If you want to capitalize on fresh chances in the market while they are still in their formative phases, it is essential for you, as a trader, to keep an eye out for them as they emerge, get updates about the latest news about crypto and learn how to trade them. These prospects may sometimes manifest themselves in the shape of totally new marketplaces. Even before 2009, when Bitcoin was first introduced, cryptocurrencies had a significant market presence.
Traders, on the other hand, didn’t start to take note of the cryptocurrency’s enormous potential until after it reached its all-time high of $10,000 in November of 2017, when it started breaking records for its price. the development of these lightning-fast marketplaces. This market is still extremely new, volatile, and provides lots of chances for the trader who is prepared to grasp how it works. Despite the growing number of players, this market is still quite young.
Understanding the various cryptocurrency alternatives accessible is the first step in getting started with cryptocurrencies. Whether you believe in the value of cryptocurrencies over the long term or want to capitalize on the daily changes that sometimes reach double digits, the following are the three most common methods to become involved in this market.
Buy and hold
Early adopters of the digital currency Bitcoin have been rewarded with millions of dollars in gains since the currency’s inception. A Bitcoin investment of $100 made in 2010 will be worth more than 5 million dollars by the time 2017 comes to a close. When you add this to the fact that cryptocurrencies run on cutting-edge technology, you can understand why some investors regard cryptocurrencies as a long-term possibility.
Buying Bitcoin and other cryptocurrencies, as well as keeping onto them, demands a more in-depth grasp of the instrument that is being dealt with. It is necessary to have an online trading account before you can purchase bitcoin. Because there is no bank involved, it is your duty to both store and maintain the security of your bitcoin holdings.
Customers have lost access to hundreds of millions of dollars as a result of the collapse of Mt. Gox, the world’s first exchange that made Bitcoin accessible to mainstream investors. Traders have also lost faith in exchanges that are not sanctioned as a result of this event. control. Because of this, many people advise using personal electronic wallets, which leaves the owners solely responsible for the security of their cryptocurrency holdings.
Trading on exchanges
You may also take part in the trading of cryptocurrencies by using an exchange to speculate on the price of Bitcoin, Ethereum, Bitcoin Cash, and other cryptocurrencies. This is another option to become involved in the market. The equally precipitous spike in the price of Bitcoin has resulted in an equally precipitous growth in the number of cryptocurrency exchanges.
Before beginning, the most crucial step for each trader is to do an analysis of the level of security provided by the exchange. Because cryptocurrency markets are not regulated in the same way that financial markets are, cryptocurrency exchanges are not regulated in the same way that financial markets are. Because of this, you need to do your own research before creating an account and sending cash.
A serious trader in cryptocurrencies on an exchange has to analyze the degree of leverage as well as the payment methods that are accessible in addition to the security measures that are in place. Those who wish to control a position greater than their original capital must first determine whether or not the exchange allows trading using margin, commonly known as leverage. If it does, then they may go forward with their plans.
There are a few exchanges that provide this choice, but the amount of leverage that is accessible may be somewhat variable. It is presently not feasible to make deposits using your card on all exchanges, which means that an in-depth investigation of the payment options that are now accessible is also necessary. Even in situations where cards are accepted, the associated costs may be so high that it would be more beneficial for merchants to use a bank transfer instead, which is slower but less expensive.
Trade with brokers
Trading cryptocurrencies using managed brokers is the most common option for investors who want to capitalize on fluctuations in cryptocurrency prices but don’t want to deal with the difficulties of using an electronic wallet or fret about the security of their money.
When it comes to security, monies that are kept with any UK-authorized broker are safeguarded against the terrible case of the broker going bankrupt up to the amount of GBP 50,000. It is important to note that several brokers provide a greater level of security at no extra expense to their clients.
Leverage is the second advantage of engaging in financial trading via a broker. Traders now have access to more leverage on a wider variety of cryptocurrencies than ever before thanks to the growing number of conventional brokers that are offering cryptocurrency trading. Regardless of the size of your starting capital, this is an excellent strategy for expanding your business’s profitability. However, keep in mind that leverage is a two-edged sword that has to be handled with caution in order to reduce the amount of possible losses.
Trading forex with the assistance of a broker is quite similar to trading cryptocurrencies. The price of cryptocurrencies is often stated in relation to either the US Dollar or the Euro; traders who want to capitalize on price fluctuations may do so via the use of spreads or CFDs. It should come as no surprise that an increasing number of traders are beginning to join, given that the majority of respectable brokers now provide trustworthy trading applications that can keep you up to speed with the cryptocurrency market no matter where you are. This lucrative industry is seeing expansion.
Cryptocurrency trading steps
Here are the 5 trading steps we believe you should take into account when trading cryptocurrencies.
Step 1: Search for a cryptocurrency exchange
Finding the top cryptocurrency exchanges should be your first order of business as a novice. Here’s a list of the most well-known exchange:
– Binance
– Coinbase
– Kraken
– CoinDCX
– Gemini
Step 2: Deposit money into your account
First thing first, log in to the exchange’s website, create an account, and add some funds. By making use of debit cards and bank transfers, it will be simple for you to add funds to your digital wallet.
In addition, funding your account using a bank transfer is one of the most cost-effective methods. Coinbase and Gemini are two examples of cryptocurrency exchanges that provide free bank transfer services.
Step 3: Choose a cryptocurrency
Although there are a variety of cryptocurrencies available for purchase, the vast majority of experienced traders focus their attention on Bitcoin and Ethereum. The rationale for this is because the value of certain cryptocurrencies can be predicted more accurately than that of other small coins. Alternate cryptocurrencies, on the other hand, have seen gains of about 1000% in only one month and may thus be seen as a viable trading choice.
Step 4: Choose a strategy
In cryptocurrency trading, one of the most critical steps is to decide on a trading strategy. As a result, it is possible to generate big profits in cryptocurrency trading if you combine the use of trading indicators with accurate fundamental and technical research. However, if you are just starting out in the world of cryptocurrency trading, it is strongly recommended that you enroll in a training course.
Step 5: Safely Store Cryptocurrencies
Last but not least, it is imperative that you keep your cryptocurrencies in a secure location. You have the option of using either software or hardware for your digital wallet; however, more cryptographic security may be attained with hardware wallets.
Trading example
Let’s take a look at a few different scenarios to have a better understanding of how trading Bitcoin and other cryptocurrencies really works.
Bitcoin trading example
You have done some study on the cryptocurrency industry, and as a result, you believe that the price of Bitcoin will rise in the near future. You decide to go long on Bitcoin (BTC/USD) at the price of $40,041, opening a position equal to 0.1 lot. Your profit or loss is determined by taking the difference in price between when the position opened and when it closed and dividing it by 10. This position is equal to one-tenth of a Bitcoin.
After a few days, the price began to climb again and eventually hit $44,560. You make the decision to exit the trade and collect the gains. Wonderful! You have a total of 451.90 dollars earned.
After doing extensive studies, you have come to the conclusion that Bitcoin’s current upward momentum is about to come to a stop. You make the decision to place a sell order for 0.1 lot of Bitcoin (BTC/USD) at a price of $45,550 with the anticipation that the price of Bitcoin relative to the US Dollar would drop in the not-too-distant future. Your profit or loss is determined by taking the difference in price between when the position opened and when it closed and dividing it by 10. This position is equal to one-tenth of a Bitcoin.
After another three hours, major institutional investors continued to buy, pushing the price to an all-time high of $48,100. Your stop-loss order will become active once it reaches that price. The difference in price between when the market opened and when it closed is the basis for determining your loss. As a direct consequence of this, if the stop-loss order is carried out, you will suffer a loss of $255. (not counting the commission).
Ethereum trading example
Imagine that, after doing some research on the market, you have come to the conclusion that the price of Ethereum is set to go up and may reach a new all-time high. According to the results of your technical analysis, the price of around $2900 is a favorable entry opportunity. You initiate a deal and purchase 1 lot of ETH/USD, which is equivalent to purchasing one Ethereum currency.
Unfortunately, the price of Ethereum reversed, falling all the way down to $2,600. You decide to close your position. The difference in price between when the market opened and when it closed is the basis for determining your loss. As a direct consequence of this, you come out $300 worse when the deal is closed (without commission).
In a different scenario, the results of your study suggest that the price of Ethereum is set to go down as a direct result of the effect of reports on a significant wallet attack. You have a tendency to have a negative stance on the market, so you decide to establish a short position at $3,300 for one lot of ETH/USD, which is equal to one Ethereum.
The price of Ethereum fell to $2,900 as word of the attack went around the community. Your take profit order, which was set at $2950, was carried out, and you then closed out your position. The difference between the price at which you opened your position and the price at which you closed it determines the amount of profit you earn. As a direct consequence of this, when the deal is finally closed, you come out ahead by $350. (without commission).