For those of you who are interested in learning about cryptocurrency trading, we are here to help you get started. This beginner’s guide will show you everything you need to know about cryptocurrency trading.
In all seriousness, trading cryptocurrencies can be a risky business. Yes, it’s true: some people have made a lot of money. However, some people have also lost large amounts.
By the end of reading this beginner’s guide, you will have all the information you need to trade on your own.
What is cryptocurrency trading?
Bitcoin became the first cryptocurrency to be launched in 2009. However, with only one coin available, no other cryptocurrency could be traded.
It wasn’t until a few years later when more and more cryptocurrencies were created that people started trading them. The idea is really simple. You trade one cryptocurrency for another, hoping that the currency you buy will increase in value.
This concept is the same as in the real-world stock market.
Exchange platforms will charge you a fee for doing this. It usually costs about 0.1% for each transaction. Cryptocurrency trading is very popular today, with billions of dollars worth of coins being bought and sold every day.
When people trade they need to use a cryptocurrency exchange platform. This is so that buyers and sellers can match. For example, if you have Bitcoin and want to sell it for Ethereum, an exchange platform will help you find an Ethereum seller to trade with.
The “lucky ones” have made a great deal of money doing this, and there are many people who are now trading cryptocurrencies as full-time jobs.
However, those who know how to trade cryptocurrencies use many different tools to help them choose the right ones at the right time. This can include software that helps investors analyze past price trends, etc.
However, everyone should start with something! As long as you are not trading with more than you can afford to lose, there is nothing wrong with trying.
Now, we will explain what short-term trading is, along with its advantages and disadvantages.
Short-term trading
Short-term trading is when you buy a cryptocurrency, but only plan to hold it for a short period of time – this can be anything from minutes, hours, days, weeks, or even a few months!
You may buy a certain cryptocurrency because you believe it will increase in price in the short term. In that case, you would sell it for a quick profit if you thought the price will go down again.
Advantages
The main advantage of short-term cryptocurrency trading is that it offers a very good opportunity for high percentage gains. Unlike fiat currency markets where prices generally do not move by more than 1% each day, cryptocurrency prices can almost double overnight!
Large trading volumes are important as it means you will always find a buyer or seller. It simply means that a large amount of money flows in and out of that cryptocurrency.
Disadvantages
It is very important to keep control of your emotions, one thing you will learn when short-term trading is that you don’t always win. It can be very stressful when prices move differently than you expected. No one makes a profit 100% of the time.
Because the cryptocurrency markets are so volatile, prices can change very quickly. This means that if you want to trade cryptocurrencies in the short term, you will need to spend a lot of time analyzing the markets carefully, looking for small gains.
Long-term trading
Have you ever heard the word “HODL?” It’s a slang word that means to hold a cryptocurrency for the long term instead of selling it. Its actual meaning is “Hold On for Dear Life” or “Wait for the expected life”. Generally, long-term crypto-trading means holding a coin for a year or more.
The idea is that while there will always be volatility, the price should increase by a large amount over the long term.
A great example of this would be the lucky investors who bought Bitcoin in 2011 when they were only $0.35. If they held on until the end of 2017, they could have sold their coins for almost $20,000 each! That’s more than 57,000X their initial investment!
Advantages
It is easy and requires little time. You don’t need to understand complex charts or trading charts as you are simply looking to hold your currency for the long term. Unlike short-term trading, where you need to spend time constantly monitoring cryptocurrency prices, you can do it in your spare time.
You don’t need a lot of money to get started. You can buy small amounts as long as you have money to spare and let it grow over a long period of time. This also allows you to avoid the stresses of market volatility.
Disadvantages
One disadvantage of long-term cryptocurrency trading is that you may miss a good opportunity for quick short-term gains. Sometimes coins rise in value very quickly, only to fall back down again. Short-term traders will notice this and can make quick profits.
Another disadvantage is that because you don’t spend time analyzing the market (as much as a short-term trader), you may miss some bad news. If bad news is released that could affect the price of your cryptocurrency (such as regulations), the price could drop and never rise again.
How to trade cryptocurrencies?
CFD
Most people trade cryptocurrencies through exchange platforms. However, there is another option with which you can speculate on price movements. This can be done through the use of contracts for difference (CFDs).
CFDs are financial derivatives that are carried out as agreements (contracts) between a trader and a broker. When we hold a contract, we do not actually own the underlying asset, instead, we own the right to receive the difference between the current value of an asset and its value in the future. If our prediction about the value of the underlying asset is incorrect and the difference is negative, the trader will have to cover that loss.
These can be created for stocks, indices, currencies, and also cryptocurrencies. With CFDs, traders can speculate on the price growth and price decline of an underlying asset. Libertex offers within its platform a CFD, where more than 60 cryptocurrencies can be found in real time.
