Are you interested in the world of cryptocurrency and want to begin trading? If you are unsure of what cryptocurrency trading is and how it works, then this guide is for you. Let’s break down the basics to help get you started.
As a note to begin with, trading in any capacity, much more so with cryptocurrency, comes with a great deal of risk. Investments can be volatile at the best of times. With cryptocurrency, even the most popular currencies, such as Bitcoin, suffer from huge volatility on a regular basis. Before making any move, ensure you have done your own research and are happy with the decisions you are going to make, and only invest as much as you can afford to lose.
What is cryptocurrency trading and how does it work?
Cryptocurrency trading involves speculating on price movements via a CFD trading account, or buying and selling the underlying coins via an exchange. The original way to trade cryptocurrencies would be setting up a bitcoin wallet, buying some bitcoins with tangible currency, and then exchanging these bitcoins on a cryptocurrency exchange site to the altcoins of choice.
What do you need to begin with?
Before you can start trading, you will first need to make sure you have the following:
- A cryptocurrency wallet (Hot or cold wallet)
- Access to an exchange that allows you to buy, sell, or trade crypto.
What you need to know about cryptocurrency trading
- A cryptocurrency exchange is not part of a regular stock exchange
- Cryptocurrency trading is a 24-hour market
- Beginners may prefer to trade cryptocurrency stocks
- The market is incredibly volatile
READ ALSO: Forex Trading Explained for Beginners, What It Is And How It Works
What are pairings?
When delving into the world of cryptocurrency trading, you will typically start by buying your first crypto with fiat currency. Fiat refers to your local or national currency such as the Naira, pound or the dollar. So, an example might be that you wish to trade your USD with Bitcoin (BTC). This is something that is popular and support by a lot of exchanges.
However, once you have tested the waters, you might want to begin trading between two cryptocurrencies, such as Bitcoin and Ethereum. In this case, they would be abbreviated as BTC (for Bitcoin) and ETH (for Ethereum) on an exchange. For a newcomer, this can be slightly overwhelming as exchanges tend to list pairings in their abbreviated forms.
Below is a list of popular cryptocurrencies in their abbreviated forms:
- Bitcoin – BTC
- Ripple – XRP
- Ethereum – ETH
- EOS – EOS
- Stellar – XLM
- Bitcoin Cash – BCH
- Tether – USDT
- Litecoin – LTC
- Bitcoin SV – BSV
- Tron – TRX
Note: This list is not extensive. There are over 3,500 cryptocurrencies out there, so it would be difficult to list them all here. It would be time well spent for any newcomer to become acquainted with popular cryptocurrencies and their abbreviations before beginning to trade. Similarly, playing around with the most popular cryptocurrencies such as Bitcoin is a great starting point to get used to this type of trading.
How to choose the right trading platform
Choosing the correct platform for you is very important. There are differences across competing exchanges, and as such, it is useful to do some research to decide which is best for your needs. Below is a brief list of some of the key things to look out for:
Available currencies: As mentioned above, Bitcoin to USD is common, but other trade pairings might be available on one platform and not another. Be sure that the crypto you want to trade with is supported.
Leverage: This refers to the amount you are allowed to trade above your initial deposit and by how much you can multiply your gains. A higher leverage will suit risk takers who look for the high reward. A high leverage is not recommended for beginners, however. A common leverage is typically 20:1 with crypto. Again, though, this is dependent on your chosen platform.
Hedging: Hedging is a risk reduction tactic that typically involves taking an offsetting position on your primary asset. This provides insurance and reduces the possibility for loss.
Minimum investment: This refers to the minimum amount you can deposit and invest with. This is important as different platforms will require different minimum investments. Choose one that suits your budget.
Customer support: You’ll want to know that your queries, big or small, can be answered. Choose an exchange that has a big support team.
Instant liquidity: the longer you wait around for your buy order to be fulfilled, the higher the risk that the value will drop due to the volatility of the market.
Validity: Before you even do anything, first make sure that the exchange is available in your area.
Reputation: Next thing that you need to check is the reputation of the exchange. Are people happy with their services? Has it been hacked recently? How secure is it? Have people complained about it? Twitter and Reddit are good sources for checking this.
Exchange Rates: Up next we have the exchange rates. Different exchanges have their own exchange rates which may vary. Do your homework here and research 3 or 4 exchanges and their rates (including deposits, withdrawal and transfer charges).
Safety: Please always choose exchanges which need some sort of ID verification from you. Even though they may take time, they are easily 100 times more safe and secure than anonymous exchanges. At the end of the day, it is your hard earned money. You must take that extra step to keep it secure.
You can do your own research and choose your exchange, however, in this guide we are going to go with the most popular Crypto Exchange out there, Binance. So, let’s start trading!
Binance Signing Up and Account Creation
Signing up is a very simple process. The moment you land on Binance homepage just click on “Sign Up”. Enter your Email address and password Click on Create account and Follow the instruction(s), remember to use your legal name so as to be able to verify your account. Create your Binance Account Here
After account creation, verify your account. To start buying and selling crypto, fund your account with your fiat Currency (Local currency) using Bank Transfer Method or Card Method (remember card funding is not available on Binance app visit Binance official website to fund your account via Debit cards).
Fiat to Crypto Trading
How To Trade Cryptocurrency: Fiat to Crypto Trading
So, you have some money that you want to invest. How are you going to go about it? The portals which connect our world to the crypto-worlds are called “exchanges.” There are a lot of exchanges out there, however, before you choose to invest in one, there are certain things you need to look out for. Let’s call this the “Exchange Checklist.” Read more here
After funding your account on Binance. To Buy Crypto, click on Markets, Spot, select your trading pair of choice, for example BTC/USDT.
To buy instantly select the lowest sell order from the sell order list and the amount of crypto (BTC) you wish to purchase. You can also bid by placing order using the buy order. I personally recommend trading against fiat pairs (USDT) of any type of cryptocurrency you wish to trade.
P2P Crypto Trading
You can also buy and sell lcrypto on Binance and other platforms via P2P (peer-to-peer). Binance’s peer-to-peer platform allows you to buy Bitcoins and other cryptocurrencies with your local currency at 0 fees. On Binance P2P, you have the freedom to choose your preferred counterparties and payment methods for your trades, with the crypto assets escrowed by Binance.
How does trading with an exchange work?
Below is how exchanges typically work:
- Users either transfer their existing crypto to their account on an exchange or use the exchange to buy crypto with fiat currency (note that not all exchanges provide the option to buy cryptocurrency with fiat currency)
- The exchange holds on to the cryptocurrency
- The user watches the prices of other cryptocurrencies available
- Users place their buy or sell orders once they have chosen the desired trade
- The exchange finds a seller or buyer to match your trade
- The exchange then completes your transaction.
READ ALSO: Cryptocurrency Wallet, Exchange And Types Explained
General Tips For Cryptocurrency Trading
The rule of “buy low, sell high” is the basic formula in Crypto trading, it applies to a pattern of cryptocurrencies price that shifts between certain price points.
Whatever the size of your capital, you can find a digital currency that matches your needs to trade. Following news on digital currency is very important, and can help direct you to choosing the best cryptocurrency for you.
There are two major factors to consider before trading your crypto currency of choice. The first is, fundamental analysis and the second is technical analysis. Technical analysis includes the same research that is done with any, and all other financial assets.
should take into account the susceptibility of the cryptocurrency markets, and the fact they can be manipulated by thought leaders of the industry for their own advantage.
Use the comment section for your question(s) and I will reply as soon as possible.
READ PREVIOUS: How To Earn Free Crypto With Mobile Cloud Mining
Follow our socials Whatsapp, Facebook, Instagram, Twitter, and Google News.
Can you please explain better on the P2P, Fiat money. And fundamental and technical analysis?
I am in interested in the crypto investment but am a novice. I need a deeper knowledge about it before investing. Thanks