Cryptocurrency Trading: A Beginner’s Guide To An Easy Start

Published on May 6, 2021
Photo by Worldspectrum from Pexels

Trading is a fundamental financial concept that includes buying and selling assets. Now, the assets can be anything from real estate property to mutual funds, and even currency.

In this article, we will be discussing the trading of cryptocurrency only.

What is Cryptocurrency?

In the year 2009, a developer known by the name of Satoshi Nakamoto created a digital asset. The asset was open to all and can be bought or sold like any other commodity. It was named Bitcoin.

Cryptocurrency is also a digital asset that can be traded digitally, exchanged for goods and services, and can also help create personal wealth.

Also known as digital currency or simply crypto, the assets use a technology called Blockchain. (We’ll be discussing it in the next section).

It is noteworthy that Bitcoin isn’t the only cryptocurrency in the market. Since its creation, there have been several other cryptocurrencies in the market. Ethereum, Ripple, Binance, and Litecoin are only a few to name.

What is Blockchain?

Often regarded as the backbone of cryptocurrency, blockchain is essentially an open ledger. As the name suggests, the ledger contains blocks of data linked to each other in a chain.

It is noteworthy that blockchain data is constantly increasing. Every transaction that occurs within the cryptocurrency domain is registered on this network of chains as a block. In other words, whether you buy or sell bitcoins, a new block of information would be added into the chained network.

Blockchain, as already mentioned, is an open network ledger. However, it does not mean anyone can control the information that it contains. Though everyone can check the data, not everyone can use it. In other words, to use cryptocurrency, the user needs two sets of keys, a public key and a private.

Another noteworthy feature of the blockchain is that another task is involved – mining for every transaction to complete. Essentially, it is the process of tracing back the ledger and creating new blocks of information. Besides, it is also the process that generates new currency.

How to Start Trading?

Now that you’re familiar with the basics, it is time you start trading. But wait, is it all you need to start trading in cryptocurrency? Supposedly not.

Keep reading to know more.

What do you need?

To start trading in cryptocurrency, the most important thing you need is fiat cash or valid banking bills. You can then use this fiat currency to buy cryptocurrency. However, there are two other things that you would need – a wallet and an exchange.

Like you use your bank account, mobile wallets, or pocket wallet to keep your money safe, you need an electronic wallet to keep your cryptocurrency. Before we tell you anything else, you must understand one thing – cryptocurrencies do not exist physically. Yes, you read that right. Cryptocurrencies are, indeed, only sets of encrypted codes.

The other thing that is an exchange is what helps you trade in cryptocurrency. If you’ve ever invested or traded in shares and stocks, then you can easily relate to the analogy. A crypto exchange works similarly as a stock exchange would. It facilitates the buying and selling process of the assets.

Buying cryptocurrency

After getting a crypto wallet and registering with a crypto exchange, the next thing you need is cryptocurrency. To buy cryptocurrency, you can either contact the exchange or contact a seller directly. In any case, you’d be paying through the exchange to buy your preferred cryptocurrency.

Other ways to buy cryptocurrency could be through an electronic transfer or an atm. For instance, you can find a Bitcoin ATM and register or create an account. The ATM should display a QR code.

The code helps the machine identify your wallet. After scanning the code, you can insert the bills into the ATM. And the corresponding value of Bitcoins should be added to your wallet.

Selling cryptocurrency

The selling process for cryptocurrency is also similar. You contact your exchange, ask them to sell some or all of your assets. And the value of your assets will be credited into your account. However, the exchange would deduct their service fees from the actual value for which your assets are sold.

On this note, you must understand that you can also sell your cryptocurrency through an ATM. The machine would then dispense the amount for which your assets are sold. But, only after deducting the service fees.

It is noteworthy that when you sell your Cryptocurrency, the sum you receive can be higher or lower than the price at which you bought them. The difference would decide whether you’ve earned profits or borne loss.

How to Maximize Profits?

Of course, when you’re trading, you intend to make profits. However, it is not always the case. Since the crypto market is highly volatile, the market value reaches record highs and lows. Sometimes, several times within a day.

As an investor, you’d want that your assets bring you only profits. And thankfully, there are ways to ensure that too.

Invest for long term

Regardless of the assets you trade, remember, perseverance and patience are the most promising growth hacks. When trading in cryptocurrency, make sure you invest your money for the long term. If not profits, it should surely help you avoid any losses. After all, cryptocurrencies are only increasing in market value over the years.

Diversify your portfolio

Another thing to keep in mind when trading in cryptocurrency is to invest in different types. In other words, you shouldn’t only invest in Bitcoin or Ethereum, but try to invest in other cryptocurrencies too. This should balance out your losses and enable you to learn more about crypto trading and how the market operates.

Focus on research

Lastly, but most importantly, you should never stop learning. You must stay updated with the changes that occur in the market. Also, try to understand what’s affecting and what will affect the crypto market in the future.

To sum it up, crypto trading is a serious business. And to succeed in the domain, you need to be vigilant and constantly update your knowledge.

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