There is no denying that the advent of blockchain technology and cryptocurrencies took the globe by storm. Despite the high volatility, cryptocurrencies’ market capitalization is growing. Unquestionably, the crypto enthusiast can’t get enough of it.
It has been observed that cryptocurrency traders frequently aim to either amass Bitcoin (BTC) and Ethereum (ETH) or generate a profit in USD in a shorter period. In a bull market for cryptocurrencies, it’s relatively simple for your portfolio’s USD value to rise, but increasing your Bitcoin holdings can be more challenging.
Therefore, it is crucial to have a thorough understanding of the assets and technologies involved before even considering getting into crypto trading. This article will walk you through every aspect of crypto trading. So, let’s begin.
What is cryptocurrency trading?
A cryptocurrency trader uses a contract for difference (CFD) trading account or exchange to buy and sell the underlying coins to wager on the price changes of crypto assets. The derivative known as CFD trading enables you to wager on changes in the price of Bitcoin (BTC) without owning the underlying assets.
Trading cryptocurrencies can be complicated, requiring knowledge, and involving several components, just like trading stocks and other financial markets. As the first crypto, Bitcoin entered the market in 2009 and has since dominated market capitalization and usage.
However, a whole industry of other digital assets has developed over time, and the assets can now be traded for money.
Trading Cryptocurrency: How to Do It?
Here is a step-wise explanation of how to trade cryptocurrency assets.
Step1: Create a trading account for cryptocurrencies
Before learning to trade cryptocurrencies, open an account with a brokerage. Some of the top cryptocurrency brokerages on the market include OKX, Uphold, eToro, and WeBull. These three options provide a straightforward user interface and a selection of alternative coins.
Like opening an account with a stock brokerage, creating an account with a crypto brokerage requires you to provide personal identification information.
Step 2: Add money to your account
Following registration with a cryptocurrency brokerage, you need to link your bank account. Ideally, cryptocurrency brokerages provided by financial institutions are either wire transfers or debit cards. A typical ACH deposit (linked bank account transfer), which is typically free on most platforms, is the most affordable way to fund your account.
Step 3: Choose a crypto asset for investment
Many crypto traders invest some of their capital in lesser-known altcoins. Small to mid-cap cryptos have a higher upside potential despite being riskier than large-market cap cryptos. Many small altcoins have increased by over 1,000% in recent months, making them attractive investments for risk-takers.
Step 4: Hop on a strategy to make profits
Cryptocurrency trading strategies are similar to that of stocks. Elliott Wave Theory is one of my personal favorites among trading strategies. Since Elliott Wave Theory is centered on the psychology of market sentiment, speculative assets like cryptocurrencies greatly benefit from its application.
Step 5: Take into account automated crypto trading
Trading bots put into practice a strategy that will benefit you most, given your investment goals. The ability of automated trading to offer a conservative, neutral, or aggressive approach allows you to quickly make money, hold your coins, or diversify your portfolio.
Think about trading cryptocurrencies actively on some platforms and using automated trading on others.
Step 6: Store your cryptocurrency
To access it, you must store your money on the exchange if you actively trade cryptocurrencies. Investing in a cryptocurrency wallet is advised if you plan to hold it for a medium to long period.
There are hardware wallets and software wallets for storing crypto. Both are secure, but hardware wallets offer the highest level of security because they store your crypto on a genuine, offline device. Many investors use the excellent hardware wallet company, Ledger to store their crypto holdings. It offers wallets at reasonable prices and supports almost all widely used cryptocurrencies, which is all you need to protect your coins. There are numerous free software wallet options for iOS, Google Chrome, and Android.
A cryptocurrency exchange happens when there is a buyer and a seller. Since trade involves two opposing sides—a purchase and a sale—someone will always gain more. Consequently, trading is a zero-sum game: there is a winner and a loser. Having a fundamental understanding of how the cryptocurrency markets operate can be advantageous to optimize for potential gains and minimize potential losses.
Once the buyer and seller have agreed on a price, the trade is complete. In general, buyers set their orders at a lower cost than sellers.