The rise of cryptocurrencies has provided a new financial market for traders. But where do you start? Stay tuned! This step-by-step guide teaches beginner traders how to trade crypto assets.
Crypto Trading Defined
Crypto trading involves the buying and selling of cryptocurrencies on a brokerage platform or digital asset exchange with the goal of generating profits. This means if you are convinced that the price of a particular crypto asset will drop, then you place a sell order. On the contrary, enter a buy order if you think the price will rise.
How to Get Started
Crypto trading might sound intimidating, but that’s not the case. You can get started as quickly as possible by following these simple steps:
Find a Cryptocurrency Exchange
As mentioned earlier, crypto trading happens on crypto exchanges or brokerage platforms. In this article, you will focus on the former. There are several exchanges available online. When assessing which one to use to trade digital currencies, consider the following factors: trading fees, ease of use, and liquidity.
Register a Trading Account
Once you find your preferred crypto exchange, the next step involves registering a trading account. Before you can start trading digital currencies, you must verify the account by submitting your ID card, proof of residence, and a selfie. The time taken for your trading account to be verified varies from one exchange to another.
Deposit Funds Into Your Trading Account
You now have a verified trading account. Next, you need to deposit funds to start your trading journey. This can be done by connecting your bank account with your exchange account. You can also use the peer-to-peer trading feature that most crypto exchanges provide.
It is advisable to buy stablecoins first due to their price stability. This allows you to explore the crypto market without worrying that your deposited funds could be losing value.
Identify Beginner-Friendly Trading Strategies
You should not enter the crypto market blindly. Instead, do a thorough research on trading strategies that can help you become profitable as a beginner trader. There are multiple strategies that suit starters. For instance, you can opt for scalping or arbitrage. The former involves buying a particular crypto asset and monitoring its price the entire day, then selling it when that price goes above your purchasing price. On the other hand, arbitrage entails taking advantage of price variations across various crypto exchanges. That means you should buy a cryptocurrency from where it is priced low and sell where it’s valued above the buying price.
You can also consider automated trading or copy trading. The former uses trading bots to execute trades, while the latter involves following the trades of seasoned traders.
Select a Crypto Asset to Trade
As a beginner trader, it is important to focus only on one trading pair. This helps you better understand its price chart and what causes its price to move up or down. In addition, ensure the trading pair has enough liquidity to allow you to enter and exit the market easily.
You now have a trading strategy and a crypto asset to trade, so it’s time to start trading. Consider risking a small amount before you go all in. Furthermore, if the crypto exchange provides a demo account, you can use it to backtest your trading strategy first.
Transfer Profits to a Self-Custody Wallet
It is recommended to have a non-custodial wallet that you can use to store your profits. That’s because such wallets offer better security features than exchanges. Some of the self-custody wallets to use include Trust Wallet, MetaMask, and Exodus.
How to Reduce Trading Risks
Understand the Cryptocurrency Market
To avoid losing funds, it is vital to understand everything that affects the crypto market, such as news. This data helps you to predict the next price movement more accurately.
Use Demo Account
As stated before, you don’t have to enter your first trade on a live account if the crypto exchange offers a demo account. You can use this account to perfect your trading strategy before risking real money.
The process of setting up a trading account is simple. However, you need a proper trading strategy and vast knowledge of the crypto market to place profitable trades. All said, risk the amount of money you are comfortable losing.