Are you interested in cryptocurrencies and thinking about trading them? Cryptocurrency trading for beginners can expose you to a lot of risks, so there are a few things you should know before you start.
Cryptocurrencies may seem confusing, especially if you don’t have much experience in this field. While it’s a steep learning curve, the good news is that it’s less complicated than you might think.
Once you have all the tools necessary, you can start trading and discovering new opportunities. Here are some of the most important things to know before getting started.
The cryptocurrency market is extremely volatile. You may have heard stories about investors who made a fortune overnight, but losing it all is equally as possible. Cryptocurrency trading for beginners usually starts with Bitcoin, but you should always try to mitigate risk by not keeping all your eggs in one basket.
Many beginners trade only the top coins by market cap because they’re better known, easier to buy, and (somewhat) less risky. As a guideline, digital coins with low market caps and volumes have high risks, but usually higher chances of seeing a good return on your investment.
The value of cryptocurrencies changes by the minute, and the market never takes breaks. Digital coins are peer-to-peer, which means that traders can move funds at any moment of the day or night, with no need for a centralised authority to validate the transactions.
Cryptocurrency exchanges are 24-hour platforms. They work around the clock only taking the occasional break for maintenance.
Trading cryptocurrency and traditional stocks follow the same general rules, but they are different ways of investing. The crypto market is still in its infancy, and while there are some rules in place, frauds and scams can still happen.
Stay vigilant and try to make educated predictions to protect your funds. Always carry out your own research and never invest more than you’re able to lose.
Cryptocurrencies aren’t tax-free. However, in most countries, they’re not seen as money, but act as an investment property for tax purposes. If you have crypto gains, you’ll pay taxes in the same way as for gold, real estate, stocks, bonds, and other investment properties.
You’ll have to keep track of all your movements and pay taxes every time you trade crypto for both fiat and other cryptocurrencies.
Trading digital coins can refer to buying cryptocurrency with fiat or trading crypto-to-crypto. Either way, the first two things necessary for cryptocurrency trading for beginners are a wallet and an account on a cryptocurrency exchange platform.
Cryptocurrency wallets can be software or hardware that enable users to store their cryptocurrency. They can also send and receive funds as well. Crypto wallets use private and public keys to allow users to store and manage their funds on the blockchain.
Cryptocurrency exchanges are platforms where you can sell, buy, and trade cryptocurrencies. When starting cryptocurrency trading, you should choose a company with a good reputation to minimise risks. Many exchanges also provide crypto wallets, but it’s advisable to get your own wallet and not keep your funds on an exchange due to the high risk of hacks.
When you decide on a cryptocurrency exchange, you’ll have to register to get an account. Most platforms require personal information and documents to confirm your identity and residence in a process known as KYC.
As a beginner, you may want to stick to spot trading – buying and selling digital assets for immediate settlement. However, you should know that you can increase your return using advanced trading techniques, such as margin trading or futures trading.
It’s advisable to learn the basics, spot the trends, read the charts, and learn how to store, transact, and get comfortable moving cryptocurrency around before you think about trying an advanced strategy like this.
All advanced trading techniques require a good knowledge of the market, so you’ll want to spend some time getting your feet wet before you take the plunge.
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