Trading cryptocurrency is something that millions are considering engaging in, but most of them do not know how to go about the process. When you trade actively, chances of losing your cryptos are always high. This happens because the crypto market is highly volatile and unpredictable. No surprises then why many newcomers prefer to buy and hold onto their cryptos for long-term gains. Cryptocurrencies run on the blockchain technology which makes them decentralized. Decentralization offers many benefits like eliminating overhead costs that you would have to pay when dealing with banks, facilitating cross-border transactions, etc. So, how can you start trading cryptocurrency?
Steps to start trading cryptos for beginners:
- Creating a brokerage account: To begin with, you are going to need a crypto brokerage account for trading. You can choose from many reliable crypto trading platforms like Kraken, Coinbase, or eToro, depending on your choice of coins and ease-of-use. For creating this account, you will need to submit your personal ID verification details; so the procedure resembles that of creating a stock brokerage account.
- Funding the account: Your next task is to transfer money from your bank account into this brokerage account. You will find that majority of the platforms allow you to fund your account using wire transfers and debit cards. The first is the cheapest option and in platforms like Gemini and Coinbase, it is free of charge.
- Choosing a cryptocurrency: If you wish to trade actively, you need to decide which crypto to invest in. People tend to choose the already-established, stable coins like Ethereum or Bitcoin that have been offering great returns over the past few years. Such coins are found to move more predictably as compared to smaller altcoins. Traders, even beginners, can make use of technical indicators to predict future price movements for these cryptos. The idea is to have a diversified portfolio; this explains why traders prefer to allocate smaller amounts to the new coins. At the same time, these smaller coins have the potential to offer you higher returns compared to those having a larger market cap, but the risks are also high. So, you need to determine your appetite for risks before taking a plunge into these.
- Decide on a trade strategy: This is one of the most important things for a beginner because there are different types of trading strategies, each with its share of advantages and drawbacks. As a trader, you need to consider multiple factors when you buy or sell cryptos. Usually, newcomers prefer to buy and hold onto their coins for the long haul, in the hope of making profits from price rise over the years. Those who are more experienced will use swing trading or scalping strategies to take advantage of price fluctuations. Whether you are a beginner or an experienced trader, it is recommended that you do a Bitcoin Trader Test run before beginning your trading procedures in order to earn a significant profit in a short period of time.
- Storing your coins: For trading cryptos, you need a place to securely store your funds. For instance, if you are a first-timer keen to hold onto your coins, you need a wallet to keep it safe and protected from hacks and thefts. Coins stored on an exchange are prone to frequent cyber attacks. You can choose from hot or cold wallets; hardware wallets are typically found to be most secure since these provide offline storage.