Cryptocurrency trading has exploded over the last couple of years. What were once traders oriented towards only Bitcoin as it was the most common and arguably only cryptocurrency available, are now people who own and trade more than a couple of dozen cryptos.
Much like Forex Trading, cryptocurrency trading requires at least some knowledge of the market. Ignoring research is essentially a ‘death sentence’ as you’ll run out of funds quick. However, compared to Forex trading, cryptocurrency trading is slightly different and generally cooler. So let’s see what you should know when trading cryptocurrency!
Cryptocurrency Trading Basics
So let’s say you’ve saved up some cash and want to start crypto trading. The best way to go about this is opening a wallet first (a secure one at that) and taking your time to research about the niche. It isn’t as simple as it sounds, but it also isn’t as complicated as you might think.
Once you’ve done your research and decided on what cryptocurrencies you’d be getting, go ahead and find a good cryptocurrency exchange. Pro tip: One of the best beginner-friendly cryptocurrency exchanges is Kucoin. We’ve done a review of Kucoin and, alongside some other crypto exchanges, they do a great job. As a starter, you won’t find it complicated to use the exchange. And it’s the perfect place to begin your cryptocurrency trading career.
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Being a member on a legit cryptocurrency exchange basically enables you to do anything. Sell high/low, buy high/low – whatever. Of course, your main goal is to make money so selling high/buying low is the ideal situation. No worries, this will come to you fairly quickly. Be sure to analyze the market in your free time so you know what you’re doing once you start trading.
It isn’t uncommon for even the best of crypto traders to get carried away by emotion. It’s as simple as seeing the value of a cryptocurrency skyrocket in one day. And once people see this, they make a rash decision – sell everything while the price is high.
This isn’t necessarily a good idea. Maybe the price will drop in a couple of days so you’d rather buy larger amounts of it. And then sell at a later date. This is where the research comes into play; unless you get into the market properly, you’ll miss out.
It’s important to not rush into action as soon as you notice a positive change. Controlling your emotions is a large part of cryptocurrency trading, so prepare yourself.
What Kind of Cryptocurrency Trader are You?
Now, it’s worth talking about cryptocurrency trader types. You might fall into one category, or another, or multiple, or none. But this methodology of determining the type comes in rather useful. In fact, it might help you understand what you could be doing wrong.
So, in cryptocurrency trading, what kind of trader are you?
- “The Even Steven” – You’re a trader that seems to always break even; not make a profit, but don’t lose any also. This might be a sign of level-headedness, but also a lack of risk taking. Don’t be afraid to take a risk in the crypto trading world! If something seems out of the ordinary – capitalize on it. Some people took a risk when Bitcoin came out and now they’re millionnaires.
- “The Hasty Trader” – If you’re making a small profit but ultimately don’t feel successful, it’s a sign that you have proper risk management – but not full control over what you do. Imagine you’re steadily earning a couple of hundred dollars monthly just from trading. Suddenly, the price of a cryptocurrency rises quickly. Instead of waiting for a short amount of time and researching the spike, you make a hasty decision. This brings you momentary joy and extra profit, but it could have been better. If you’ve waited just 5 minutes, the profit margin would be even better. But it’s okay – a small profit means you’re doing something right; just not all of it.
- “The Big Fish” – The Big Fish is a trader who’s already established the rules of play and is making a solid profit. These traders have mastered the trading methods and timing of trades. Essentially, once you reach this point, all that’s left is perfecting each skill related to cryptocurrency trading.
- “The Noob” – No offense, we all had to start from zero. Don’t be surprised or feel bad if you can’t quite connect the dots in the beginning. Cryptocurrency trading is broad and, even though it can be easy, it’s difficult to master. Learn more about market cycles, improve your research, and take your time to learn. No rush!
There’s a common misconception that the best step you could take when trading crypto is focusing on just one. One cryptocurrency that is supposed to make you a fortune.
But this is terrible advice. The cryptocurrency market is more volatile than the one for regular currencies. Things can change lightning fast and you might not be able to react in time. So, focus on at least a couple of cryptocurrencies and track them.
Eventually, some event will ruffle the market and you might make even more profit just by taking it slow, and spreading your influence.
Final Words about the Basics
Since these are the basics of cryptocurrency trading, we won’t overcomplicate it. Start with these and slowly evolve your skills. The main take from this article is that you should be smart about trading. Don’t forget that you have plenty of time, but don’t be too leisurely; take risks.
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Also, there are gaming cryptocurrencies where, instead of playing a game for nothing – you can play for crypto! And, the more you play – the higher the chances you’ll turn a profit just by playing a game!
Which cryptocurrency is your favorite and why? How long have you been a cryptocurrency trader? Let us know in the comments below!