Cryptocurrency Trading Made Easy: Learn the Basics with This Simple Guide
The cryptocurrency market has exploded in the last few years, with trading volume hitting billions per day. It is important to understand how this volatile and oftentimes unregulated market works before you decide to invest your money in it though so that you can make informed decisions on which currencies should be a part of your trading portfolio. This article will provide some basic information about cryptocurrencies for those who are new to the space and want to start experimenting with trading them.
What you need to know about cryptocurrency
Cryptocurrencies are not regulated by a central bank or government, meaning their value is determined solely on the demand for them. Because cryptocurrencies are not tied to a physical asset and often lack liquidity, their value can swing dramatically even on the day of trading.
There are different types of cryptocurrency wallets for storing your digital currency once you’ve accumulated some by buying or exchanging it with other currencies like US dollars or euros. You’ll want a wallet that offers two-factor authentication and is easy to access. Nowadays, there’s a huge selection of wallets out there but the most popular choices are those type of cryptocurrency wallet that offer both cold storage (offline) and hot storage (online), security measures like two-factor authentication for extra protection, plus an app interface so it’s really easy to use!
A ‘hot’ cryptocurrency wallet is where your coins are stored online on an exchange or with another service provider which makes them accessible for trading at any time of day. A ‘cold’ wallet is where you store your cryptocurrencies offline in a digital or paper wallet and can be accessed only when connected to the internet.
There are three main types of exchanges out there where traders buy and sell cryptocurrencies – centralized exchanges (CEX), decentralized exchanges (DEX), and peer-to-peer platforms. There’s no best option because they all have their own pros and cons but some people prefer centralized exchanges because transactions are easy and quick; others prefer decentralized exchanges as they offer more privacy.
Where to trade cryptocurrency
A cryptocurrency exchange is a type of marketplace where traders can buy, sell and trade cryptocurrencies. When choosing a platform, it is important to consider its fees and how they compare to other exchanges. Some platforms may charge high transaction or withdrawal fees which can eat into your profits if you are not careful.
It’s also crucial that the exchange has low deposit rates for cryptocurrencies, trading pairs with lots of liquidity (meaning there are many buyers and sellers), and provides good customer service in case something goes wrong during the trade.
While some popular crypto-friendly institutions like Coinbase offer these features, smaller ones might not have them yet so make sure to do plenty of research before depositing any funds on an unfamiliar site.
Centralized vs decentralized exchanges
There are different types of cryptocurrency exchanges, such as centralized and decentralized. But what is the difference between them?
A centralized exchange is owned by one entity or person who has taken responsibility for its maintenance. It includes a matching engine that helps traders find each other’s orders and transactions to execute trades and get an instant price with minimal transaction fees. People typically use these because they offer more security due to their well-developed matching engines which help traders find the best prices for every single transaction
However, some people still prefer decentralized exchanges because they offer more privacy.
Top Crypto Exchanges
Leaving your funds on a crypto exchange is risky as it can be hacked or have security breaches that would result in theft of customer funds (e.g., Mt Gox)
With this knowledge, I’ll show you some of the most popular trading platforms so we can get started with investing!
Coinbase is a leading exchange that has good security, liquidity, and the ability to trade cryptocurrency against fiat currencies. You can buy Bitcoin with USD or EUR and then use them for trading other cryptocurrencies. This platform offers an easy way of buying, selling, and storing your coins in one place. It now offers advanced order types such as stop-loss orders which enabled you to set a floor where prices might drop below at some point during the trade. With this, there’s protection if you invest blindly without knowing what kind of price movement will be priced into your investment.
Binance is one of the most popular cryptocurrencies trading exchanges right now because it offers many coins to trade plus an intuitive interface that makes it easy to find the best trading pair. You can use their coin called BNB as a way of paying for your transaction fees, thus getting more bang for your buck!
People often choose Binance because it costs less per transaction and has a good reputation for being secure. It offers low fees but requires crypto funds to trade, meaning you’ll need to deposit cryptocurrency, like Bitcoin or Ethereum, into the account before trading.
KuCoin is another top cryptocurrency exchange that offers more than three hundred unique coins to trade. It has its own coin called KuCoin Shares (KCS) which can be used for various discounts on trading fees but is not necessary as the platform accepts many other cryptocurrencies, like Bitcoin and Ethereum.
KuCoin also provides trading bot services which is a powerful trading tool that can help you earn stable and predictable profits. It’s easy to use, even for beginners. You don’t need any programming skills or knowledge of cryptocurrencies – just set the bot up in minutes and let it do the work!
The best part about this product is that it’s free to use. All you have to do is download the app on your phone, sign up with your email address, and then start using the bot!
Bittrex is another popular option because it supports over 190 different types of digital currencies on its markets. You might need to hold some currency in your account balance to complete larger trades without incurring any additional costs or waiting periods before withdrawals are processed.
The main thing these exchanges have in common is that they offer an easy way for people – newbies and experts alike – to get into cryptocurrency investments securely, efficiently, and with minimal risk-taking.
Why invest in cryptocurrency
Cryptocurrency can be a great addition to your portfolio if you’re looking for higher returns and more diversification. Purchasing cryptocurrencies is no different than purchasing stocks, as they are just digital tokens that represent value in the company or organization to which it’s tied to.
The cryptocurrency market has been on an impressive bull run over the past few months where the prices of coins have doubled or tripled in price. So, if you purchase a coin at $200 and it goes up to $400, your investment would be worth double. If the market is bearish (meaning prices are going down), then some coins might only decrease in price by 20% or 30%. This puts cryptocurrency on par with other asset classes where there can be huge winners as well.
A key reason for investing in cryptocurrencies is because they have had a lower correlation than traditional investments like gold and stocks. Meaning that when stock markets go down, crypto tends not to perform as badly. Further, even when the stock market is performing well and gold prices are up (meaning they’re going down), cryptocurrency tends to still perform better.
Here are a few things you need to consider before deciding if this new investment opportunity is for you:
Do I have some money saved?
This isn’t an area where someone can invest in their retirement fund like stocks or bonds with long-term goals. If there was ever a huge crash in the crypto markets, it could take years of saving just to recoup your losses from one trade with another coin on the other side of the spectrum.
I’m educated about investing – do I understand how this work?
Many people might think that since they can read about cryptocurrency in the news, they understand it. However, there’s a difference between reading about them and understanding how to invest or trade.
Do I have time?
The crypto market is not something where you will be able to buy every day like stocks are for short-term investing goals. It takes some research on what coins might do well over time and then waiting until those prices go down before buying into them again after holding onto another coin that has gone up more than your first investment as the price of one falls at different rates. This type of trading requires patience while trying to predict which coins will rise in value and when so that you don’t end up with too much invested in just one area instead of diversifying.
What’s the risk?
Crypto trading has been popular around 2018, but it is risky as well due to the volatility of Bitcoin and other cryptocurrencies with some coins going up in value while others are losing their worth. One mistake could mean all your money being lost for good if you’re not prepared. Investing what you can afford to lose and not using the money you need for something else is a good idea.
A word of warning
Scammers target new crypto traders to steal their funds and other personal information, so be sure to know how the site or app works before clicking around on it.