Cryptocurrency trading is the foreign exchange of cryptocurrencies, just like the foreign exchange market (Forex) of regular currencies. This means that you can trade different cryptocurrencies like Bitcoin, Ether, Litecoin to USD and backwards.
Foreign exchange (forex) market trading is the buying and selling of currencies between traders. In its simplest form, this involves exchanging a currency that you own into another, then exchanging it back later. Forex market trading occurs “over-the-counter” between participants in the market, usually using online platforms.
Trading cryptocurrencies works the same, but instead of selling and buying fiat currencies, such as euros or US dollars, traders buy and sell cryptocurrencies, such as bitcoin, Ethereum (ETH) or Litecoin.
Just like forex market trading, cryptocurrency trading works by exchanging one currency into another and back. You will mostly exchange a regular currency into a digital currency and then, later, back into a fiat currency, although there are traders and exchanges that allow cryptocurrency-to-cryptocurrency trading.
Types of cryptocurrency traders
There are two types of trading available to traders interested in market trading cryptocurrencies:
Long-term trading or investing
Long-term traders buy and hold cryptocurrencies over a long period. They may hold a cryptocurrency for a determined amount of time (such as weeks, months or even years). Studying price trends over a long period allows long-term traders to make informed decisions and avoid suffering from short-term fall in value.
If you strongly think that the value of a cryptocurrency will grow firmly over a determine period of time and don’t want the stress that comes from short-term value dips, then this method could be your best choice.
Short-term trading or intraday trading
Short-term trading eschews the stability of long-term trading for the possibility of taking advantage of short-term price swings and involves buying and selling cryptocurrencies over the span of a day or a few hours.
If you’d rather take position of the distinctive unpredictability of cryptocurrencies by getting in and out of a trade quickly, then this method might be for you.
Why trade Cryptocurrency and no other Forex?
To start trading cryptocurrencies and earn money, you really need to know how steps, besides if you want to start trading Forex, that takes several weeks. They usually need to follow security measures and send you you’re the sign-up forms and access code per mail. Not to mention that it takes several days until the transferred money from your bank account is arrives at your Forex Broker.
It should be also mentioned that crypto-trading is easy to leave. Just transfer your digital coins out of the exchange into your wallet and you are done. We don’t even want to start talking about how complicated it is to quit your broker.
One big difference to Forex are the big spreads. A spread is the difference between ask and bid prices. The spread of bitcoin to US Dollar is intuitively bigger than the one of US dollar to Euro exchange, since the market is less liquid.
A bigger spread opens the possibility for the trading strategy called cryptocurrency scalping. Often utilized by market makers. You have the option to use leverage trading on some Forex and Cryptocurrency Exchanges.
Getting started trading cryptocurrencies
The first thing you need is a wallet. Only then you can buy cryptocurrencies like Bitcoin or Ether and protect them. We have made a guide on how to obtain Bitcoin already, check it out if you don’t already possess one.
Most cryptocurrency exchanges have a free a wallet along the ability to trade, but we suggest, that you don’t put all your cryptos in one place. This way you can minimize your risk of an exchange going broke, being scammed or getting hacked.
Most exchanges offer digital currency trading with the obligation of buying Bitcoin, therefore Bitcoin is the first thing you should consider buying. Most exchanges also accept different payment methods like online bank transfers, PayPal or Credit and debit cards.
The advantages of trading cryptocurrencies
Trading cryptocurrencies, while like trading fiat currencies on forex, comes with its own set of advantages.
Cheap fees and fast exchanges
For each trade, the exchange platform you’re using, commonly will take a small percentage as commission for the service they’re providing. Where cryptocurrency trades vary from their fiat currency equivalent is in the size of this fee. Because the fees for transferring digital currencies are cheaper than credit card and regular bank transfer fees, market-trading fees are cheaper than forex-trading fees.
Traders make earnings when the price of the currency takes large march upwards, and cryptocurrencies often experience large price opportunities. While this increment the risk, you can often make a huge amount of profit with a relatively small bankroll.
You can only commerce stocks and assets during business hours, and you can only trade forex from Monday to friday. Cryptocurrencies, on the other hand, can be traded 24/7, anytime and anywhere.
Steps to get started trading cryptocurrency
Now that you know how market trading works, you’ve decided on the type of trader you want to be, you know what you should look out for and you have studied the theory, you’re ready to start trading cryptocurrency. Let’s look at everything you’ll need to get started.
Find a broker
A broker that provides an online platform for trading cryptocurrencies is a must. While many traders use cryptocurrency exchanges to market trade digital coins, these exchanges were not built with trading in mind and usually involve high fees.
Learn the platform
Brokers usually offer their own trading platform, and each broker’s system will be slightly different from one another. You will need to put in the time to learn how the platform works, where each feature is and how to utilize it.
When you first access a broker’s website, you might feel overwhelmed. This is normal, so spend some time with it and continue doing your research. You will get easy to use with it in no time.
The motto of “buy low and sell high” holds for cryptocurrencies just as it holds for any other sort of investment or trading. Don’t buy digital currencies when the price is at an all-time high, and don’t sell them when they’re at an all-time low. Digital coin markets move up and down, and large movements up are often followed by sudden falls.
The best way to learn how to trade is to trade. There is no secret. Once you’ve learned all the theory, you’ll need to get your feet wet. Buy some cryptocurrency, set your limits and get started.