Cryptocurrency Trading

Cryptocurrency trading knowledge is important nowadays. The emergence of cryptocurrencies has created a thriving market for crypto assets. Both professional traders and beginners seek to benefit from market volatility. But where do you start? What does “trading” really mean? And how do you ensure that you are trading with care, security, and safety?

Have you ever thought about cryptocurrency trading? Here is a great opportunity to learn how to trade cryptocurrencies in this tutorial for new cryptocurrency traders. Keep following and let’s check it together!

What is cryptocurrency trading?

Cryptocurrency trading, or trading of cryptocurrencies, is the process of buying and selling digital assets on a cryptocurrency exchange or brokerage platform with the goal of making a profit.

You can trade the cryptocurrency you own or enter into futures contracts, options, or contracts for differences (CFDs). The latter is essentially traded on margin. These financial derivatives allow a cryptocurrency trader to speculate on the price movements of a cryptocurrency without owning it.

If you believe that the value of a cryptocurrency will increase, you can buy it. On the other hand, you can short-sell it if you believe the currency’s value will decrease. This means you can make money if the price goes in any direction, as long as your prediction is accurate.

How to trade cryptocurrency: Before your first trade

Cryptocurrency trading is not as intimidating as it may seem. You can get started quickly by following the steps below.

Find a cryptocurrency exchange 

Once you’ve found a trading strategy that works for you, start looking for an exchange to trade on. Consider factors such as ease of use, entry and exit options, fees, reputation, financial health, and the team when choosing a cryptocurrency exchange. Many of the best cryptocurrency exchanges offer integrated tutorials and allow users to create demo accounts to practice trading without risking real money.

Create an exchange account

Register an account with the cryptocurrency exchange of your choice and verify your identity. Verification may involve providing identity details, taking a selfie, and submitting proof of address. The time it takes for the exchange to approve your identity verification can vary from one platform to another.

Add funds to your account 

After identity verification, deposit fiat currency into your account or link your bank account (if available) to buy the cryptocurrency you want to trade. Alternatively, you can transfer cryptocurrencies to the exchange if you already own some.

Research beginner-friendly trading strategies

Before you start trading, you need to learn as much as possible about this topic. Investment and trading strategies should be at the top of your research list. 

Depending on the type of trader you want to be, you can seek investment strategies that fit your chosen category. For example, passive strategies include buy and hold, day trading, or dollar-cost averaging (DCA). Buy and hold simply means buying crypto and holding it for a specific period in the hope of selling it for a profit in the future. On the other hand, DCA is a strategy in which a trader regularly buys equal amounts of crypto, or a fixed dollar amount, over a specific period, regardless of the price.

Arbitrage trading takes advantage of small price differences between exchanges. For example, you can buy bitcoin on one exchange at a lower price and immediately try to resell it on a platform showing a higher bitcoin price.

Choose the cryptocurrency to trade 

Conduct market analysis to identify the best coins to trade. You can do this by analyzing price movements, what other people are trading, potential risks, and the most popular crypto trading pairs. A pair, for context, is when we see the coin you will exchange like BTC < > USD. Additionally, examine the projects and teams behind the coins on your radar.

You can choose established, large-cap coins like BTC and ETH or high-risk, mid-cap, or small-cap altcoins. The decision depends on your risk appetite. While mid-cap altcoins are riskier than large-cap market coins, they may offer higher returns due to larger price swings.

Start trading

Begin trading the cryptocurrency of your choice using your preferred trading strategy. You can do this manually or use a beginner-friendly trading bot. You can start with a small amount to get a feel for how it works before risking more. Alternatively, if the exchange offers this feature, you can practice trading using a demo account.

Securely store your cryptocurrencies: Consider moving some of your trading profits out of your cryptocurrency wallet and into a non-custodial wallet. This can be an option if you don’t want to reinvest all your gains into trading and risk losing them. It’s also suitable for traders who want to store their cryptocurrencies for the medium or long term.

Non-custodial wallets provide better security than exchange wallets because you have full control over your money. However, cryptocurrency intended for active trading can remain in the exchange wallet.

How to reduce the risk of cryptocurrency trading

Conducting a trade on a demo account before making a real trade is always a good idea. This option has zero risk and helps beginners practice trading without using real money. However, you will be trading in live market situations in real-time. This gives you the opportunity to see how limit and market orders work and learn what happens when you set a stop price. Traders can practice spot trading on Binance by accessing the “Demo Account” page.

After conducting a demo trade and feeling somewhat confident in your skills, conduct a real trade with a small amount of money. This minimizes the risk of losing all your money, especially since you are a beginner and your skills have not been tested. If you incur losses, return to trading on a demo account. Additionally, conduct more research to find out what you are doing wrong.

A stop-trigger price can minimize your losses or maximize your profits. Therefore, you can secure your position by setting it up every time you place an order. This also means you don’t need to monitor your trading every hour.

Cryptocurrency trading in practice

Cryptocurrency trading doesn’t have to be complex, but research is essential. Learning to trade cryptocurrencies is relatively straightforward; just follow the steps above. However, you also need motivation, commitment, and a good understanding of the cryptocurrency market, trading, and strategies.

While spot trading is the most basic form of active trading, it is not necessarily easy. However, you can improve your skills and build confidence with demo trading. Nevertheless, don’t worry if you can’t grasp spot trading because you can always switch to passive cryptocurrency trading, which is much easier and less demanding.