How to start trading cryptocurrency. Instructions for beginners

How to start trading cryptocurrency. Instructions for beginners

By Kluma | InterestingCrypto | 1 Jun 2020


 

The digital money market is full of pitfalls. You can lose money when storing bitcoin, buying and selling it, making transactions on and off the exchange. How to start getting acquainted with a new type of asset, how to avoid losses and develop trading skills

The turmoil in the economy, fluctuations in financial markets, as well as the halving of bitcoin in the past couple of months have attracted new users to the cryptosphere. This is evidenced, for example, by data from the online Bank Revolut, which reported a 68% increase in the number of investments in digital assets among British users.


Digital money is gradually becoming widespread in the world, thereby attracting new users. However, newcomers may have a lot of questions, the lack of answers to which can lead to monetary losses and failure in this area of activity. Let's see how to avoid this and how to start getting acquainted with the crypto world.


The main thing


Getting to know the world of cryptocurrencies is better to start with choosing a strategy. The main ones are investing or trading. The first implies the acquisition of an asset and long-term storage. The second is short-term speculation. A trader makes a lot of transactions with digital assets, hoping to benefit in a short period of time.

Depending on the chosen strategy, the ways of storing cryptocurrency also differ. Cold wallets are better for investments. This way you can keep your cryptocurrency on your computer or flash drive. Plus-security, no one can steal cryptocurrency without direct access to it.

Minus-illiquidity. If suddenly the exchange rate of the coin begins to decline sharply and the user wants to sell it, it will take time to transfer the assets to the trading platform. In addition to this, it is possible for emotions to specify an invalid address when sending money, which will lead to their total loss without the possibility of recovery.

Exchanges are best suited for trading digital assets. On them, the client can sell or buy cryptocurrency at any time, as well as use additional options. For example, leverage, which can be used to manage additional capital. However, this is extremely risky, as there is a chance to lose all your funds very quickly.

On some exchanges, you can also make a Deposit in cryptocurrency or use the staking function. It allows you to get passive income for storing coins. However, it is risky to hold funds on trading platforms. They can go offline at any time due to a malfunction, be hacked, and funds, respectively, stolen. There have been cases when unscrupulous employees of the company embezzled customer funds. We have told you more about how to store cryptocurrency in another article.

When the choice is made, it remains only to purchase the cryptocurrency itself. Large trading platforms allow you to do this through payment systems such as PayPal and others, as well as using Bank cards.

Cryptocurrency can also be purchased through exchanges, and then transferred to an exchange or cold wallet. However, this method is not safe. There is a risk of using the services of fraudsters or entering incorrect data when sending funds. If this happens, there is a 99% chance that the cryptocurrency will be lost. But if you are in such a situation, please contact the service's technical support. It is likely that employees will meet the requirements and help restore the loss if possible.

Directly trading


Trading digital assets is an extremely risky trade. The price of cryptocurrencies is volatile, it can fluctuate by 10-20% per day, sometimes by 50% or more. For example, on March 12-13, the price of bitcoin fell from $8,100 to $3,800. In this regard, inexperienced users may get the impression that trading can bring huge profits almost every day. However, practice shows the opposite, as a rule, 90% of newcomers lose most of their capital in the short term and leave the market.

For this reason, it is better to start trading cryptocurrency from a training account. Some exchanges allow you to create an account with a virtual balance. This will allow you to get acquainted with the market and the device of the trading platform, to practice.

Then you can Deposit a small amount on the exchange. Losses are inevitable, but this is a mandatory stage of becoming a trader. A beginner should feel what it is like to lose money and hold a losing position. This will help the user understand their psychology: whether they are able to suffer losses and not make panic, erroneous transactions, control themselves and make decisions with a cold head. It is better to acquire this skill in advance, without paying large sums for such an experience.

In addition, you should definitely turn to the theory. For example, read scientific literature on trading, listen to lectures on this topic, take appropriate courses, get acquainted with technical and fundamental analysis. All this will help you not only see the UPS and downs of asset prices on the charts, but also try to predict them.

By studying the literature and experience of other traders and investors, you can also master various trading strategies. One of these is averaging. It involves dividing the capital into several parts and investing in the asset in small amounts. This method will help you find the optimal point of purchase of an asset.

Averaging is a basic, probably the simplest strategy. In addition to it, there is still trading from levels, catching "shootouts" and "false breakouts" and others. We have discussed them in more detail in a separate article.

What not to do


Beginners make a lot of mistakes and they usually cost money. In this regard, it is better to familiarize yourself with other people's experience in advance to avoid unnecessary losses. To do this, we have prepared several rules that should be followed by every novice user.

Do not buy cryptocurrency on the news. As a rule, if the user found out about some news that should lead to a rise in the price of the coin, it probably already happened. If you bought it, you must use stop loss orders. These are requests to sell coins at a certain price. For example, if a user buys bitcoin for $9000, and the price rises to $9100, you can place a stop loss order at the point of purchase. In this case, the exchange will automatically sell the asset at the specified price, and the trader will not lose anything.

Don't be greedy. If you managed to buy bitcoin for $9000, after which its price rose higher, it is safer to sell some of the coins, and put the rest on a stop loss.

Be very careful or do not trust other people's signals to buy and sell assets. At the moment, Telegram and other social networks have many channels that publish forecasts for the cryptocurrency. Their authors are not responsible for their subscribers ' money.

Do not give someone, especially unfamiliar people, capital in trust management. And if you do this, then only with the conclusion of a contract approved by a notary. This practice has been popular in the crypto world for several years and often has a negative result for inexperienced traders.

Don't get emotional. Most losing trades are made precisely because of loss of control.

Do not trade on the last money, and even more so on borrowed money. It is difficult to earn money on the cryptocurrency market, but it is almost impossible for novice traders. For this reason, you should invest only those funds that are not sorry to lose. And certainly not to invest capital that may suddenly be required in view of the prevailing global crisis caused by the Covid-19 coronavirus infection.

Always have funds in case the price of an asset falls below the level at which you bought it.

Don't neglect your training. Trading on the cryptocurrency market is not a casino, but hard, nervous work. It can take years to understand how the asset price behaves in a given situation.

Record your transactions. This will help you evaluate and adjust your trading strategy, as well as identify mistakes.

Learn not to lose and recognize the loss. If you are not sure about the transaction, it is safer to close it and wait for another, successful moment. It is better to give the market a small share of capital than to be stuck for several years in a bitcon purchased for $20,000, and twice miss the opportunity to purchase it for less than $4,000.

Sum up


The cryptocurrency market does not tolerate playing for luck. Here traders compete: retail and large. Some take their winnings, others leave the market empty-handed, and sometimes with debts. Therefore, you need to take trading in digital assets seriously, calculate every step and think about possible negative consequences.

A novice user should first decide on a strategy: investing or trading. Allocate an amount for this, which he does not mind losing. Then buy cryptocurrencies with it and transfer them to the exchange or to a cold wallet. You can pre-train on the training account, read thematic literature and take courses, examples of which we have given in this article.



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