How to Trade Cryptocurrency? A Beginner’s Guide

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As cryptocurrency is gaining popularity, more people want to join in the trade daily. But trading has always been quite a challenging task for the non-traders and sometimes for regular traders as well.

When it comes to trading an online currency commonly known as cryptocurrency, even the experts tend to get confused. If you do feel the same, this article is for you. It is a beginner’s guide for people dealing with cryptocurrency trading and those who want to succeed in this business. 

Cryptocurrency trading is a procedure of purchasing and selling online currency coins with the help of some exchange medium. It is a decentralized form of money and works with the help of blockchain technology.

Many financial institutions from around the world are entering and willing to enter the crypto market at present. Cryptocurrency trading is the trading of digital money through exchange and other mechanisms. If you are a beginner in the crypto market or even an expert, here are a few points that may assess you further. 

How to Trade Cryptocurrency – Types?

There is more than one type of cryptocurrency available in the digital market. The different kinds of cryptocurrencies are all together collectively known as altcoins. At present, there are more than one thousand varieties of cryptocurrencies in circulation.

The most common and famous among all the cryptocurrencies is Bitcoin. Initiating its value from one Bitcoin to one Dollar, now Bitcoin stands for 21,813.70 US Dollars (at present). Bitcoin trading is the most common among all the altcoins and has value and volatility. 

how to trade cryptocurrency

As thousands of different altcoins are in the market, some are active, while others are not traded very actively in the crypto market. It means that some cryptocurrencies may have limited choices and fewer opportunities for being traded.

The owners may find fewer buyers when they wish to sell cryptocurrency owned by them. For beginner traders, trading in active altcoins is always safe. The two most active and common types of cryptocurrencies are: Bitcoin(BTC) and Ethereum (ETH)

Bitcoin has the highest share in the crypto market with 38%, and Ethereum stands in second place with 18% of the share in the market.

Apart from that, people also tend to invest in standard stocks and share markets. You can check out detailed information about the most expensive stock and those with good returns. Do give it a read if you’re skeptical about investing in Cryptocurrency. 

Mining of Cryptocurrencies

Cryptocurrency is generated solely through specialized computers with the help of arithmetic computation. This process of generating cryptocurrency is known as Mining.

Cryptocurrencies hold their value because of the rare power of specialized computers to create new coins. It also has a high worth as some cryptocurrencies have a finite supply, meaning the maximum number of new coins can be generated practically. 

How to Trade Cryptocurrency – What is Trading?

Cryptocurrency trading can be understood easily with the help of the example of forex exchange. Just as in Forex exchange currencies of different countries are sold and bought for exchange of each other by different people, in some manner, cryptocurrency trading works the same way.

Cryptocurrency can also be bought against US dollars and sold later when the investor wishes to. Buying and selling of bitcoins can either lead to profit or loss for the trader according to the circumstances prevailing in the market.

In simple words, it means that you can buy cryptocurrency from exchanges against US Dollars. The exchange will calculate how much Bitcoin or digital currency can be bought with the particular amount with which you wish to trade. 

CFD for cryptocurrency Trading 

The word ‘CFD’ stands for contract for difference. It is a financial tool that allows traders to invest in cryptocurrency without actually buying it or being the actual owner. CFD helps investors when the trade is risky and the user needs to be well protected. It is pretty standard for investors in volatile markets.

It enables the dealers to speculate as to the prices of altcoins and other assets rise and fall. CFD is a method by which traders can invest in cryptocurrencies without personally owning any, so they do not need to worry about buying, storing, and selling.

The advantage CFD holds is that the traders do not have to invest a large amount of money and only make a small amount of deposit. 

Bitcoin Trading through CFD 

It is quite easy even for a beginner to trade bitcoin with the help of Bitcoin CFD. A Bitcoin CFD allows people to invest in Bitcoin without actually buying any unit of the Bitcoin.

While Bitcoin is the most famous cryptocurrency, it is also known for its buoyancy. So when trading Bitcoin, its volatility can turn to be an advantage for you if you pay attention to the market and respond accordingly. 

Trading through exchange 

You have to create an exchange account before starting trading activities via an exchange. Trading through the exchanges can be costly because an account must be maintained. Before initiating trading activities, you must collect and store the tokens of the particular cryptocurrency and store it in your wallet.

When trading through an exchange, you have to buy the coins themselves and use them for further trade. To become a pro in cryptocurrency exchange trading, you need to gain experience, which comes gradually with time.

Exchanges also have their limits up to which you can maintain your deposits. These types of exchanges serve the traders to invest in bitcoin trading and all other types of digital money exchanging.

As there are a number of exchanges present in the market and the beginner might not know which one to choose among the rest, here is a checklist that you should opt for. 

  • Availability 

When you wish to invest or start trading in cryptocurrency, always check that the exchange is accessible in your region. It is possible that some exchanges might not be operating in your country or place. Ex- CoinBase, one of the largest exchanges, does not operate in Indonesia. 

  • Rate of Exchange 

Different exchanges may have varying exchange rates from each other. Always check and compare exchange rates before trading to be on the safe side and for optimum profit. 

  • Security 

To make yourself stay on the safe side, always go for the well-known and reputed exchange. Check the exchange eligibility before you start your dealings and put your investments into it. 

Additional ways to trade cryptocurrency 

For beginner investors and traders, those looking for an easy way to get themselves into the crypto business can invest in funds that buy Bitcoins and other known digital currencies. These funds can come with premium pricing compared to other alternatives.

But, it is one of the easiest ways to gain exposure to the crypto world and hold ownership of altcoins. Grayscale Bitcoin Investment Trust, trading as GBTC, is one of the most common cryptocurrency funds. But these types of funds come with their own expenses and cons. 

Cryptocurrency Trading and Bitcoin 

Among all the cryptocurrencies, Bitcoin is the most significant and is the leader if all others. For a beginner, it is always better to invest in Bitcoin than any other cryptocurrency available.

Bitcoin having high value is generally split into multiple units, and different investors buy the units. To sustain and succeed in the crypto world, you should know how to buy Bitcoins and trade them significantly.

Cryptocurrency Trading with Automated Trading tools

It can take some time for a beginner to understand and comprehend the cryptocurrency market and blockchain technology completely. Investors who do not want to take extreme risks with their investments in this volatile market should consider funding in an automated trading tool.

The individuals who are pros at crypto trading may also find it sometimes challenging to keep up with the pace at which things are changing. In the fast-changing algorithms of altcoins and volatility of Bitcoin, professional help may sometimes be required.

Summing Up

So, as you have gone through different ways to trade cryptocurrency, you will be well aware of alternatives available to you in the present. Choose the one that best suits your requirements and that you think will be profitable for you.