Cryptocurrencies have taken the world by storm in recent years. As people learn about the benefits of trading crypto, more interest is generated each year. Being such a complicated topic, however, it can be difficult to simply jump into trading and expect results. As a beginner, your aim should be to first learn about the market before investing any of your money into it.
For starters, you will need to know the basics such as how cryptocurrency prices fluctuate and what trading strategies are used. After that, you can look into tools you can use to help with trading such as crypto scalping signals and trading platforms.
There’s no better place to start your trading journey than with this beginner cryptocurrency trading guide.
What is a cryptocurrency?
Think of cryptocurrency as the modern form of digital money. It is a currency that is not affiliated with any single country or government. It works in a similar way to currencies (i.e. the USD), but it is backed by technology for security. Computerized databases have secure records of who holds a certain number of cryptocurrencies. This is done using blockchain technology.
What is crypto trading compared to crypto investing?
There are multiple terms thrown around in the crypto world that can be confusing to beginners. Crypto trading and crypto investing seem similar in the way it works, but there is a stark difference. When you’re crypto investing, you are essentially holding your assets for a long period of time (a few months to years). Crypto trading, on the other hand, is when you hold your assets for a short time (a few seconds to weeks).
What causes price fluctuations in cryptocurrencies?
Just like with most financial assets, the price of cryptocurrencies will fluctuate on a regular basis. The thing with crypto, however, is that the rate of fluctuation is very fast. This can be daunting to new investors, especially if you dabbled in stock trading. The rate of change in pricing in cryptocurrencies far surpasses stock trading.
However, by learning how and why these price changes occur, you can alleviate some of these fears. This can even allow you to predict future changes in price, which is what some crypto traders bank for.
- News and Media – Coverage of the coins plays a big role in determining the price. Depending on whether it is good or bad news, the price will rise or fall. And this doesn’t have to be big news segments either. A small spark on social media can even trigger these changes. You have to study the market to understand which changes cause an effect.
- Popularity – Cryptocurrencies have evolved from simply trading the currency online. It can now be used to purchase goods from local stores, integrated into banking systems, and more. If a cryptocurrency becomes more popular and is used more in these other systems, the price will tend to increase.
- Political decisions – Global or country-wide decisions that affect a cryptocurrency will have a direct impact on the price.
Tips on how to trade in cryptocurrency
1. Do thorough research
Because the crypto market is so vast, you need to learn as much as possible to be successful. Do your own research into the cryptocurrencies themselves and the platforms to trade them on. This will allow you to minimize risk and start gaining profits quickly.
2. Practice before investing
Investing is not as simple as selecting an asset and then putting money into it. The market is quite volatile so you need to be on the lookout for price and news changes. To practice how a market will work, most platforms have dummy accounts to practice on. Use these accounts initially to get a feel for the market before you invest any actual money.
3. Don’t put all your money into one cryptocurrency
Remember, a few minutes is all it takes for the price of a cryptocurrency to fall. You don’t want to invest all your money into one asset, only for it to crash. Research multiple cryptos and spread your investments among them.
4. Don’t fall for FOMO
As humans, the Fear Of Missing Out (FOMO) is a common misconception. You shouldn’t feel pressured into making decisions about your crypto. Do your own research and make decisions based on that, and not because everyone else is either buying or selling.