You might have heard it before, but Bitcoin and other cryptocurrencies (Ethereum, Litecoin, Dash) have been on a wild roller coaster ride since their inception. Recently, Bitcoin has been going up in price to levels we haven’t seen in years.
Cryptocurrency trading is an exciting space and one that anyone can be involved in. You can buy, sell, or exchange cryptocurrency without going through a financial institution like banks or brokers. But to gain an understanding of how it works and the terms involved, you must first understand what cryptocurrency is.
What is Cryptocurrency?
Crypto is a type of digital asset designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units. Cryptography is used to secure transactions and verify the transfer of assets. The first cryptocurrency was bitcoin, followed by Ethereum, Ripple, Mastercoin, and Litecoin. A lot has happened in cryptocurrency over the years since its creation in 2009 including major hacks on cryptocurrencies that have resulted in billions lost for users.
What is Cryptocurrency Trading?
Cryptocurrency trading or crypto trading is the process of buying and selling cryptocurrencies, which can be done through cryptocurrency exchanges. The exchange acts as an intermediary between traders and those who want to sell their crypto. It is much like a stock market with a variety of different cryptocurrencies available for trade.
Crypto trading might sound like an impossible task, but it’s actually not that difficult. The key to success is having the right knowledge: a clear understanding of how crypto trading works and what you’ll need if you want to be successful.
How to Trade Cryptocurrencies
It’s no secret that the volatile nature of cryptocurrency prices can make people have second thoughts about investing in it. But there are ways to mitigate this risk and make money on the rise or fall of cryptocurrencies.
Follow these steps to learn how to trade cryptocurrencies.
1. Before you can invest in cryptocurrencies, you need to have money in an online wallet. This is a basic, yet important step that you must take before you can begin investing in anything involving digital currencies.
2. Once you have money in an online wallet, you must first deposit it into your brokerage account (which is essentially just a bank account for buying and selling cryptocurrencies). You’ll need to look up the name of your brokerage firm and make sure that they accept these types of transactions (most do). You’ll also need to verify your account with them — which involves answering questions regarding how much money you have, what kind of credit cards are attached to it, and so on.
3. Find and research the cryptocurrencies that you want to invest in. If you are looking to get started with Bitcoin or Litecoin, we highly recommend reading our Blockchain 101 section. It’s also recommended that you read some of the information available at CoinMarketCap.com, as it will help you understand how the price of various cryptocurrencies changes over time.
4. Join a Facebook group to learn more about Bitcoin and other cryptocurrencies — but don’t forget that many of these groups are complete scams. Be sure to do a background check before getting involved with any group.
5. Start learning about the process of buying and selling cryptocurrencies on various exchanges. Learn how to use limit orders and market orders, as well as how you can calculate profits based on the different coin values.
6. Many sites charge a fee for allowing you to change one cryptocurrency into another, or for transferring funds from one wallet to another. In most cases that fee will range between 1% and 10%. Be sure that you’re comfortable with these fees before getting started with trading, otherwise trading might not be worth it to you because of the fees charged by your online wallet, brokerage account, and exchanges.
7. Start trading using the techniques you’ve learned and keep track of your trades to ensure you obtain the best return on your investment.
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Final Words
Cryptocurrency trading is an innovative way to invest money. You can make huge profits if the price of any cryptocurrency skyrockets, but you also run the risk of losing your initial investment.
If you’re interested in trading Bitcoin, Ethereum, or Litecoin, there are a few things for which you should be prepared before getting started. Two basic things to keep in mind are that cryptocurrencies are highly volatile and investing anything significant into them is very risky.
