Trading Cryptocurrency For Beginners. We will help explain the basics in this article.
Types of Cryptocurrency?
When most people think of cryptocurrency, they think of Bitcoin, however, there are thousands of cryptocurrencies in existence, which are called altcoins. These altcoins may have limited trading opportunities because they are not well known or are traded on limited exchanges. So, for newbie traders who are trying to get their feet wet, trading with the most commonly used cryptocurrencies will help ensure your trading in an active market.
Some of the commonly traded cryptocurrencies are actively traded are:
Bitcoin (BTC) Ethereum (ETH)
Litecoin (LTC) Ripple (XRP)
Dash (DASH) Dogecoin (Doge)
Some Common Terminology
Fiat – is the commonly used term for paper money, like CAD or USD.
Wallets – is where you store your cryptocurrencies. There are two types: hot wallets which are connected to the Internet and cold wallets, which are kept offline.
Exchanges – are websites that act as a medium to buy and sell cryptocurrencies. Just like buying and selling stocks and bonds.
You can also get more information about Bitcoin and Altcoins on platforms like coinmarketcap, which were created to track the capitalization of different cryptocurrencies, the amount of trades that use them and the current price converted into fiat currencies.
What is Cryptocurrency Trading?
Cryptocurrency is comparable to forex, where each coin is representing a currency that could be traded for fiat or other cryptocurrencies. Just like forex, cryptocurrency traders can use buy & hold strategies or trade on the up & down volatility to make a profit. With the volatility in Bitcoin and altcoins, shorting, which is betting on a downward movement in price, isn’t generally recommended for new or less experienced traders.
SInce Bitcoin and some other altcoins are trading in thousands of dollars, It might seem impossible for some trades to make trades or take a position, however, you do not need to trade a full Bitcoin or other altcoins. Trading can be accomplished by trading in a fraction, for example .0001000 BTC.
Theoretically, since Bitcoin’s supply is limited to 21 million coins, (about 17 million in circulation) the ability to trade fractions of a Bitcoin allows for each of those 21 million coins to be split 100 million times. Yet, exchanges will not support small units in trades.
First off, at present, it would be a huge mistake if you were to invest all of you life savings on Cryptocurrency. Since the market is relatively new and has not yet matured, Cryptocurrencies are extremely volatile. Number one rule before trading is RESEARCH, RESEARCH and more RESEARCH. Do not rely on YouTubers or some random guy on twitter. Since you are investing your hard earned money, you need to develop an understanding of what cryptocurrency is, market trends and what are the fundamentals. Only then would you be able to decipher between the so called cryptocurrency “experts”.
Cryptocurrency is still relativity young and new, therefore, with limited consumer protections/government regulations in place, the liability is on the trader or investor to stay safe. Yet, cryptocurrencies are here to stay and they’ve already created many successful business and millionaires.
Trading Cryptocurrency For Beginners