Trading cryptocurrency, like any form of trading investment, has specific steps and requirements to follow. While everyone is trying to get a hold of cryptocurrencies, one should still be given the complete guide to cryptocurrency trading.
A lot of investors today like to trade cryptocurrencies because it is a highly volatile asset class. When you do it in the right way, you will be able to acquire higher returns than traditional investments. However, like any form of investment, crypto trading is risky—you have to be ready for whatever outcome you see.
Of course, you should also not forget the two golden rules in crypto trading:
- Only invest what you can afford to lose.
- DYOR. Do your own research.
Crypto Trading, Explained
Before diving deeper, let us explain what is crypto trading first.
Trading is referred to as the economical concept of buying and selling assets like goods and services between two parties. Furthermore, crypto trading is what you call the buying and selling of cryptocurrencies in a crypto trading platform or crypto exchange.
Different Types of Crypto Exchanges
- Centralized Trading (CEX)
Centralized exchanges are run by a private businesses. Users don’t have complete control of their money because the exchange has access to their transactions, assets, and even private keys. If the exchange is compromised, this leaves users open to harmful attacks.
- Decentralized Exchanges (DEX)
Because there is no central hub or middleman, a decentralized exchange is really closer to the fundamental essence of Bitcoin. Servers are dispersed globally to ensure that, in the event of an attack, no one computer can compromise the entire network. A DEX also does not require a KYC procedure, in contrast to CEXs.
- Hybrid Exchanges
A hybrid exchange gives consumers a taste of both worlds by combining the security provided by a decentralized exchange with the increased functionality of a centralized exchange.
Four Types of Trading Strategies
There are four trading strategies that are implemented in both traditional and crypto trading. These are Scalping, Day Trading, Swing Trading, and Position Trading.
Scalping is a short-term trading strategy that enables traders to acquire instant profits. Here, traders hold the assets for a few minutes or even seconds. Its purpose s to achieve small profits that can be accumulated throughout the day.
- Day Trading
Also known as ‘Intraday Trading’, this trading strategy involves holding assets for a whole day. Here, traders enter and exit the position on the same day. This type of trading involves basic technical analysis using technical indicators to determine market conditions and trends.
- Swing Trading
In this type of strategy, traders hold the assets for a couple of days or weeks and follow short to intermediate-term trends. Here, traders do not need to worry about the ups and downs of an asset because swing trading, in contrast to day trading, will not hold your asset for just a day. It is perfect for those who are not active in daily trading.
- Position Trading
Also known as ‘Trend Trading’, Position Trading enables traders to focus on the long-term price shifts of an asset. Trading experts use this kind of strategy to achieve maximum profit from major price shifts.
Furthermore, according to a trader’s requirement and availability, they can use any of the aforementioned trading strategies.
Steps in Cryptocurrency Trading
Here are the proper steps that beginners can follow when starting their crypto trading journey.
Step 1: Look For A Cryptocurrency Exchange
Beginners need to research the best crypto exchange first. An exchange that is user-friendly with good functions, to be able to use it properly while maximizing profits.
Some of the most popular ones are:
Create an account on the exchange and provide the necessary information required.
Step 2: Fund Your Account
Once you have your account in any of the crypto exchanges of your choice, the next thing you should do is fund your account. To do this, you can add money to your digital wallet, use your debit cards, or through wire transfers.
Step 3: Select The Crypto You Want To Invest In
There are around 20,000 cryptocurrencies available in the market. It is at your discretion which cryptocurrency you want o invest in.
Some of the famous cryptocurrencies are:
- Bitcoin (BTC)
- Ethereum (ETH)
- Binance (BNB)
Traders often choose a cryptocurrency depending on its predictability. While some traders find BTC and ETH easy to predict, there are others who prefer altcoins or some small crypto as well.
Step 4: Choose A Strategy
While mastering all trading strategies take time, it is important to understand the correct fundamental and technical analysis of trading to maximize your profits. For beginners, it is advised to take a crypto trading course to become an expert.
Step 5: Choose The Most Secure Wallet
It is essential to store your funds in a safe place. For this, traders need to choose the most secure crypto wallet. It may be a software or hardware wallet—whichever makes you feel secure and safe.
Some of the famous crypto wallets are:
- Hippo Wallet
Suffice it to say, crypto trading requires the right knowledge and tools to start. It is often regarded as a high risk, compared to stock trading, but this depends on a trader’s strategy and what assets he holds. If anything, all forms of investment are risky—which is why you have to be ready before starting it.
Before trading cryptocurrency, do your own research first and only invest what you can afford to lose. Results may take time, but reaping what you sow will be evident in the end.
Disclaimer: This article solely expresses the author’s thoughts, which may not reflect those of Enifex. Nothing in this article should be interpreted as investment guidance. Enifex encourages all clients to do their own research before investing in cryptocurrencies.