Understanding The Basics Of Trading Cryptocurrencies

Since their electronic introduction in early 2009, cryptocurrencies, whether its Bitcoin, Litecoin, Ethereum, or others, have grown from an unnoticed blip on a computer screen to a global financial phenomenon, making and breaking fortunes because of its commonly unpredictable trading patterns and soaring growth trends.

In case you're a complete beginner who's intrigued by the possibility to enter the world of cryptocurrency trading, you're at the right place. In the following crypto trading guide, we're going to get down into the heart of the matter of what cryptocurrency is, how to trade it, the advantages that crypto trading offers, and finally, the common trading mistakes that every novice trader should avoid. Without further ado, let's dive in and understand the basics of trading cryptocurrencies.

What Is A Cryptocurrency?

Cryptocurrency is digital money that works as a medium of payment or exchange of value, and every crypto asset portrays a network with a unique technology behind it. It's called crypto because the money is protected by cryptography as a form to sustain the currency's identity and as proof that it can't be duplicated or copied.

All cryptocurrencies work and identify as decentralized structures. Cryptocurrencies aren't supported by central banks, but by the technology they represent and the people who build the crypto network. Before the emergence of cryptocurrencies, everyone who wanted to buy a product or purchase a service could pay only through traditional or fiat currencies controlled by the government, banks, and other financial institutions.

On the other hand, because cryptocurrencies were created with no conventional financial institution or central bank involved, they can allow you to store, send, and receive value with no necessity of any intermediary or third party. And while Bitcoin was the first cryptocurrency launched more than ten years ago, thousands of other digital assets have been released and used worldwide ever since.

Each of these cryptocurrencies has specific technology or a platform behind it. The highly visible digital coins are not the platform but the face of each specific crypto ecosystem. The value of each cryptocurrency is typically represented by what people believe is the crypto's platform worth. For example, Bitcoin represents the entire blockchain, LTC is the token of the Litecoin platform, Ether is the Ethereum network's coin, and XRP is the asset for the payment medium Ripple.

Cryptocurrency Trading

One way to trade cryptocurrencies is to open a financial situation to speculate about the difference between the opening and closing rate of the currency through crypto trading brokers. Besides this type of crypto trading, there is another alternative for exchanging cryptocurrencies if you want to have real possession of the coin through a cryptocurrency exchange.

It doesn’t matter if you want to speculate with the opening and closing prices of cryptocurrencies, or you want to acquire digital assets; you should pay close attention to the volatility, value, liquidity, and the associated risk of each currency you wish to trade with.

Cryptocurrency Trading Platforms

As we previously stated, cryptocurrencies can be exchanged in multiple ways. However, suppose you are interested in having real ownership of the digital token. In that case, you should go to a trustworthy exchange platform that provides intermediation services between entities who want to buy and sell crypto coins.

Open an account on a crypto exchange platform of your choice and fund your account with crypto or fiat currencies if the platform allows it. After that, look for an offering that suits your needs. Concerning crypto exchange platforms, some allow users to make transactions with fiat currencies, while others only accept crypto to crypto arrangements.

Advantages Of Cryptocurrency Trading

Just like all other investment markets, cryptocurrency trading has its pros and cons. However, based on the money-making industry's principles listed below, cryptocurrencies sum everything a market would dream about, having endless possibilities.

Volatility

As Bitcoin rose four-digits one year just to lose significantly in the next one is the dream of high volatility trading markets. Currently, Bitcoin stands at around $17,500 for one coin, which speaks volumes about cryptocurrencies' possibilities through high volatility. Even though the crypto market is comparatively new, it's very wild with tepid movements each day that provides you with significant options in both short and long sides. That being said, volatility is sometimes excellent, but it comes with high responsibility and the chance to get burned, so strong risk management skills are a must.

The Trading Markets Never Sleep

The trading market is open 24 hours per day, 365 days per year, even on holidays. This means that you don’t have to take your crypto trading open on regular hours, but take it as a side job and something that you can do whenever you want. Besides, you won’t need to wait for any confirmations, as crypto trading transactions are settled in real-time, and the market is nearly always liquid.

Liquidity

An always-open market with elite liquidity like the crypto trading market is a superb place to trade. As there are thousands of different cryptocurrencies available on the market, the possibilities to trade between them and fiat currencies, the money, and the number of players are always substantial.

Common Trading Mistakes That Traders Should Avoid

Cryptocurrency trading is a risky business, and mistakes can cost vast amounts of money. That’s why we’ll go over the most common trading mistakes that people make when they start exchanging crypto in the hopes that you’ll be able to avoid them.

Don’t Leave Money On An Exchange

The first ground-rule for any new crypto trader says you don’t leave money on an exchange that you’re not currently trading on. If your money’s sitting on the exchange platform, it means that you don’t have any real control over them, and in case the exchange goes offline, gets hacked, or goes out of business, you may end up losing hefty sums of real money.

Whenever you find yourself in the position to have money that you don’t need in the short term for trading on an exchange, ensure to move them into a crypto friendly bank or crypto wallet for safekeeping until you want to use them again for trading.

Never Risk More Than What You Can Afford To Lose

One of the biggest mistakes you can make is to risk more money than you can afford to lose. Consider the amount you feel comfortable with, take a look at it, and imagine the worst-case scenario it can happen: you can lose it all.

If you start trading above that amount, immediately stop because you’re doing everything wrong. Crypto trading is a risky business, indeed. If you invest more money than what you’re comfortable with, it can affect how you trade, and it may provoke you to make bad choices.

Always Trade With A Plan

A lot of new traders start trading without having an action plan that’s clear enough. You’re smarter than that, so don’t make this novice mistake and always have a concise plan by your side regarding your profit goals, when you should enter, and when you should exit from a specific trade.

Final Words

We hope that you now have a clearer picture of what crypto trading is and how it works. However, getting started with cryptocurrency trading can be a truly daunting task as there are many more concepts and things to learn that will certainly take time to master the craft. Now that you’re a bit more comfortable with this modern-day trading technique, we encourage you to get down to work, become a successful cryptocurrency trader, and find out first hand why crypto trading is becoming more and more popular amongst tech-savvy entrepreneurs.

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