Learn how to trade crypto with these 4 techniques
With non-fungible tokens (NFTs) fetching astronomical prices and yield farming protocols enabling massive returns, it’s no wonder that everyone wants in on the crypto craze. Even those who don’t fully understand how it works are eager to trade cryptocurrencies and get a piece of the pie.
However, trading crypto is not as simple as selling NFTs. This beginner’s guide to crypto trading will cover the basics of how to trade cryptocurrencies, what to look out for, and some key strategies to get started.
What is Crypto Trading?
Unlike crypto investment, crypto trading does not aim solely to get as many coins as possible to search for long-term returns. Instead, the main goal of crypto trading is to earn dollars or any other fiat currency by taking advantage of the market’s short-term fluctuations.
Before we get into the nitty-gritty of crypto trading, there are two things, in particular, we want to highlight. A lot of traders have learned them the hard way, so hopefully, you can avoid making the same mistakes.
Cryptocurrencies are volatile
This is perhaps the most important point to understand before trading cryptocurrencies. The prices of cryptocurrencies can fluctuate wildly, and these swings can happen very quickly.
This volatility is one of the main reasons why crypto trading can be so profitable and so risky at the same time. If you are not careful, the prices can swing against you and you can end up holding a worthless coin.
Because of its volatility, you need a solid base of capital to start crypto trading. Gone are the days of buying a few Bitcoins with beer money. You need to have a serious amount of cash to get into the game today, and a whole lot more to start making enough money to start trading full-time.
Cryptocurrency regulations are a work in progress
Owing to its newness, regulations for cryptocurrency are still being hashed out. In the US, for example, there is a lack of clarity on whether certain digital currencies fit the bill of a “security” and would therefore be required to adhere to the registration and disclosure guidelines set by the Securities Act of 1933 and the Securities Exchange Act of 1934.
On top of that, there are currently several more issues that still need to be addressed by policymakers, including:
- The classification of cryptocurrencies.
- The legal status of Decentralized Autonomous Organizations (DAOs).
- Reducing crypto taxes
- Anti-money laundering compliance requirements
This regulatory uncertainty creates additional risk for traders. Before deciding to trade, do some due diligence on your country’s regulatory stance on digital currencies.
How to Start Crypto Trading
The actual practice of crypto trading is relatively simple. We go over each step below.
1. Pick a crypto exchange to trade in
There are several crypto exchanges to choose from. For beginners, we’d recommend going to the most popular exchanges to get started. Binance, Coinbase, and Kraken are all good choices.
2. Convert your cash into crypto to fund your account
You’ll need to convert your fiat currency to your coin of choice. Many exchanges, like Binance, allow you to buy directly through its platform. You can use your debit or credit card, or even your bank account, to make the purchase.
3. Choosing your coins
When you first start trading, it can be tempting to just buy whatever coins are on the rise. Don’t give in! New coins come in weekly, all with tons of hype; most are worthless now.
Take the time to research which coins are worth investing in. As you learn more about crypto trading, you’ll begin to get more comfortable looking into things like:
- The team behind the coin
- The coin’s Whitepaper
- Market cap
- Daily trading value
Knowing everything you can about the coins you trade gives you a leg up on your competition: other traders. So choose your coins wisely!
4. Selecting a trading strategy
Selecting a trading strategy that matches your individual goals and risk tolerance is crucial to success as a trader. No one strategy fits all, so it’s important to find an approach that works for you.
Committing to a clear outline of how you want to trade crypto can keep your head above water when you end up on the wrong end of trades. A series of small losses can easily cascade into a large one if you start giving in to your emotions. Having a solid trading strategy in place will help you stay the course when things go wrong. When deciding on one, make sure it answers these three vital questions:
- What coins are you trading?
- How are you going to trade your coins?
- At which points will you enter or exit potential trades?
Some of the most popular trading strategies you could test out include:
- Day trading- Entering and exit trades within 24 hours. High-profit but not for the risk-averse. Best for active, experienced traders.
- Position trading- Purchasing assets and holding them—typically for months—for long-term gains based on overall market direction. Requires a lot of patience and research, but that extra time can work to the benefit of beginners.
- Swing trading- Similar to position trading but focused on capitalizing on short-term price swings rather than long-term movements. A bit more active than position trading, but still not as fast-paced as day trading. Great for beginners.
- Scalping- A strategy involving entering and exiting multiple positions within seconds or minutes to profit from small price movements. A scalping strategy is more of a numbers game: small profits from each trade, but hundreds or thousands of trades executed over one day. Highly active and can be very stressful. Not recommended for beginners.
Trading crypto can be a great way to make money, but it’s not for everyone. It’s important to do your research, choose your coins wisely, and have a solid trading strategy in place before you get started. Do your due diligence and keep the tips above in mind, and you just might be the next success story to inspire a new generation of traders!
If you are intrigued by crypto currencies and would like to understand more about them and how you can learn more about trading cryptocurrencies trading, understanding trading strategies, identifying good projects, you can look at our 2-hour workshop, Certified Crypto Associate.
It will empower you with the knowledge to help you identify better investment opportunities, so you can trade cryptocurrencies in a more safe and profitable way.
Click below image to see more about what is covered in this online training.