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Learning how to trade cryptocurrencies is learning how to trade digital currencies, which is different from trading other financial assets such as stocks, ETFs, or commodities.
In this post, I will show you in detail how to learn how to trade cryptocurrencies, and not only that! I will provide you with a guide and roadmap for beginners with the step-by-step process that you should follow if you are really interested in the world of cryptocurrency trading.
Let’s dive into it!
Table of Contents
Basic Concepts of Cryptocurrency Trading
Here are some important basic concepts to distinguish between and some examples. These concepts will help you get an idea of the type of trading you want to engage in and its level of difficulty.
What is cryptocurrency trading?
Cryptocurrency trading is an activity where individuals buy and sell different types of cryptocurrencies, such as Bitcoin, Ethereum, or any other digital currency. The main goal of trading is to profit from the price fluctuations of these cryptocurrencies.
example
Imagine that you buy Bitcoin at a low price and then sell it when its value increases. The difference between the purchase price and the sale price is your profit. The price is constantly changing; it is like an eternal roller coaster that fluctuates every minute, even if by small amounts. This is due to supply and demand, market news, or economic events.
You can even profit from these small changes. Let’s say you bought Bitcoin at $24,762.96 and sold it at $24,772.96. It looks like you made a profit of $10, but it depends on your investment. However, if you invested $200,000 in this trade, the profit would be calculated as the price difference multiplied by the amount invested. In this example, the profit would be:
Profit = Price difference × Amount invested Profit = $10 × $200,000 Profit = $2,000,000
So, if you invest $200,000 in that trade and the price of Bitcoin changes as mentioned, you will make a profit of $2 million.
Types of cryptocurrency trading
There are different types of cryptocurrency trading. One is short-term trading, where traders aim to profit from small price fluctuations over short periods, such as minutes, hours, or days. Long-term trading, on the other hand, involves holding cryptocurrencies for longer periods, hoping for their value to increase over time.
Here are some ways to trade cryptocurrencies:
- Buy and sell cryptocurrencies: You can buy cryptocurrencies directly on an exchange and sell them when their price rises. This form of trading involves physically owning cryptocurrencies and storing them in a digital wallet.
- Trading in stock exchanges: Exchanges also allow you to engage in more active trading, where you can take advantage of price fluctuations to buy and sell cryptocurrencies with the aim of making short-term profits.
- Margin trading: Some exchanges offer margin trading, which allows you to trade with borrowed money. This allows you to amplify your profits (as well as your losses) based on the leverage used.
- Cryptocurrency Futures: Futures contracts are agreements to buy or sell an asset, in this case cryptocurrencies, at a predetermined price and date in the future. Cryptocurrency futures contracts allow you to speculate on the future price of cryptocurrencies without actually owning them.
- Contracts for Difference (CFDs): CFDs are also used in cryptocurrency trading, allowing you to speculate on the price movement of cryptocurrencies without actually owning them. When trading with CFDs, you can profit from both rising and falling price movements, and have the flexibility to open long positions (bet on the price rising) or short positions (bet on the price falling).
| Trading method | Facilitates | Learning requirements | Trading experience |
|---|---|---|---|
| Buy and sell cryptocurrencies | easy | essential | No previous experience required |
| Trading in stock exchanges | moderate | moderate | Some previous experience is recommended. |
| Margin trading | Medium to hard | advanced | Previous experience required |
| Cryptocurrency Futures | difficult | advanced | Previous experience required |
| Contracts for Difference (CFDs) | Medium to hard | Intermediate to Advanced | Some previous experience is recommended. |
- easy: A relatively simple trading method to understand and implement. You do not need deep technical or financial knowledge, and you can implement it easily.
- moderate: Requires an intermediate level of trading knowledge and skills. May involve the use of exchanges and basic market analysis.
- Medium to hard: More complex, requires a higher level of knowledge and experience. May involve the use of leverage and more advanced trading strategies, which entail higher risks.
- difficult: Advanced and complex, extensive knowledge and experience in trading. You need a strong understanding of advanced financial and technical concepts.
Trading Cryptocurrencies vs Holding Them
When we talk about trading cryptocurrencies, we are referring to buying and selling them repeatedly with the aim of making short-term profits. It is like buying collectible cards at a low price and selling them at a higher price to make more money. In this case, you will need to learn how the cryptocurrency market works, analyze charts, and make quick decisions to take advantage of opportunities.
On the other hand, the term “holding” is used to describe the strategy of holding cryptocurrencies for the long term without selling them. It is like owning a deck of cards and deciding to hold them without trading them for a long time, hoping that their value will increase over time. This strategy does not require much technical knowledge or constant market analysis as the main focus is on holding cryptocurrencies for a long time and waiting for their value to increase.
Both strategies have their own advantages and challenges. Cryptocurrency trading may offer quick profit opportunities, but it also involves more risk and will require more time and effort to learn and follow the market. Holding cryptocurrencies, on the other hand, is more convenient and less stressful, but it requires waiting longer to see a return on investment.
If you choose the latter strategy, I recommend purchasing a secure cold wallet and storing your Bitcoin or Ethereum (currently the most secure cryptocurrency) in it. You can do this by purchasing one of our cold wallets, and once it arrives, you can store your Bitcoin in it, which you can buy here. If you need personal and completely free assistance, we are here to help.
Why cold wallet?
When it comes to keeping your cryptocurrencies safe, prioritizing security is paramount. A common mistake is to leave your assets on an online trading platform for extended periods of time. This practice can expose your funds to potential risks such as hackers and theft.
Instead, consider using a cold wallet, also known as a physical wallet. It’s like having a safe vault for your digital assets. Cold wallets keep your private keys offline, away from hackers and online vulnerabilities. I recommend our wallet, as it’s the most secure on the market today, resistant to shocks, fires, and floods.
By storing your cryptocurrencies in a cold wallet, you have full control and ownership of your funds. You can also reduce your dependence on online exchanges and reduce the chances of losing your assets due to exchange-related issues or security breaches.
While e-wallets provided by exchanges may be convenient for trading, they also come with higher risks. Always transfer your purchased cryptocurrencies to your own secure cold wallet for long-term storage and peace of mind.
How to Learn Cryptocurrency Trading Step by Step
1. Educate yourself
I can’t stress this enough. Most people who start trading cryptocurrencies or get involved in trading are intimidated because they don’t know how to manage risk or diversify their portfolios. If you’re going to trade, there are a series of concepts that you should be aware of.
2. Create an account on the exchange
I recommend using Bit2me for its ease of use and security. When you sign up, you will be asked to provide various details like your ID, email verification, etc.
You can open an account directly from here.
3. Choose the cryptocurrency you want to trade.
From the “Wallets” section of the main menu, you can access the full list of cryptocurrencies. Depending on the exchange, you will have different options of cryptocurrencies available. It is common to have accounts on multiple exchanges to explore more possibilities.
4. Create a wallet
Once you have chosen your cryptocurrency, there may be exchanges that require you to create a wallet. It is very simple and can be done in a few clicks.
5. Purchase order execution
Simply click “Buy”, choose the amount you want to invest, and then select your preferred payment method.
6. Choose your trading strategy
It is important to choose a trading strategy that matches your goals and risk tolerance. You can choose short-term strategies such as day trading or longer-term strategies such as swing trading. Research and learn about different methods to find the approach that suits you best. In the recommended courses mentioned above, you can find detailed information.
7. Take risk management measures
Proper risk management is crucial to protecting your capital. Set loss limits and use tools like stop-loss orders to automate selling your cryptocurrencies if the price drops below a pre-determined level. Additionally, diversify your portfolio by investing in different cryptocurrencies and consider allocating only a portion of your available funds to trading.
8. Monitor and close your position.
Once you have opened a position, it is essential to constantly monitor its performance. Use charts and technical analysis tools to make informed decisions about when to close your position. Remember that the cryptocurrency market is volatile, so it is important to be prepared to adjust your strategies based on changing conditions.
Some tips for you
Here are some tips that I think are essential and can help you succeed if you can follow them:
Learns: Learn more about cryptocurrencies and trading. There are many resources available online to help you.
risk: Never invest more than you are prepared to lose. Manage your capital responsibly.
Practice: Use a demo account to practice before trading with real money.
diversification: Don’t put all your eggs in one basket. Reduce risk by diversifying your investments.
Keep your cryptocurrencies safe: Use a cold wallet to avoid unnecessary hacking and theft.
Stay informed: Follow market news to make informed decisions.
I hope this comprehensive guide helps you get started with cryptocurrency trading. If you have any doubts or questions about which path to take, feel free to leave a comment or contact us.
