Introduction
Cryptocurrency is decentralized and can be accessed from anywhere in the world. Since the inception of Bitcoin in 2008, people have used cryptocurrency trading to barter different coins in hopes of increasing their asset value with each trade. With passing time, a lot of cryptocurrencies were launched, such as Ethereum, Litecoin, and Ripple. Gradually, these coins have gained a massive fan following. Now cryptocurrency trading is adopted as a profession by many people from across the entire world.
The concept of cryptocurrency trading is somehow similar to the trading in Stock Exchange. Just like conventional trading, people while trading with cryptocurrencies do need a cryptocurrency exchange. The cryptocurrency exchange provides traders with a platform where they can trade different digital currencies. If you are a buyer or a seller that has an Ethereum coin, then the cryptocurrency exchange will make sure that you are matched with another buyer or seller in order to execute the trade of this digital currency.
Cryptocurrency exchanges earn money by getting a 0.1% profit from each trade, and because of the exponential increase in the cryptocurrency trading industry, these exchanges have been making a bank. However, trading is not all fun. Some traders have lost a huge sum of money because of dash strategies, but with proper training and planning, some traders have made it big in the industry.
Although some experienced traders utilized different tools to reduce risks in cryptocurrency trading, the tools usually include AI-induced software that identifies safe zones for trading so that the trading can be done with minimum risks involved.
How to Begin Trading with Cryptocurrency Trading
To begin trading with cryptocurrencies, first, you need to get hold of some digital currencies. There are numerous ways to attain them. For example, you can buy them from different cryptocurrency exchanges or mine them by solving mathematical questions, and when you are able to solve one problem successfully – you get a certain percentage of a coin as a reward for it.
Similarly, you can use your credit or debit card to buy coins from an exchange broker, but there is a certain percentage involved, which is the profit of that broker.
Once you get hold of a few coins, the next step involves the trading itself, but there are certain protocols involved before one gets to do that. For starters, the traders need to sign up with a cryptocurrency exchange so that they can connect with other traders to sell their coins or buy more.
The traders need to carefully select their exchange as, due to several reasons, some cryptocurrency exchanges work within a few countries.
The decision should be based on whether that certain cryptocurrency exchange works in that country and what rates do they provide for the exchange.
After the selection of the cryptocurrency exchange – there is a signup process involved. The crypto exchanges require certain details that need to be filled in. After that, they provide the new traders with their accounts which will be ready for trading. Moving on, safety should be the utmost priority of traders. There are numerous scams in the digital currency world; hence it is important to vary the dynamics of the cryptocurrency exchanges.
Networking is important; traders can get tips from other investors who have been successful in this business to make sure that they are putting their money and time into reliable resources.
New traders can take help from automated trading platforms that provide the users with AI-induced algorithms so that there are minimum risks involved when the trading is performed. Once the traders get a hold of the tricks, they can perform transactions on their own.
Short Term Trading
The strategy of short-term trading involves buying cryptocurrencies for a limited amount of time to sell them afterward to make a larger chunk of profit. Although there is no limit to the time limit as it can either be a few minutes, weeks, or months but no more than a year.
The basic strategy is to buy a cryptocurrency when the prices are low and when the prices go up, you sell them immediately before the next drop. But it does not always go according to the plan because the nature of the cryptocurrency is very volatile, so it is very hard to determine when the prices will surge and when they will dip. It is all about being proactive and observant in the market, and whenever there is a right spot, you take advantage of it and make a profit.
- The Advantages of Short-Term Trading
Firstly, Short Term Trading provides a very fertile window of gaining short-term profits. Therefore, traders who have a good sense of predicting where the cryptocurrencies will lead in the next few hours or days are at an advantage of making huge profits.
Similarly, there has been an exponential increase in the new emerging cryptocurrencies; therefore, traders have numerous options of different cryptocurrencies for trading. They can invest in cryptocurrencies that are not very expensive, so if they are wrong with their prediction, they do not lose a huge sum of money.
- The Disadvantages of Short-Term Trading
Due to the volatility of the cryptocurrency industry, there is no fixed method as to when the prices will increase or decrease. This means that there is a huge risk involved whenever there is a transaction or trading performed. Therefore, people who cannot keep their emotions in control and are not patient will face huge losses while doing short-term trading.
The process of short-term trading is slow at the beginning as one needs to analyze the market trends to make a good choice; therefore, people are often impatient, and they end up losing a sum of money.
Long Time Trading
Long-term trading in the world of cryptocurrency revolves around one word, “HODL.” You may be unsuccessful while finding it in the conventional dictionaries, but all the cryptocurrency Greeks know how important it is to be aware of this technique.
“HODL” is a jargon used in the cryptocurrency trading world, which stands for “hold on for dear life.”
The basic concept of this term is to hold on to cryptocurrencies for more than a year in order to achieve a high-profit window. Although the prices of cryptocurrencies are always volatile, there are certain surges that occur once a year that prove to be more profitable than any other time.
A notable example of long-term cryptocurrency trading would be when people bought Bitcoin in 2011, when it was worth a few cents. But now, it has surged to 57,000 U.S. dollars. People who had bought a ton of bitcoins for a few cents are perhaps now billionaires if they are still holding those coins.
- The Advantages of Long-Term Trading
One of the main advantages of the long-term trading technique is that the traders do not need to spend huge sums of time understanding the dynamics of the stock market. They can just buy some coins and hold them with minimum effort, waiting for that exponential surge.
Similarly, there are very few risks involved in long-term trading as there is not a lot of investment involved. Traders can just buy a few coins with the extra money that they have and can afford to lose it. Therefore, the profits could be an added benefit rather than a liability whenever they are attained in the foreseeable future.
Finally, long-term traders do not feel anxious when the market goes down in the short-term case scenario because they are focused on the bigger picture rather than little trading windows.
- The Disadvantages of Long-Term Trading
Firstly, when traders do not spend time analyzing the stock market, they sometimes miss huge opportunities to make quick profits. The nature of the cryptocurrency is very volatile; therefore, there are times when the prices of certain coins increase exponentially for a few hours and then dip for a longer period.
Similarly, one needs to be aware of the current affairs in the market and since long-term traders do not spend time networking and analyzing the market. They can be unaware of certain storms which could affect their assets in the future. For example, sometimes there are certain regulations put in place on certain coins, which means that their prices will never rise with huge profits. It is wiser to sell them as soon as possible rather than holding onto them. Since long-term holders are often unaware of these changes, holding on to them will be useless as there will be no profit made. Moreover, they will lose money over time as no new profits will be made.
How to Avoid Scams In Cryptocurrency Trading
Trading is a tricky job that requires great observation skills. When it comes to cryptocurrency trading, the risks involved in trading increase manyfold. Sometimes traders lose their entire investment in a matter of a second, while other times, they make the biggest trade of their lives.
Therefore, it is important to weigh the pros and cons of a trade before you make it. A successful trader is never quick with his or her decision. Although some trades do involve a prompt response, it is always advised to think carefully before taking the leap.
Consequently, good traders are always determined with their abilities to deal with their losses. Sometimes the losses are huge, but with their time and effort, some traders can get their losses back within due time. However, some reckless decisions can make them lose more money while getting their previous losses back.
Therefore, it is important to understand that profits and losses are both involved in the trading, and sometimes traders do lose money. However, they can use these losses as lessons to learn how trading works with regard to cryptocurrencies.
It is always necessary to be informed about what is happening in the market. Sometimes people spread misinformation to stop people from investing. This strategy is known as FUD. To avoid scams, it is important to analyze the situation and do your research regarding the new plays in the market.
With the help of proper planning, traders can dodge many bullets that would have been harmful to their business. Similarly, traders should not buy into the hype. They should understand that they are not the only players in the market, and sometimes people do try to influence people with their uninformed opinions.
On the other hand, the campaigns launched for buying the new cryptocurrency coins can be lucrative, and people sometimes do give in and invest in the hype. But most of the time, the hypes do not pay off, and traders lose huge chunks of their money. To avoid these scams, it is crucial to make your own decisions rather than relying on other people and their opinions.
Cryptocurrency Versus Stock Trading
The main concept of both types of trading is similar. However, there are some major differences between the two that need to be discussed. First, trading is a risky job, but when cryptocurrencies are involved, it becomes riskier. This is because cryptocurrencies are highly volatile in nature, and it is hard to predict when they will take a dip.
Similarly, cryptocurrency is new, and people are still exploring its possibilities and benefits. Unlike the traditional and conventional method of stock trading, cryptocurrency trading has not been around for a longer period of time, and they are still in the process of mainstream adoption. Therefore, there are bigger risks involved as people are not that aware of how cryptocurrencies will manifest in the foreseeable future.
Where You Can Store Your Cryptocurrencies
Since there are a lot of scams involved in cryptocurrency trading, it is important to protect your coins from such scams. The most secure way of keeping track of your cryptocurrency is to have a cryptocurrency wallet. The wallet works like a conventional storage space where you can store, send and receive your coins while trading.
There are certain terms of a cryptocurrency wallet that traders need to learn. For example, a private key is issued to be used when the traders need to access their cryptocurrencies. And a public address is used when other people want to send you coins from their wallets. In the foreseeable future, many organizations and companies will opt for a public address so that people can make transactions using their digital coins. However, the traders should keep in mind that the private keys that they possess should not be shared with anybody so that other people cannot access their private wallets. If these private keys get into the hands of malicious actors, they will exploit your wallet and all of the funds present in it.
There are different types of cryptocurrency wallets, for example, Hot Storage and Cold Storage. The Hot storage is pretty like the wallet that you carry in your purse or your pocket when you move around. Even though you can access this wallet easily, but the money in there is vulnerable – you can easily lose it because of a burglary or your irresponsibility.
While on the other hand, Cold Storages can be understood by considering them as savings account. It may not be possible for you to access this kind of wallet every day, but the money in there is safe and sound and ready to be used on a day when you are short on money from your hot wallet.
Traders can keep both wallets for a smooth run, but the regulation of these wallets is important. The keys need to be kept safe until there is a need to use them. Otherwise, traders can be scammed easily.
The Future of Cryptocurrency Trading
According to analysts who supported cryptocurrencies, the future of cryptocurrency and its trading is bright. They think that in the future it would be one of the most widely used trading products in the world. Soon the banks would go out of business as more would want to opt for a decentralized currency rather than a currency that is centralized by the government.
Since people can control what they want to do with their cryptocurrency, this has sparked the interests of many entrepreneurs as they want to invest in something that they can control, unlike the traditional currencies that are bound to change due to circumstances they cannot control on their own.
However, some critics think the hype of cryptocurrency trading will go down soon as the prices of popular coins such as Bitcoin have surged to almost $57,000. There is a very small possibility that they will increase more. Even if they do, it would be harder to get access to them. Hence cryptocurrency trading would be a thing of the past.
Therefore, it is very hard to predict where the future would lead this type of cryptocurrency trading, but one thing is certain that the people who were able to take advantage of this hype were able to increase their wealth by many folds and the people who were too scared to take the leap have lost a bold an opportunity that may never return.
Final Words
After going through the entire article of mine, I hope you would have got an understanding of what cryptocurrency trading is. Now, if you want to become a cryptocurrency trader, you can sign up with a reliable cryptocurrency exchange and start trading.
