With the type of fame and exposure, cryptocurrencies have gathered over the last couple of years, the interest of most people have been stirred towards them. Currently, according to several reports, it has been revealed that cryptocurrency investment is the most profitable investment anyone can make at this moment. This has made more people interested in trading digital currencies. The problem is that trading cryptocurrencies is not an easy task that anyone can quickly start without having prior knowledge of how the market works. This need for cryptocurrencies has prompted the need for this article. We will discuss how you can begin trading cryptocurrencies.
Before you can begin trading cryptocurrencies, it is important that you know what they are. Basically, cryptocurrencies are digital currencies that can be used as a medium of payment for goods and services. In addition, digital currencies can be used as a store of value. To begin trading these digital currencies, you will have to understand that there are about 1,300 active cryptocurrencies trading on the crypto market. These digital currencies have been developed to offer users solutions to some of the problems that we face. it is important that you remember that each of these digital currencies has different price ranges and future value. Also, according to reports and speculations, it has been revealed that more than half of the active cryptocurrencies in the market would not be around in five years time.
Select A Cryptocurrency
As mentioned, there are about 1,300 cryptocurrencies actively trading, so it is wise that you choose one that has the potential to experience an appreciation of value in the coming years. So this is the first step that you have to take. It is very important that you conduct intensive research into the background, technology and team members behind any crypto project you have the intention to invest in. The whitepaper of the project, forums like Bitcointalk and Reddit are key tools you should use when choosing cryptocurrency to trade on. As a trading tip, it is important that you choose more than one cryptocurrency. This is to ensure that you do not lose all your funds if one fails
Choose A Digital Wallet
After you have decided on what crypto to trade, you have to download or purchase a digital wallet as this will serve as your crypto banking and transaction facility. There are tons of wallets you can choose from. These wallets are designed to ensure that you do not store your funds on cryptocurrency exchanges. Some of the types of wallets include; the mobile wallets, paper wallets, hardware wallets etc. Generally, the hardware wallets happen to be the most secure wallets around. Some of the most well-known wallets you can choose from include;
- Nano S ledger
Asides these wallets mentioned, there are tons of other wallets you can choose from. Once you are able to set up these wallets, a wallet address would be given to you. This address would be like your personal number which would be presented each time you seeks to send coins to your wallet.
Choosing An Exchange
There are two ways to get coins, it is either you mine them or buy from exchanges. These exchanges are designed to offer a list of cryptocurrencies that you can buy through any of the supported payment methods. Since mining is a more complicated way of owning cryptocurrencies, buying through exchanges is the easier choice for those that don’t want to go through the technical hassle or don’t have the huge capital outlay that some mining activities require.
Actually, there are two types of exchanges; the decentralized and the centralized exchanges. The decentralized exchanges as the name implies does not have a central authority that is responsible for processing transactions. Centralized exchanges, on the other hand, has a central authority structure. The complex nature of these decentralized exchanges has made more people opt for centralized exchanges. Currently, there are tons of centralized exchanges you can choose from. When choosing a cryptocurrency, it is important that you consider some of these essentials, they include;
- Transaction fees of chosen exchange(s)
- Security level
- The registration process
- Deposit and withdrawal limits
- Support of multiple cryptocurrencies
- Support of multiple payment options
Some of the exchanges you can choose from include;
Buy & Trade
Once you have been able to choose a suitable exchange from the long list of exchanges available, you have to buy cryptocurrencies and then start trading. Crypto trading like any other business venture has its risks, so make sure you are making educated decisions when trading
You can buy cryptocurrencies from any of the payment options that are supported by the chosen exchange. Once you have purchased these cryptocurrencies, you have to send them to your wallet address, why? Recently, there have been reports of cryptocurrency exchange hacks which has resulted in most users losing most if not all of their coins. Send a reasonable amount of coins bought to your offline digital wallet.
If you have plans to become a regular crypto trader, it is advisable that you go for an exchange that offers in-depth analysis, charts, graphs, and trading strategies. This would ensure that you make calculated and profitable decisions.
Do’s And Don’ts Of Trading Cryptocurrencies
- Only invest in a crypto after proper research
- Always keep up-to-date with market happenings
- Ensure that you choose a suitable and secure exchange and wallet.
Pros of trading cryptocurrencies
- High volatility (Day traders)
- Total control of your cryptocurrencies
Cons of trading cryptocurrencies
- Risks of loss of investment(s)
- High volatility (Hodlers)
Trading cryptocurrencies happen to be a lucrative opportunity for many due to the large sways in prices of crypto assets on occasions, at the same time, it is very risky. The unexpected drop in the value of cryptocurrencies is one reason why most financial institutions have warned their customers not to Invest in them. Before venturing into cryptocurrency trading, endeavor that you fully understand how it works. It is also wise to know some of the used market terms like FOMO (Fear Of Missing Out).
Boost your knowledge and read more about other cryptocurrencies.