Trading is not a new concept. In fact, we engage in commerce in our daily activities. Because every time we buy or sell something, we complete a trade. As such, a trader makes money by trading on the financial market and buying and selling at the best prices available at the moment.
Trading in the financial market has traditionally involved assets known as financial instruments, which are the purchase and sale of assets using fiat currency. Equities, bonds, and currency pairings are examples of these assets. However, this conventional trading is mainly controlled by a central authority or a single entity.
Similarly, as cryptocurrency becomes more popular in the financial industry, you can make a lot of money trading digital assets. Unlike traditional currencies like the US dollar, cryptocurrencies are not always governed by a central authority because they are based on decentralized technology.
So, where do you begin when it comes to cryptocurrency trading? Is it worth it? Are there any strategies you should be aware of to be successful? This article will address all of these concerns. Continue reading!
What is Crypto Trading?
Crypto trading is buying and selling cryptocurrency on an exchange or a trading platform. Crypto trading aims to make a profit within a certain period. But first, it's crucial to know the difference between crypto trading and crypto investment.
The terms are used interchangeably, but they function differently. However, they are comparable because the final goal is the same –making a profit from your crypto assets. They vary in that the outcomes of trading operations are typically expected in the short to medium term as traders take advantage of market volatility.
This could range from a few minutes or hours to a few days or weeks. But in the case of an investor, they want to create a return over a more extended period; this period could be as long as 6-months, 2-5 years, or even decades. Because investors have a longer time horizon, their expected returns on each investment are typically higher.
Crypto Trading Format
A trade usually involves two parties. These two parties are typically on opposing sides –a buyer and a seller. As a result, because there is a purchase and a sale, one party is bound to earn more than the other. However, having a fundamental understanding of how cryptocurrency markets work can help minimize potential loss and optimize for maximum profit.
So, if you're interested in crypto trading, you should think about market volatility and the factors that influence price movements. For example, if more traders purchase a particular crypto asset, the price would rise because the item is in higher demand. Similarly, the price falls when more traders sell a specific crypto asset.
Since cryptocurrency is volatile, you should understand the different trading strategies and execute how you can manage your trades.
Crypto Trading Strategy
A trading strategy can be referred to as buying and selling assets securely while evaluating market trends and profiting from their volatility. This means a trading strategy is a plan you intend to use to execute trades. Because there is no single correct technique for trading, each strategy will be heavily influenced by the trader's personality and preferences.
Typically, you'll want to decide what asset you're trading, how you'll trade it, and decide on the assets' entry and exit points.
Types of Crypto Trading Strategies
This trading strategy entails exploiting increasing trade volumes to profit. Scalping is the shortest-term trading approach many traders use to make a quick profit. However, the profit is not as great as other trading systems, as scalping aims to make tiny profits throughout a specific period. Hence, when the market is bustling, profit prospects are outstanding. However, scalping is a very fast-paced strategy that is time-bound. As a result, it is highly risky for a beginner trader.
This type of cryptocurrency trading involves holding assets for a day. As a result, it is often referred to as "intraday trading" because it involves entering and exiting positions within the same day. In this sort of trading, you must examine technical analysis, which includes technical indicators to assist you in understanding current market trends and identifying trade patterns.
However, day trading is an active trading technique because cryptocurrency markets, as you probably know, do not have an opening or closing time as it runs around the clock. Still, day trading refers to a trading technique in which the trader enters and quits positions within 24 hours.
The time duration used in swing trading varies. Unlike in day trading and scalping, traders generally open and close positions several times per day. This occurs over a much longer time frame in swing trading. As a result, people maintain the function for a few days or weeks. This trading style follows intermediate-term trends that last between 1 and 30 days. Swing trading eliminates the need to worry about daily ups and downs because you won't be holding the crypto asset for a single day.
In most instances, you'll want to look for an asset that appears to be undervalued and has the potential to appreciate in value. Subsequently, you would purchase this asset at a low price and then sell it at a higher price to profit. Unlike scalping, swing trading is a strategy a beginner can quickly adopt, primarily because it reduces the stress of fast-paced day trading.
This trading method focuses on long-term price movements. To maximize profit, traders buy assets to keep for extended periods —usually measured in months— to make gains by selling those assets at a higher price later. Moreover, traders are indifferent to minor price swings when employing this trading technique. Instead, they are solely concerned with significant market patterns and act according to the market situation. Similar to swing trading, position trading is an ideal trading strategy for beginners.
Benefits of Crypto Trading
Anonymity and Privacy
You'll enjoy crypto trading if you place so much emphasis on your right to privacy. Crypto trading allows you to be completely anonymous when accessing decentralized cryptocurrency exchanges. This gives you possession of your digital money and enables you to trade without submitting your identity to anyone online. Of course, centralized trading platforms exist if you don't mind giving your information and having another party store your digital assets. There are also centralized exchanges, which are third-party trading platforms where you can trade anonymously. However, your identity is not unknown because your information is requested during registration.
Cryptocurrency volatility is part of what makes the crypto trading market so intriguing, as this is the soul of traders. Quick intraday price movements can provide traders various opportunities to buy and sell crypto assets, but they also carry a higher risk. You will have better trading opportunities with the cryptocurrency market because of what it has to offer you as a trader.
Because the cryptocurrency market has no centralized authority, it usually is open for trade 24 hours a day, seven days a week. Furthermore, cryptocurrency transactions take place between individuals on cryptocurrency exchanges worldwide. As a result, the cryptocurrency market remains open and active at all times, allowing traders to earn.
The best aspect of crypto trading is that it allows the trader to control the currencies and trade accordingly. Furthermore, the transactions are based on blockchain technology, which provides users with unrivaled security.
Getting Started with Crypto Trading
Sign up on Crypto Exchange
Unless you currently own cryptocurrency, you'll need to register an account with a crypto exchange to begin your trading journey. To open an account, you'll need to supply personal identifying information to your crypto exchange, as it is a requirement for Know Your Customer (KYC).
Fund Your Account
The next step is to fund your account after you have created an account with any of the cryptocurrency exchanges. Debit cards and wire transfers are usually accepted. As a result, you can add money to your digital wallet because cryptocurrency exchanges are the most often accepted payment methods.
Choose An Asset
There are numerous cryptocurrencies available on the market. Still, most traders –especially beginners– prefer bitcoin and ethereum since they are more predictable than other smaller coins and make it easier to employ trading indicators. However, altcoins frequently enjoy huge increases, making them a viable trading choice.
Choose a Trading Strategy
Choosing a trading strategy is a crucial stage in cryptocurrency trading. As a result, you can earn high profits in cryptocurrency trading by combining trading indicators with proper fundamental and technical research. Hence, consider all trading strategies before settling on the most convenient method that gives the best results for you.
Securely Store Your Crypto
Finally, it is critical to keep your cryptocurrency in a secure place. You can do this by using a digital wallet, either software or hardware. Both are secure, but hardware wallets offer maximum security because they store your cryptocurrency on a physical device. Read more on how to use hardware wallets.
What’s more? Unlike other custodial wallet providers, you don’t need KYC verification to operate an account with Cwallet; your email address is all you need to register. We’ll manage the rest from there.
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