7 Tips for Getting Started with Cryptocurrency Trading
Bitcoin is the oldest cryptocurrency and continues to be the most substantial coin with a market capitalization of 67%. According to a 2020 Crypto Research Report, there are 43 million Bitcoin addresses. We can assume that 64 million cryptocurrency addresses from these statistics, including Bitcoin and all altcoins addresses, exist.
Most of these wallets are used in cryptocurrency trading, which is among the drivers of crypto adoption. It is an exciting venture and can be quite rewarding. However, prospective traders should note that it can still be a daunting adventure.
Research and Update Your Knowledge
In recent years there have been several articles on cryptocurrencies and the success of crypto trading. Everything may look all good and straightforward but don’t get it wrong. It is more likely to make a big loss if you rush to stake your funds.
Before you can even decide to trade in digital assets, make sure you understand the theory behind digital currencies or at least the basics. Try to get a complete overview of the cryptocurrency space, including common terminologies and trading terms.
Furthermore, it is important to learn about the different cryptocurrencies, the leading ones, and each coin’s trends. It would be beneficial to understanding the technical aspects of cryptocurrencies. This will prove quite useful in the end as you get started.
Create a New Wallet
Cryptocurrencies are not tangible sources of money. They do not exist in a physical sense. Traders never actually see or hold the assets in their hands. Everything happens virtually, and the only thing you need is a digital wallet.
Each wallet has keys which you will use to control the assets held in the wallet. Individuals use them to store and trade their holdings. There are different kinds of wallets, but generally, they can be classified as hot and cold wallets.
Hot wallets are usually found online, so you need an internet connection to use them. They are the easiest to use, but the downside is that they are prone to hacking. On the other side, cold wallets do not require an internet connection. Individuals can print the keys to their wallets or scan a QR code.
These are offline wallets and are thus much safer since they are not susceptible to hacking. It would be much better to store your cryptocurrency holdings in the cold wallets and have just a little proportion in the hot wallets.
Find a Reputable Exchange Platform
Once you have your wallet, how do you trade without any cryptocurrency holdings? Exchange platforms will help you obtain your first digital coins. There are many exchange platforms in the market, so you need to be careful when choosing one.
For safety, reasons it is recommended to pay higher fees than end up with scammer platforms with lower fees. Some platforms have wallets that support different cryptocurrencies, so you may not even have to create your wallet first.
Sign up and exchange your fiat currency for its crypto worth. Therefore, you should research the coins supported by the platform first and see whether the platform supports the coins you want to trade and the fiat currency you are exchanging.
Create a Portfolio
The cryptocurrency industry is highly volatile, making it a significant risk for your stake. However, you have the option of creating a portfolio to spread the risks. Developing one may not be an easy venture for beginners, but you can always find a couple of useful portfolio development tips.
Select a few best performing coins and include them in your portfolio. That way, you can make small adjustments to each of them while monitoring them closely. If by any chance one of the coins goes down, you will not have lost everything.
Select and Automate Your Strategy
There are many cryptocurrency trading strategies you can use, and the choice depends entirely on you. Some common strategies used include investing in the tokenized crypto fund, investing in staking coins, portfolio indexing, rebalancing, and scalping.
In any case, no strategy guarantees a profit. Further, in most cases, crypto trading will require you to monitor the market all through, and this can be quite tiresome. Therefore, it would help if you select your best trading strategy and automate the process.
It is not advised to put all your eggs in one basket, and still, not a good idea to distribute all your funds in different cryptocurrencies. No matter how good your portfolio is or how perfect the strategy is, cryptocurrencies’ volatility is still in play.
The value can shoot or drop massively within minutes, and this could mean the end for you. Therefore, always invest what you are ready to lose. Besides, you are just getting started in cryptocurrency trading, so there is still a lot to learn.
Investing little by little will help you understand the industry as you get through the wins and losses.
Be Patient and Avoid FOMO
If your interest in crypto trading is motivated by other traders’ success stories, you could easily fall into the trap of FOMO. FOMO refers to the fear of missing out.
Some of the people giving testimonies could even be con artists trying to lure you into a particular trading platform. It is a common trick whereby the individuals advertise a particular coin and how promising it is.
The aim is to instill the fear of missing out on their victims. Crypto trading may be lucrative, but most probably, it won’t make you an overnight millionaire. Invest small and be patient to avoid falling victim to scammers.
Cryptocurrencies are doing a lot for the world, but one thing that will always be uncertain is crypto traders’ outcome. It takes a lot for a beginner to understand these digital coins.
The technology behind them, blockchain, is not one that an average person will easily understand. However, this does not mean crypto trading remains for the elite group. The seven tips above could be all you need to start trading with cryptocurrency.