How to Start Cryptocurrency Trading: Beginner’s Guide
You must have heard all the buzz about trading cryptocurrency, and the fortune people are making simply by trading digital assets. I would say you heard right, people are making a lot of money daily just by trading cryptos like BTC, ETHER, and so on.
Well, if your dream is to earn rewards from trading digital assets, you are not far from achieving it. In this guide you will learn what cryptocurrency is and how to make money trading it.
How to Start Cryptocurrency Trading
Trading on top digital l assets will reduce your chances of losing everything but other cryptos are riskier and offer greater gains.
This does not depend on whether you trade the top cryptos like Bitcoin, Ether, or the less popular ones. The first thing to consider is how to reduce the risks by hedging or not trading with all your investable funds.
You can as well use sofisticated software that can enable you to trade and make millions without lossing money.
The crypto industry has seen more millionaires recently than any other form of financial investment but so many who are interested are afraid of venturing into it. Why? You may ask.
Well, I have two answers to this question;
My first answer is that the cryptocurrency market is highly volatile and people are afraid of losing money.
The second one is, some people do not take time to study and understand cryptocurrency. No one can progress in what they do not understand.
If you are interested in making money in crypto by trading, and probably do not know how to go about it, this guide will help you. It will teach you how to trade, profit from trading, and minimize losses. A good starting point is understanding you what cryptocurrency is.
What is Cryptocurrency?
What comes to your mind when you hear the word “cryptocurrency” Bitcoin, Ethereum, Litecoin, and the rest? If you have thought of these, you have an idea of what cryptocurrency is. But we can give you a simple definition.
Cryptocurrency is a digital currency used as a medium of exchange between one person to another. It functions with cryptography to conduct person-to-person financial transactions using what is known as private and public keys.
Transaction Techniques Using Cryptocurrency
The encryption techniques used in cryptocurrency enables transactions to be regulated by generating the units of currency and verifying the transfer of funds without a third party like banks, or the government.
It is a currency of the internet that does not have central control. It enables faster, seamless, and cheaper transfer of funds from one party to another.
Thousands of dollars can be transferred from one person to another in seconds at a rate as low as a few cents. Such transactions could take days to be transferred through a traditional banking system at a higher cost.
The first cryptocurrency created was Bitcoin, in 2009, by a group known as ”Satoshi Nakamoto.” After the creation of bitcoin, other types of cryptos were also created, currently, there are three categories of crypto in circulation.
All crypto transactions are processed on a shared database known as the blockchain. It is run by various computing networks which are known as nodes. All these nodes are connected to a network to process transactions and no single one has total control over the transactions processed.
Types of Cryptocurrency
Cryptocurrency is a single word that defines all digital currencies but they come in different categories according to how they were created.
After the creation of the first digital currency bitcoin, it was discovered that it has scalability issues despite its success. This brought about the creation of another type of cryptocurrency that would improve upon the challenges of bitcoin.
The new form of crypto created is known as “Alternative to Bitcoin” or Altcoins.
Soon afterward, it was also discovered that there is a particular issue that applies to all digital assets which is “volatility ” that also needs to be taken care of and this led to the creation of Stablecoin.
All three types of crypto have an underlying technology known as the blockchain, this means that all the cryptocurrencies run on the blockchain.
Now, let’s take a closer look at the different types of cryptocurrency.
Bitcoin is the first type of cryptocurrency that was created on 3rd January 2009, by a group known as Satoshi Nakamoto. Its supply limit is 21, 000,000, which was released on 9 January 2009, in an initial amount of 0.1.0.
Bitcoin was created to be an alternative method of payment and it is expected that it will be faster and cheaper than the other methods. Though it is cheaper to process payments using bitcoin, it still has scalability issues which makes it unable to match the processing capacity of the already existing payment processing methods.
Visa could process 42,000 transactions per second but bitcoin could only process 7 transactions per second.
Though at a point Bitcoin Lightning Network was created to improve transaction speed, other digital assets were also created as an alternative to bitcoin and these are known as altcoins.
Note: Bitcoin Lightning Network is a second layer solution built separately on the bitcoin network to enable transactions to be processed faster.
Alternative Coins or Altcoins
Bitcoin was created to test run cryptocurrency, its success brought about the quest to modify the digital asset. Though it was thought about to improve bitcoin transaction speed, having an alternative digital asset also became a remedy.
Altcoins are the second category of cryptos that were created after bitcoin. Besides taking care of bitcoin challenges, altcoins were also created to prove the success of cryptocurrency. They also run on blockchain technology. Examples of altcoins are, NEO, Litecoin, and Cardano.
At last, the bitcoin scalability issue was taken care of by the creation of altcoin, but there are still other major issues that affect all digital assets. Volatility is a common issue with all the cryptocurrencies, another set of digital assets that would solve this problem known as Stablecoin was created. This category would minimize the price volatility issue of digital assets.
Stablecoin is a type of crypto that allows the market value of the digital assets to be pegged at an external currency like the U.S dollar, another digital asset, or commodity price such as gold.
This means that the underlying assets determine the amount of Stablecoin that would be created, the underlying asset is held in reserve as a hedge fund. Examples of Stablecoins are TetherUSDT, USD Coinusdc.
Now, you know what cryptocurrency is and the types of digital assets there are, let’s move right away to how you can make money from them, and one of the ways is trading.
What is Cryptocurrency Trading?
Crypto trading is the practice of swapping digital assets for fiat or another digital currency. Trading starts when a broker indicates an interest to buy or sell cryptocurrency at a certain price by initiating an operation. The intention behind this operation is to profit on the rise or fall of the asset rate.
As a crypto trader, your aim should be to take advantage of opportunities in the markets. But before you start, here are a few things you should keep in mind.
Things to Keep in Mind Before You Start Cryptocurrency Trading
1. The Cryptocurrency Market is Highly Volatile.
It is possible to make huge profits or losses in a minute of crypto trading. This does not depend on whether you trade the top cryptos like Bitcoin, Ether, or the less popular ones. The first thing to consider is how to reduce the risks by hedging or not trading with all your investable funds.
Trading on top digital assets will reduce your chances of losing everything, other cryptos are riskier and also offer greater gains.
2.Learn About Crypto And Choose a Good Exchange
⦁ Take time to learn about cryptocurrency and all the terms used in its trading.
⦁ Create a digital wallet
⦁ Choose a good crypto trading company or exchange
⦁ Connect your bank account, debit, or credit card so you can exchange digital currency with your local currency.
⦁ Verify your account by uploading your ID, so you can increase your purchasing limit.
⦁ Take a critical assessment and choose the cryptocurrency you want to trade on
⦁ Check the analysis and pick an entry point which is the price at which you can initiate a deal. Do your calculation and set the maximum loss allowed to open a single operation.
When starting crypto trading, check the charges and losses, you may take between 25 – 50% in a few months or even double your whole investment in one year. However, this is just a tip and should not prompt you to go into borrowing, you can merge up your deposit but remember not to use all your funds when you start trading.
One thought on “How to Start Cryptocurrency Trading: Beginner’s Guide”
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