbase, and eToro are among the top cryptocurrency brokerages available. All three of these choices have a simple user interface that shows a wide range of cryptocurrencies. You can pick a broker or exchange of your choice and commence over it.

Once you choose the one, dive into opening an account. Provide crypto brokerage with the basic information required to sign-up for an account. This information may include, but is not limited to:

1. Email Address
2. Date of birth
3. Your Address
4. Social Security number

Step 2: Link Your Account.

After you have registered with a cryptocurrency brokerage, you will need to link your bank account. Most cryptocurrency brokerages accept bank financing via debit cards and wire transfers. Wire transfers are often the cheapest way to fill your registered account – and they are cost-free on Coinbase and Gemini.

For our readers, who are not familiar with wire transfers, here is a thing! Wire transfer (bank or credit transfer) is a method of electronic funds transfer from one person or entity to another.

Step 3: Select A Cryptocurrency To Invest In

Most active cryptocurrency traders widely believed of their money into Bitcoin and Ethereum. Because these cryptocurrencies move, more predictably than other newly born altcoins. Also, their trading utilizes technical indicators in uncomplicated ways.

Some technical trading indicators with their formulae include:

Relative Strength Index (RSI)	RSI = 100 – 100 / (1 + RS)RS = Average of periods which close up in price / Average of periods which go down in price Generally, the number of periods used is 14, but it is entirely up to the trader how many to use.
Moving Average Convergence Divergence (MACD)	26 period EMA – 12 period EMA at closing prices Where EMA is Exponential Moving Average
Bollinger Bands	Middle Band – Simple Moving Average over 20 days (SMA) Upper Band – SMA over 20 days + (Standard deviation of price over 20 days x 2) Lower Band – SMA over 20 days – (Standard deviation of price over 20 days x 2)
On Balance Volume (OBV)	If an asset’s price closes up: The volume for that day + OBV’s total If the price goes down: The volume of a day – total OBV’s If the price remains the same: Zero calculations

Many cryptocurrency traders invest a portion of their wealth in lesser cryptocurrencies. Although small and mid-cap cryptos are riskier than large-cap cryptos, they have increased upside potential. Many minor cryptocurrencies have grown more than 1,000% in a couple of months, making them appealing options for risk-averse investors. In the end, the choice is all yours.

Step 4: Select a Strategy

Choosing a trading strategy is a crucial stage in crypto trading. As a result, you may earn gigantic returns in cryptocurrency trading by combining trading indicators with proper fundamental and technical research.

The following are some of the most common crypto trading tips:

1. Day Trading

As the name suggests, Day Trading is a fast-paced strategy that capitalizes on single-day trading on short-term price swings.

Short terms fluctuations cause a high risk of loss associated with attempting to time the market. Therefore, this approach is not good for every trader.

• Hedging

Hedging occurs when one investment cancels out some or all of the risk of loss with another. Traders employed this method to avoid volatility fluctuations while holding the coins.

Cryptocurrencies can be hedged using financial products such as contracts for differences or futures. These allow you to wager on the future value of the currencies.

If you are an expert in this approach, you are good to go; otherwise, risks are your fate.

• Scalping

Scalping is a short-term trading approach often known as a quick moneymaker.

Professional cryptocurrency traders retain the coins for a few minutes or seconds in this form of transaction to profit from little price swings. However, the profit is not as large as in other trading systems. The goal of scalping is to make modest profits that accrue during the day.

The best moment to execute the trade is when the market is highly active since this increases the chances of more returns.

• Trading Positions

In this trading technique, you must concentrate on long-term price fluctuations. Primary price fluctuations are taken into account by trading specialists to maximize profit.

Position trading is also known as “trend trading” since traders prefer to maintain positions for prolonged periods. In addition, monitoring weekly and monthly price charts will help you evaluate market patterns.

Traders that use this trading approach do not concern with modest price swings. In reality, they are solely concerned with the trending market movements and react appropriately.

Hence, depending on your needs and availability, you may select any Bitcoin trading tactics.

Step 5: Keep Your Cryptocurrency Safe.

If you are willing to trade your coins actively, you will need to keep your money on the exchange to access them. If you intend to keep your bitcoin for the medium to long term, you should purchase a cryptocurrency wallet.

There are two types of cryptocurrency wallets: software wallets and hardware wallets – both are secure.

• A hardware wallet (Offline storage) is a cryptocurrency wallet that holds the user’s private keys (important information necessary to approve outbound transactions on the blockchain network) in a secure hardware device. The hardware wallets from Ledger are device-based, which means they employ storage mechanisms (such as USB drives) to hold private keys, making it harder for hackers to obtain the key from an internet location. Ledger has two hardware wallets available: the Ledger Nano X & the Ledger Nano S.
• Software wallets are best for quick transactions or trade cryptocurrency. Some accessible wallets for iOS, Google Chrome, and Android include Exodus Bitcoin, Crypto.com, or Crypto Wallet.

Five Common Crypto Mistakes to Avoid

Crypto mistakes are shockingly widespread, and we have listed a few of them here.

1.    Making Purchases Only Because the Price Is Low

Low prices are not necessarily indicative of a good deal. Prices are sometimes cheap for a reason! Keep an eye out for coins with declining user rates.

Frequently, developers abandon a project, and it stops updates, rendering the coin vulnerable.

2.    Falling for Scams

• Cloud multiplier swindles. Fraudsters may approach victims through email or text message with an “investment offer.” They claim to reward investors twice or treble the amount they put into bitcoin if they transmit it to a certain digital wallet. Never go with free money offers.
• Spoofing. Criminals may inflate or deflate the price of relatively tiny or unknown cryptocurrencies by issuing bogus buy or sell orders, sending the currency’s value rising by hundreds of percent at a time. They can inflate the price by advertising it on social media and then selling it at a higher price on cryptocurrency exchanges. They then vanish. The same is true for malicious wallet software.
• Fake Coins. With so many cryptocurrencies on the market, it is difficult to identify the genuine ones & fake ones. When you buy in counterfeit coins, thieves can take your identity and, in many cases, your hard-earned money. Do not accept anyone’s word for it; instead, conduct your own study using as many credible sources as possible.

3.    Going “All-In”

Some of the most dubious trading sites advise you to make the most of your money by betting as much as possible. This is a brief way to the poor house.

Better crypto investment advice would be to limit your investment money to a particular percentage — say, 4% — and always retain an emergency cash reserve that is never involved in the market.

4.    Thinking Of Cryptocurrency as Easy Money

Making money by trading any financial instrument, whether equities, commodities like gold and silver or cryptocurrencies, is not simple.

Anyone who claims otherwise is most likely attempting to dupe you into making crypto blunders.

5.    Forgetting About Your Crypto Key

If you use a hardware wallet to store your cryptocurrency offline, missing your key is akin to losing the keys to a bank vault.

All of your cryptos will be lost if you lose your key.

Conclusion

In this cryptocurrency trading guide, we discussed the basics of cryptocurrency trading and its structure, along with some strategies. Besides them, we also covered some steps that are simple and easy to follow when it comes to trading cryptocurrencies. If you want to learn more about trading with cryptocurrencies, you can sign up for one of our crypto courses.