WHAT IS CRYPTOCURRENCY TRADING, AND HOW TO GET STARTED
Cryptocurrency trading is the buying and selling of digital currencies with the purpose of making a profit. Cryptocurrencies operate on blockchain technology.
Blockchain technology makes digital currencies like cryptocurrency secure by cryptography (writing or solving codes). Trading cryptocurrency is simple and secure.
How To Get Started with Cryptocurrency Trading
This is how you can get started;
1. Research whether cryptocurrency trading is good for you: Cryptocurrency is a very volatile asset. Active trading can have outcome of substantial losses. Before getting started, it's important you have an understanding of how any crypto of your choice works.
There are some good things to do to see if crypto trading matches your investment goals, such as; exploring the blockchain, noting moves made by experienced traders and reading guides.
Always make sure you are within your affordable budget.
2. Make your decision on whether to do short-term or long-term trading: Traders are divided into two groups: short-term and long-term. They are both very different. Short-term traders create and execute a trading strategy for short-term cryptocurrency price swings.
Short-term trading is more active, risky and stressful than long-term trading. But it provides larger and faster returns for people that do it right. This strategy lets you profit from rising and dropping cryptocurrency prices.
What long-term traders do is buy and hold cryptocurrencies with the intention of using or selling them later.
If you feel like it's too much stress to trade actively, and you believe that the price of the cryptocurrency will grow in the long run, then this style might be right for you.
3. Choose the method of trading that's right for you: The next step is to choose a trading method. This is very important because they are all different and require different techniques.
There are mainly three ways to make short-term cryptocurrency trades.
i. Directly trade cryptocurrencies against each other: You can choose to trade a pair of crypto against fiat currency or against each other with the aim of making a profit by buying low and selling high.
If you get it right, your funds grow. If you get it wrong, your funds decrease over time. Changing markets and bad trades can reduce your holdings.
Your crypto value will fall and rise, but there's no risk of instantly losing your whole money to a bad trade.
This method requires accurate timing of the market, which requires a lot of research and might be difficult.
ii. Trade cryptocurrency derivatives: Trading crypto derivatives does not require owning any cryptocurrency. Instead, you can "bet" on the market.
Trading derivatives offers more flexibility than buying and selling cryptocurrencies. But it is more difficult and suits only experienced traders. There are various types of derivatives, such as; perpetual swaps, futures and options. They all have their own nuances and can be simultaneously used.
Derivatives trading includes using leverage, which can magnify gains and losses. Derivatives can as well be a fast way of losing money.
iii. Trade cryptocurrency CFDs: Cryptocurrency (contracts for difference) CFDs are a specific type of derivative that allows you to place bets on an asset's price movement.
Like other derivatives, they allow traders to go short (bet on price drop) and long (bet on price rise) as well as use leverage without owning the underlying asset.
CFDs don't require buying and selling derivatives in an open market. Rather, you are buying from and selling to any trading platform you use.
4. Learn how to read charts and place trades: You need to be sure of various things like;
- The risk associated with crypto trading
- How to read charts
- If crypto trading is right for your circumstances.
Before you start trading, you need to
5. Choose a trusted exchange and start trading: When you want to choose a platform for trading, consider factors like; if it offers leverages or derivatives, if it integrates easily with cryptocurrency trading bots and what order type it allows.
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