From being valued at pennies to skyrocketing to almost $20,000 with Bitcoin, learning how to trade cryptocurrency is a huge discussion today.
What is cryptocurrency and why are people trading it? How can you grow your income using cryptocurrency? And, more importantly, is it hard to learn how to trade cryptocurrency? In this article, you’re going to learn exactly what you’ll need.
Summary of How to Trade Cryptocurrency
Here is a brief overview of the steps involved in how to trade cryptocurrency:
Read and research any and all cryptocurrencies you’re interested in trading before you start: Knowledge is power
Set up any wallets for the cryptocurrencies you’ll be trading. Each currency requires its own unique wallet
Sign up for, and go through the identity verification process for any of the trading platforms you’ll be using
Determine the trading strategy you’ll be using, whether long-term, short-term, or a blend
While many people benefited from the hype of cryptocurrency’s rise, the temptation to jump on the bandwagon of what’s trendy without learning how to trade cryptocurrency has caused many to miss out on strategically growing their investments.
We’ll break these elements down and figure out the most effective ways of how to trade cryptocurrency. Just in case you’re new to the world of crypto though, you might still be a bit lost and wondering…what exactly is cryptocurrency?
Quick Refresh: What is Cryptocurrency?
Cryptocurrency is basically a term for digital currency that is not tied to any fiat currency or centralized entity. This means that cryptocurrency isn’t owned by a bank, federal reserve or government and therefore, it stands independent from the Dollar, Euro, or even gold or silver.
In order to prevent fraud and create security earning money with Bitcoins, the transactions carried out with cryptocurrency are recorded digitally with something known as a blockchain, which is the spine and secret to cryptocurrency’s success. It is like a digitally embedded “paper trail” of transactions or receipts for anyone learning how to trade cryptocurrency.
Transactions go through a rigorous confirmation process to ensure that only genuine transactions are added permanently to the blockchain, allowing individuals to earn income via the internet while trading, investing, mining, or buying currencies.
So with that in mind, how does one learn to trade cryptocurrency?
Trading Cryptocurrency and Becoming a Master Trader
Before you jump head first into how to trade any cryptocurrency, it’s important to read up on the industry first: Bitcoin, Ethereum and Litecoin are 3 of the many different types of cryptocurrencies one can trade on trading platforms. Before you prepare to even invest any money and purchase cryptocurrency, it’s paramount to read, read, read and research everything you can first!
Just like any good stock investment, cryptocurrency trading is not exempt from risk. Actually it is rife with risk but it can so be highly rewarding. For example, the Winklevoss brothers became the first billionaires from their Bitcoin investment. And they weren’t the only ones who traded cryptocurrencies and came out on top! That being said, it’s important to weigh the pros and cons of how to trade cryptocurrency and go into it with eyes wide open!
After you put in your research, it’s pretty easy to get started on how to trade cryptocurrency. What you need is:
A Cryptocurrency Wallet (or 2)
Just like the fancy or worn out wallet you have, a cryptocurrency wallet holds the private keys that let you buy, sell and trade cryptocurrencies. It’s what helps keep your cryptocurrency safe. A private key is comparable to that of a paper bill with its individual serial number. When you buy or sell with that paper bill or private key, you are giving away (or earning) your right to spend that cryptocurrency.
So just like your physical wallet, a cryptocurrency wallet will tell you the total of each currency you own and let’s you receive or store newly bought cryptocurrencies and pay other people. Just like with your regular wallet, ALWAYS keep your cryptocurrency wallet safe.
A Cryptocurrency Trading Platform (or 2 or 3 or more)
Depending on what type of cryptocurrencies you want trade, usually one will use more than one cryptocurrency trading platform account. Some of it is to meet security needs but often it’s just because there is no universal trading platform that trades all of the cryptocurrencies available.
And that’s it! A little know-how, a cryptocurrency wallet of your choice and a cryptocurrency trading platform or two of your choice and that’s how you are set up to trade cryptocurrency!
Beginners Tips on Trading
Read, research & read some more
As mentioned before, the first and most important thing to learn how to trade cryptocurrency is to read and research a lot before you start trading. Learning how everything works, the terminology, and even the trends of trading can be overwhelming if you jump into it blind.
Also, if you don’t know what you’re doing, you can easily lose a lot of money instead of earning!
Study trading strategies
Yes, learning how to trade cryptocurrencies is very new and different from trading stocks and bonds. However, the trading strategies and even the trends are the similar. So take some time to learn some trading strategies to apply as you learn how to trade cryptocurrencies.
This has proven to be really advantageous to those who know what signs to look out for so you know when is the best time to buy and sell on the trading market.
Start with popular cryptocurrencies
There’s really nothing wrong with buying popular cryptocurrencies like Bitcoin, Ethererum and Litecoin when you first start out. While it can be a bit nerve racking when the news headlines light up about the rise and falls of any or all of these cryptocurrency values, there is also a lot of coverage for you to read, observe, and learn from these highly visible cryptos.
Once you get the hang of trading with the more popular cryptocurrencies, you’ll know what to look out for when you start branching out to less popular altcoins. While altcoins can come with more risk they also can have higher returns!
What You Need to Look Out for With Trades
Okay so now you got yourself started on how to trade cryptocurrency. Here are a few things that are definitely important to keep in mind as you go forward with trading:
No matter what you do, how secure your cryptocurrency wallet is or how solid your trading strategy is, trading cryptocurrency is risky. Yes, you could say the same thing about stocks and bonds but it is worth being extra cautious about your approach on how to trade cryptocurrency. Here’s why:
Unlike other investments, the volatility of cryptocurrency fluxuates at a much higher and more dramatic rate. Early in the article it was mentioned that cryptocurrency is decentralized and not regulated by banks or reserve. While this opens many doors for opportunity, this also means that there are not as many safeguards.
Schemes like bubbles, pump and dump and sensational media frenzies drastically affect the value of a cryptocurrency from one hour to another and happen quite often. This still does happen in the stock market but regulations do work to keep investors from being subjected to this as much.
Also blockchain technology itself may be secure from being faked, copied or altered, but there are also many cryptocurrencies being created everyday that can in fact be a scam.
There are many worthy cryptocurrencies that have the potential to change the future but with them also come those who are out to swindle people from their investment and those that just simply flop. This may be in the form of investing Bitcoin in an even exchange for a “new” altcoin, and then all the sudden altcoin flops and you’ve lost your Bitcoin.
This is why it is paramount for anyone learning how to trade cryptocurrency to be vigilant in their investments and not jump on to trends just cause it’s a popular move.
Government regulations can also drastically affect cryptocurrency trading value. Some governments are not open to the cryptocurrency market at all and certain countries are banned from buying, selling or owning cryptocurrencies all together.
Usually when something in regards to country regulations to embrace or restrict cryptocurrency is announced the value can take a sudden jump or nosedive.
Finally, and the most important thing to keep in mind is that the technology of cryptocurrency is still brand new. Yes, we have heard a lot about its success but there is still a lot of risk that Bitcoin, Ethererum or even blockchain technology could fail all together.
Don’t let this dissuade you from investing at all! But, again, like any good investor, the trick on how to trade cryptocurrency successfully is to go into all your risks with eyes wide open. So when you think about how much you want to invest or what you want to invest in, don’t invest more than you are willing to lose.
Thoughts on Investing with Cryptocurrency
Generally speaking, there is no reason why anyone shouldn’t see cryptocurrency trading as an investment. Earlier it was recommended to find a trading strategy to use when you learn how to trade cryptocurrency.
First, there are many many different strategies out there and you can find a trading strategy that suits you. This doesn’t necessarily mean you have to be an avid day trader who is always watching the charts. You can, in fact, use a long-term trading strategy with cryptocurrency if that’s what you are interested in doing!
Long-Term Trading Strategy
If you’re interested in holding your cryptocurrency over a long period of time (weeks, months or maybe even years) then it would be considered as a long term strategy. Many who chose this route may believe in the successful growth of the cryptocurrency value and are usually willing to stick through the short term rises and falls
Day Trading or Intra-Day Trading Strategy
Obviously the long-trading strategy’s opposite, learning how to day trade cryptocurrency looks at taking advantage of the smaller rises of values of various cryptocurrencies. One of the benefits of a highly volatile cryptocurrency market is that the short-term growth can lead to a lot of profit for the investor if done right. The only downside to this is that, when you day trade cryptocurrency, it is more of a full-time job rather than a casual hobby.
So whether or not you want to invest for the long run or make instant profits is really up to your preferences and how you want to trade cryptocurrency. There is no wrong answer on how best to go about how to trade cryptocurrency!
Purchasing Your Cryptocurrency of Choice and Final Thoughts
Once you are sure that you are ready to trade cryptocurrency, we have complete guides for the most popular currencies ready to walk you through the process of purchasing step-by-step:
Cryptocurrency is a fairly new and trending technology with lots of success and a lot of risks. Learning how to trade cryptocurrency can be incredibly rewarding to your portfolio, and you can even use your knowledge to create other sources of income. Many traders sell and package their expertise in the form of consultations, workshops, and earning money blogging about their strategies. In general, there is a lot of risk in any investment and, if done wrong, you could lose your initial input. But there are many ways to turn cryptocurrency trading into a successful venture!