Do you want to learn more about cryptocurrencies and start trading? This guide is for you if you’re not sure what cryptocurrency trading is or how it works. Let’s look at the fundamentals to get you started.How to trade cryptocurrencies
To begin with, trading in any capacity, especially with cryptocurrency, carries a high level of risk. Even in the best of circumstances, investments may be risky. Even the most popular cryptocurrencies, such as Bitcoin, are subject to extreme volatility regularly. Before making any judgments, make sure you’ve done your homework and are comfortable with your choices, and only invest what you can afford to lose.
What exactly is cryptocurrency trading, and how does it function?
Cryptocurrency trading is using a CFD trading account to speculate on price changes or using an exchange to purchase and sell the underlying coins. Setting up a bitcoin wallet, purchasing bitcoins with fiat currency, and then exchanging these bitcoins for the altcoins of choice on a cryptocurrency exchange site was the original way to trade cryptocurrencies.
What do you need to begin with?
Before you can start trading, you will first need to make sure you have:
A cryptocurrency wallet (Hot or cold wallet)
Access to an exchange that allows you to buy, sell, or trade crypto.
What you need to know about cryptocurrency trading
A cryptocurrency exchange is not part of a regular stock exchange
Cryptocurrency trading is a 24-hour market
Beginners may prefer to trade cryptocurrency stocks
The market is incredibly volatile
What are pairings?
When delving into the world of cryptocurrency trading, you will typically start by buying your first crypto with fiat currency. Fiat refers to your local or national currency such as the Naira, pound, or dollar. So, an example might be that you wish to trade your USD with Bitcoin (BTC). This is something that is popular and supported by a lot of exchanges.
However, once you have tested the waters, you might want to trade between two cryptocurrencies, such as Bitcoin and Ethereum. Here, they would be abbreviated as BTC (for Bitcoin) and ETH (for Ethereum) on an exchange. For a newcomer, this can be slightly overwhelming as exchanges list pairings in their abbreviated forms.
Below is a list of popular cryptocurrencies in their abbreviated forms:
- Bitcoin – BTC
- Ripple – XRP
- Ethereum – ETH
- EOS – EOS
- Stellar – XLM
- Bitcoin Cash – BCH
- Tether – USDT
- Litecoin – LTC
- Bitcoin SV – BSV
- Tron – TRX
Note: This list is not extensive. There are over 3,500 cryptocurrencies out there, so it would be difficult to list them all here. It would be time well spent for any newcomer to become acquainted with popular cryptocurrencies and their abbreviations before trading. Similarly, experimenting with the most popular cryptocurrencies, such as Bitcoin, is a significant starting point for getting used to this type of trading.
How to choose the right trading platform
Choosing the correct platform for you is very important. There are differences between competing exchanges, and it is useful to do some research to decide which is best for your needs. Below is a brief list of some of the key things to look out for:
Currencies: As mentioned above, Bitcoin to USD is common, but other trade pairings might be available on one platform and not another. Be sure that the crypto you want to trade with is supported.
Leverage: This refers to the amount you may trade above your initial deposit and by how much you can multiply your gains. Higher leverage will suit risk-takers who look for a high reward. High leverage is not recommended for beginners, however. Common leverage is typically 20:1 with crypto. Again, though, this depends on your chosen platform.
Hedging: Hedging is a risk reduction tactic that typically involves taking an offsetting position on your primary asset. This provides insurance and reduces the possibility of loss.
Minimum investment: This refers to the minimum amount you can deposit and invest with. This is important, as different platforms will require different minimum investments. Choose one that suits your budget.
Customer support: You’ll want to know that your queries, big or small, can be answered. Choose an exchange that has a big support team.
Instant liquidity: the longer you wait around for your buy order to be fulfilled, the higher the risk that the value will drop because of the volatility of the market.
Validity: Before you even do anything, first make sure that the exchange is available in your area.
Reputation: Next thing that you need to check is the reputation of the exchange. Are people happy with their services? Has it been hacked recently? How secure is it? Have people complained about it? Twitter and Reddit are excellent sources for checking this.
Exchange Rates: Up next, we have the exchange rates. Different exchanges have their own exchange rates, which may vary. Do your homework here and research 3 or 4 exchanges and their rates (including deposits, withdrawal, and transfer charges).
Safety: Please always choose exchanges that need some sort of ID verification from you. Even though they may take time, they are easily 100 times more secure than anonymous exchanges. It is your hard-earned money. You take that extra step to keep it secure.
You can do your own research and choose your exchange. However, in this guide we are going to go with the most popular Crypto Exchange out there, Binance. So, let’s trade!
Binance Signing Up and Account Creation
Signing up is a very simple process. The moment you land on the Binance homepage, just click on “Sign Up”. Enter your Email address and password. Click on Create account and follow the instruction(s). Remember to use your legal name to verify your account. Create your Binance Account Here.
After account creation, verify your account. To buy and sell crypto, fund your account with your fiat Currency (Local currency) using Bank Transfer Method or Card Method (remember card funding is not available on the Binance app. Visit Binance’s official website to fund your account via Debit cards).
Fiat to Crypto Trading
How To Trade Cryptocurrency: Fiat to Crypto Trading
So, you have some money that you want to invest. How are you going to go about it? The portals which connect our world to the crypto-worlds are called “exchanges.” There are a lot of exchanges out there, however, before you choose to invest in one, there are certain things you need to look out for. Let’s call this the “Exchange Checklist.” Read more here.
After funding your account on Binance. To Buy Crypto, click on Markets, Spot, and select your trading pair of choice, for example, BTC/USDT.
What is Crypto Trading, Types, And Terms Explained For Beginners
To buy instantly, select the lowest sell order from the sell order list and the amount of crypto (BTC) you wish to purchase. You can also bid by placing an order using the buy order. I recommend trading against fiat pairs (USDT) of any type of cryptocurrency you wish to trade.
P2P Crypto Trading
You can also buy and sell crypto on Binance and other platforms via P2P (peer-to-peer). Binance’s peer-to-peer platform allows you to buy Bitcoins and other cryptocurrencies with your local currency at 0 fee. On Binance P2P, you have the freedom to choose your preferred counterparties and payment methods for your trades, with the crypto assets escrowed by Binance.
How does trading with an exchange work?
Below is how exchanges typically work:
Users either transfer their existing crypto to their account on an exchange or use the exchange to buy crypto with fiat currency (note that not all exchanges provide the option to buy cryptocurrency with fiat currency)
The exchange holds on to the cryptocurrency
The user watches the prices of other cryptocurrencies available
Users place their buy or sell orders once they have chosen the desired trade
The exchange finds a seller or buyer to match your trade
The exchange then completes your transaction.
READ ALSO: Cryptocurrency Wallet, Exchange, And Types Explained
General Tips For Cryptocurrency Trading
The rule of “buy low, sell high” is the basic formula in crypto trading. It applies to a pattern of cryptocurrencies’ prices that shift between certain price points.
Whatever the size of your capital, you can find a digital currency that matches your needs to trade. Following news on digital currency is very important and can help direct you to choose the best cryptocurrency for you.
There are two major factors to consider before trading your cryptocurrency of choice. The first is fundamental analysis, and the second is technical analysis. Technical analysis includes the same research that is done with all other financial assets.
should consider the susceptibility of the cryptocurrency markets, and the fact they can be manipulated by thought leaders of the industry for their own advantage.
Use the comment section for your question(s) and I will reply as soon as possible.