Beginner's Guide To Cryptocurrency | How To Trade Crypto For Profit
This article will cover everything you need to know before making your first investment in Bitcoin or other alt coins.
Tom, Crypto Enthusiast
Table Of Content
What is Cryptocurrency?
Crypto trading is a trendy topic right now. It's not uncommon to hear people saying that they would like to start investing in this booming field but don't know where to start or how this process works. This blog post will teach you all the basics so you can get started today.
First of all, cryptocurrency is not a real currency. However, you can use them to purchase things like real money or other forms of traditional currency (like euros or dollars) in recent times.
These digital currencies do have value, and people trade them on exchanges worldwide, just like stocks. This means that if Bitcoin or the altcoins cease to exist for some reason, one day, its 'value' will go down since there will no longer be a trade market for this type of digital token.
What Makes Crypto so Popular Right Now?
There are many reasons people invest in cryptocurrency , but the main factors are the following:
They are relatively new.
Blockchain is considered innovative technology.
Large price swings, which means that there's a lot of potential for profit.
Secure and anonymous online transaction (to an extent).
In addition, the fact that there are no transaction fees is also a significant feature of this type of asset.
What is a Blockchain?
According to Forbes , a blockchain is simply an open, decentralized ledger that records transactions in the form of blocks where each block contains data on all prior transactions that have occurred since its creation.
As the name implies, it resembles a linked list with each item containing information about the previous one event (i.e. a transaction) and the next one to be attached at some point in time.
Such particular structure make the data within the blockchain nearly impossible to hack into since they cannot be changed or deleted.
This provides security for both sides involved (buyer/seller) when trading cryptocurrencies online.
How Many Cryptocurrencies are There and How Much are They Worth?
As of December 2021, there were over 8000 cryptocurrencies in circulation, with a huge market capitalization.
Bitcoin is the most well-known and has the highest price of up to $67000.
Other popular cryptos include Ethereum, Litecoin, and Ripple.
While the values of individual coins vary greatly, as a whole, the market is rapidly growing and presents an exciting opportunity for investors.
Why You Should Own Cryptocurrency?
There are many advantages of crypto. Some include:
Global and secure asset because each transaction is verified and recorded.
Transactions are fast and easy so that you can buy and sell quickly.
Booming field resulting in many great investment opportunities. Over time, it has increased in value, so you can make a lot of money if you invest correctly.
Disadvantages of Cryptocurrency
They include issues with value, security, and transactions.
Cryptos are also not as widely accepted as traditional currency, making them difficult to use.
Additionally, their value can be incredibly volatile, making them a risky investment. Cryptocurrencies are still a new technology, and there are many unknowns about their future.
There is also no guarantee that they will continue to be popular or that their value will remain stable.
They are also vulnerable to hacks and scams, resulting in lost funds.
Transactions using digital currencies can also be slow and expensive compared to traditional credit cards or bank transfers.
Overall, there are many risks associated with investing in cryptos, and it is important to understand these before making any decisions.
Crypto Trading For Beginners in 10 Steps
When learning how to start crypto trading, the first step is to create an account with a cryptocurrency exchange. This is where you will buy and sell your coins. You can choose from many different exchanges, but we recommend Coinbase or Kraken.
Once you have created an account, you will need to deposit some funds into it to start trading. Most exchanges accept payments via bank transfer or credit card, but some also accept PayPal transfers.
Now that you have funded your account, it's time to start trading. The basic concept of crypto trading is simple: buying low and selling high.
1. Identify Cryptocurrencies That Are Worth Investing
The first step to identify which coins are worth investing in is to look at the market cap of each crypto. This is simply a measure of the total value a particular cryptocurrency in circulation. You can find this information on websites like CoinMarketCap.
The next step is to look at the price charts for each coin. This will help you determine if a particular crypto is going up or down in value. Of course, you want to invest in coins that go up in value, not down.
Finally, you also want to consider the volume of each coin. This is simply the number of daily trades made for a particular crypto. The higher the volume, the more liquidity the coin has and the easier it will sell.
2. Select A Cryptocurrency Wallet
The first step in trading for beginners is to choose a cryptocurrency wallet. There are several different wallets, each with its own set of features and benefits. Here are the most common types :
Desktop Wallet
A desktop wallet is installed on your computer and allows you to access your cryptocurrencies directly. We consider this type of wallet more secure than other options, but it can also be more difficult to use.
Mobile Wallet
A mobile wallet is an app you download onto your smartphone or tablet. It allows you to store and access your cryptos on the go. Mobile wallets are convenient and user-friendly, but they may not be as secure as other options.
Online Wallet
An online wallet is a web-based crypto wallet. According to Medium, digital currency is stored online through a site that acts as an intermediary between you and the blockchain network to allow access to your coins, monitor trades, and execute transactions.
Paper Wallet
A paper wallet refers to printable documents containing public addresses for storing your digital currencies offline in "cold storage" (e.g., on USB drives or external hard drives).
By keeping your private key outside of any digital device connected to the Internet, experts consider this type of wallet as one of the most secure options available today. However, it also requires extra caution because you will lose all access to your crypto funds if the physical document is lost or stolen.
3. Choose The Right Coin or Token
Just because a coin has high values doesn't mean it's going to be a great investment. Like any other type of investment, you must make your own research before investing as there could be substantial risk involved if not done correctly.
As previously mentionned, I recommend checking out Coinmarketcap. They provide real-time informational data, including current price, market cap, volume, and more.
Now that you know what to look for, choose which cryptocurrency will be your first investment.
4. Decide on Your Trading Strategy
Before jumping into trading, I highly recommend researching how markets work.
Then, test out concepts by practicing with demo accounts until you are comfortable managing risk (online brokers like eToro offer free virtual practice accounts).
Cryptos can move quickly, so it is important to understand technical analysis and have a rudimentary knowledge of fundamental analysis before getting started in this space.
If you want help learning these techniques, I recommend checking out this free online trading guide.
5. Choose Your Trading Platform
It's now time to open up a real trading account with an online brokerage platform.
Again, you have many choices, including some popular ones like Coinbase, KuCoin, Binance, and Kraken.
Most brokers will allow you to trade cryptocurrency CFDs (contract for difference) or go straight into the market at spot prices.
6. Make Your First Trade
With the research and knowledge you have attained over time, you are now ready to make your first trade.
The great thing about cryptos is that there are no commissions when investing in them directly (most brokers charge a fee for cryptocurrency CFDs).
Once you open up an account at one of the aforementioned online brokerage platforms, place a market order or set a price limit on any coin or token.
7. Use Stop-Losses
As I mentioned earlier, cryptocurrencies can move quickly and sometimes unpredictably. This is why it's important to have risk management tools such as stop losses in place, so you don't lose more money than intended.
When trading CFDs, some brokerages like eToro will automatically set a stop loss for you. But if you are buying coins/tokens at spot prices, you will need to set this yourself using an order book.
Stop losses are also beneficial when trading digital currencies as they help limit downside risk and provide opportunities for capturing gains.
8. Create a Crypto Portfolio
While many people start trading coins in isolation, the truth is that it can be much more beneficial for your bottom line if you make investments with an eye toward diversification. This means holding various coins/ tokens instead of just one or two at any time.
We recommend using CoinTracking, which allows you to track all transactions, including purchases and sales, and balances on each "coin address" (similar to bank accounts). It also provides useful information about value appreciation per coin broken down by percentage gain and loss over time.
9. Watch the News and Stay Up to Date with Trends
As with any other investment, it's important to stay up-to-date on news and events that may be affecting the cryptocurrency market.
This could include anything from regulatory changes to new partnerships or product releases.
A great way to do this is by subscribing to newsletters that provide daily (and sometimes hourly) updates on all things about digital currency.
10. Store Your Cryptocurrencies Safely and Securely
Once you have invested in some digital currency, you need to find a way to store them safely and securely.
This is very important, as if your coins are stolen or lost, you will lose all your money.
The best way to store digital currencies is by using a cryptocurrency wallet.
Many different wallets are available, but we recommend using a hardware wallet like the Trezor or Ledger. These wallets allow you to store your coins offline, making them much more secure.
Another option is to store your coins in a cloud wallet like Coinbase or MyEtherWallet. These wallets allow you to store your coins online, but they are still much more secure than storing them on an exchange.
How to Start Trading Cryptocurrencies for Profit
Now that you know the basics of how to buy, sell, and store your cryptos, it's time to start trading them for profit.
The first thing you need to do is identify which coins are going up in value and which ones are going down. You can do this by looking at the price charts for each coin.
Once you have identified some winners; it's time to start buying them. Try to buy them at their lowest point to maximize your profits. Then the tricky part is to start selling it when it reaches its highest point. This will allow you to make the most money possible from your investment.
Here's a great video tutorial that is particularly useful to understand the basics and fundamentals of crypto trading.
Other Ways to Make Money with Cryptocurrency
We suggest investing in Defi protocols like lending your cryptocurrency for yield.
This process allows you to can tap into a global liquidity pool by "loaning out" your crypto assets, allowing other investors to borrow them and generate interest rates on their own loans backed up with collateral. This way you can loan your crypto assets and get paid in return.
There are many ways to make some extra bucks with digital currencies, but one way that may be particularly lucrative for you is called "staking".
According to US News, this process is similar to "mining" as you are contributing to validate transactions.
Staking your crypto can be an easy & passive way of earning some additional income with you coins.
How to Avoid Getting Scammed When Trading Cryptocurrencies
One of the biggest risks when trading cryptocurrencies is getting scammed. There are many scams out there, so it's important to be aware of them and protect yourself.
The best way to avoid getting scammed is by only dealing with reputable exchanges and wallets. For example, Coinbase and Binance are very reputable exchanges, and Trezor and Ledger are reputable hardware wallets.
Another thing you can do is research each cryptocurrency before investing in it. You can find detailed information on all the most popular coins by looking them up on CoinMarketCap.
What are Some Things to Consider Before Investing in Cryptocurrency?
If you decide that cryptocurrency is right for you, there are a few things that you should do before investing. First of all, educate yourself about this new field and how it works to make an informed decision.
Also, consider the different types of digital currency available to determine which one is right for your needs and research companies who provide them so you can find trustworthy services with security protocols in place.
It's important that you only invest as much money as you're willing to lose because coin value may fluctuate significantly over time or disappear entirely if demand decreases.
Finally, I do not recommend to keep any currency on exchanges due to security reasons and higher risks of hacking. Instead protect your investment by transferring your tokens after purchase directly into a secure wallet where they won't be as vulnerable.
What are the Risks Associated with Cryptocurrencies?
Digital currencies are highly volatile and risky investment. Their values can rise or fall sharply in a very short period.
Before investing, be sure to do your research to understand the risks involved and how this asset could fit into your overall investment portfolio.
Governments or central banks do not back cryptocurrencies, so their value is determined purely by supply and demand. This makes them susceptible to bubbles and crashes, which can be costly for inexperienced investors.
Additionally, crypto transactions are irreversible, so if you lose your paper wallet, get scammed or send them to the wrong address, your coins are gone forever.
Make sure you have a solid understanding of how digital currencies work before investing in them.
How Can I buy Bitcoin or Other Cryptocurrencies?
The easiest way to buy Bitcoin or other cryptos is through an online exchange platform.
Many different exchanges are available, so do your research to find one that meets your needs. Also, be sure to read reviews from other users to ensure the exchange is legitimate and secure.
Some of the most popular exchanges are:
Kraken
Coinbase
KuCoin
Binance
Once you create an account with your chosen platform, it's necessary to link your bank account or credit card so that you can buy coins. It usually takes several days for new accounts to be verified before they can use their services. Once this process is complete, buying and selling cryptos requires just a few clicks.
If you don't have enough funds in your linked account immediately, some exchanges allow users to purchase fractions of coins rather than whole units. Just select how many coins you want and enter payment information because the system will automatically update the balance of all available funds.
Of course, you'll then need to transfer these digital currencies into cold storage if you plan on holding them long-term instead.
Where Do You Get Cryptocurrencies?
There are many ways to get cryptocurrencies:
You could buy them directly from another person in a peer-to-peer exchange like LocalBitcoins.
If there is no seller in your local area or the buyer has bad reviews, you can always purchase cryptos through an online platform such as Coinbase, Kraken, KuCoin, or Binance.
Earn it by participating in activities such as mining coins using specialized hardware. This might be easier then learning about trading virtual currencies but still requires some knowledge on what exactly it is that you're doing.
Are Cryptocurrencies Legal?
Cryptocurrencies are legal in most countries.
However, some countries have taken a more negative stance towards cryptos and have made it illegal to use them. For example, China has banned Initial Coin Offerings (ICOs), and South Korea has banned the trading of cryptocurrencies.
Therefore, it is important to research the legality of digital currencies in your country before starting to trade them.
Conclusion
If you are truly convinced that cryptocurrency is the future of money, it should be worth investing some time into learning how to trade them effectively.
You don't have to be a genius or math whiz to do so. However, if this is something new for you, there are many other resources online which can help you get started with digital currencies and their exchanges.
The more familiar you become with the basics behind buying, selling, transferring coins, etc., the better off you'll be when making real-time decisions during market fluctuations.
And remember, patience always pays.
If a coin has allure for you as an investor, another great way to learn would also come from talking to active people.
Cryptos are notoriously volatile. If you invest at a time when the market is down, your investment could rapidly lose value and result in large losses.
In addition, the uncertainty surrounding regulation adds another layer of risk because some countries may decide not to let their citizens trade with these currencies completely or restrict trading opportunities altogether.
However, many countries will most likely regulate them similarly to how they handle stocks through taxation methods, making investing more attractive again if nothing else does too much damage first.
Digital currencies are becoming more and more popular with each passing day. According to ABC Action News, the value of Bitcoin averaged $60,000 in 2021, which was an unheard-of feat for a new currency that first launched only 13 years ago.
And many people are turning their attention from solely focusing on these coins or tokens into developing new platforms that use them too - such as Defi (or decentralized finance).
If you're interested in getting started with cryptocurrency trading, here's a summary of the nine steps we covered in this article to help you get started:
1. Learn the basics of cryptocurrency and bitcoin
2. Choose a digital wallet
3. Identify the best coin to invest
4. Determine your trading strategy
5. Find a crypto exchange (trading platform)
6. Buy your first cryptocurreny
7. Minimize your risk by using stop-loss
8. Look to diversify your investments by aquiring different cryptos
9. Stay up-to-date with news and trends
10. Protect your coins by storing them in a crypto wallet outside of your exchange account
Cryptocurrencies are one of the most exciting things to happen in decades in the finance world, and are opening up a vast range of new opportunities like we've never seen before.
So, now that you've got a handle on how to trade them, start investing in cryptos now while its new and booming.
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