Cryptocurrencies are digital assets that run on special blockchain-based platforms. Similar to fiat currencies, you can trade them and earn from their price fluctuations. It’s possible to either invest money in underlying tokens or bet on price changes using contracts for difference.
The key thing you should know about crypto trading as a beginner is that virtual coins are the most volatile investment products. This means two things:
- You can invest small amounts and earn huge ones thanks to a dramatic spike in the price.
- You can lose your investment completely due to the crash of the chosen crypto or issues with its blockchain.
Crypto trading appeals to beginners because of the first aspect – everyone is allured by potentially huge benefits that can amount to millions of dollars. However, the trick is that pure luck isn’t enough to have the same profits. The crypto market has its own tendencies and terms you should be aware of.
In this short guide, we’ll try to explain the key aspects of cryptocurrency trading that a beginner needs to know before starting. You will also learn how to get into this competition and where efficient crypto trading is enabled.
Ways to earn on crypto
When trading any asset class, you can choose a certain style that seems profitable and suitable for you. Here are the most popular trading styles if you are willing to deal with assets from the digital market.
This is a very active style that might require some background trading experience and quick reactions to events on the market. The advantage of this way of dealing with cryptos is that profits come instantly, despite being small. When scalping, you make trades every several minutes.
From its name, you can easily guess that day trading is about making deals over the course of the day. It can be more profitable than the previous option since deals are bigger. Alongside this, the risks of losing money also increase. That’s why day traders are recommended to utilize special stop-loss orders.
Range trading is when you adjust the bottom and upper stop limits for your trades. You make purchases when the security is at the bottom limit. When the position gets to the highest set limit, the security is sold automatically.
Investing is the most common way for beginners to earn from virtual currencies. This approach doesn’t require you to follow charts and make analyses on a daily basis. You just buy a virtual token and sell it when you see that the coin spikes in its price.
Terms for beginners to know
As a crypto trading beginner, you need to know some basic terms of this market. We chose the five most important terms every new crypto trader must know:
Bitcoin is the first, biggest, and most famous virtual currency. All other digital coins, which were created after it, are known under the term altcoins. Altcoins are very different, they might run on different blockchains and feature various technical peculiarities.
In the crypto industry, this term has the same meaning as in other financial markets – it indicates that the tendencies and prices on the market tend to be on the growing rally.
This term is the opposite of the previous one. If a token starts a bear run, it means that its price is declining.
This abbreviation stands for decentralized applications. These are special solutions developed on the capabilities of blockchain networks utilizing smart contracts. Ethereum is currently the biggest protocol for the creation of such applications. Its native cryptocurrency is available under the ETH ticker symbol.
The abbreviation stands for the fear of missing out. This fear is common for crypto traders who see the upward value movements of cryptos they don’t trade or own. This makes them anxious and they start thinking that they can miss the surging trend and suffer losses. FOMO often makes beginning crypto traders take inconsiderate decisions.
Steps beginners should take
Getting started isn’t as complicated as an average newbie may think. Of course, an easy start doesn’t mean further success in crypto trading. Nevertheless, if you are eager to get into the world of crypto, you need to take these simple 5 steps:
- Register an account on a crypto exchange or any online platform that enables cryptocurrency trading.
- Replenish your account with a minimum required deposit amount.
- Choose assets you are willing to trade based on your knowledge of their long-term performances and technical peculiarities.
- Create a crypto wallet (if this isn’t enabled by your trading platform automatically) and add some coins for long-term crypto investments.
- Start trading.
Risks for beginner
Every beginner must understand that trading any asset class doesn’t come riskless. Here are the most common issue of the crypto market and trading there:
- Lack of regulation – the crypto market is decentralized, meaning it doesn’t follow the regulations of any financial authority.
- The extreme volatility of cryptocurrencies.
- Security issues – blockchain is one of the safest technologies, however, there is a big probability that you, as a beginner, will choose the wrong network with poor security measures.
- Speculative nature of cryptocurrencies – cryptocurrencies can be held by a small group of individuals, making them highly speculative and non-liquid.
- Technical complexities of the market.
We hope that this short guide for beginners will inspire you to learn more about cryptocurrency trading and not get into it without deeper knowledge of the market.