Cryptocurrency Trading for Beginners: A Simple Guide
Newbies in the crypto space always have it rough when it comes to learning how to buy and sell crypto. There is just always too much content to digest which leaves them confused at the end. In this guide, we have simplified cryptocurrency trading for beginners to clear any confusion you may have and set you on the right path to trade crypto like a pro.
The cryptocurrencies you hear and see so much of today began in 2009 with Bitcoin, the first crypto created and currently the most valuable and popular of the thousands of crypto on the market. Although Bitcoin didn’t gain much traction at its early stage, which is common for every innovation, until early 2016 which marked the beginning of Bitcoin’s sustained price rise.
At this time, many people had already become interested in Bitcoin and other cryptocurrencies like Ethereum (ETH) and Ripple (XRP). They saw it as a way to earn money because they could see the prices of these coins rising and if they put in their money, that is, buy a unit of BTC or ETH, and the price goes up, their investment follows suit which was a stress-free way of making money from the comfort of their homes. Although there were risks involved too.
I heard about Bitcoin sometime in 2016 through my friend, he talked to me about it and how we could make a lot of money if we bought some units with a few bucks. He also explained how so many people are “cashing out” from this new technology but I didn’t quite understand how it works and I let it slide. I mean, the whole concept was new to me and it sounded risky, which it is.
Anyway, my friend was convinced that Bitcoin is the future and bought a whole lot and kept it, This is called “HODL” derived from a misspelling of “hold” and stands for “Hold on for Dear Life”, It is a common crypto term that refers to buying and holding crypto for a long time. A few months later, I also invested in BTC but with very little money because I was batshit scared of losing money.
It wasn’t until late 2017 that I took out time to fully understand Bitcoin and what the entire crypto ecosystem was all about. I understood the technology behind it – Blockchain – and other ways of making money in the crypto space. I have always thought it is just HODL but then I learned there are other ways like crypto trading, creating crypto content such as the one you are currently reading, admin or moderator of a crypto community, developing Decentralized Apps (DApps) as a Blockchain programmer, building trading bots, and so much more. The opportunities I discovered at the time were endless and there have been more like flipping NFTs and metaverse gaming.
If you are new to crypto trading or new to the whole crypto thing but looking for a side or full-time hustle, you may want to consider crypto trading. This article will serve as your guide on how to trade cryptocurrency as a beginner. I have simplified the process to make it as clear as day and to help clear any confusion you might have had and set you on the right path to trading your first crypto with ease.
What is Crypto Trading?
Cryptocurrency or crypto trading is the buying and selling of digital assets like Bitcoin, XRP, BNB, USDT, etc. by using a crypto trading exchange to make a profit over a certain period. Many beginners in crypto trading often confuse crypto investing and crypto trading thinking they are the same, but they are not.
The concept behind trading is to take advantage of the market volatility and make a profit within a certain period, whereas investment works when you hold the assets for the long term just like HODL which I explained earlier. To make any investment, you must ignore short-term market movements and instead seek for long-term trends. The primary objective of investing in cryptocurrencies is to acquire more coins.
On the other hand, because trading involves slight changes, it is essential to learn about the daily market when engaging in trading. If you want to succeed at trading cryptocurrencies, experts advise studying both short-term and long-term market patterns. Buying low and selling high, then waiting for the trends to change in your favor, is a better analogy. To maximize your profit when trading cryptocurrencies, you will need to often drop coins.
Which one is preferable? Which one is better suited to you? You must make that choice. You can begin educating yourself about the markets and then gain knowledge through practice. You'll eventually be able to decide which one best fits your personality, trading style, and financial objectives.
How to Trade Cryptocurrency: A Guide for Beginners
And now to the main icing on the cake. This is where you will find the guide to cryptocurrency trading for beginners and learn how to trade cryptocurrency on your own from scratch. Let’s get started…
Step 1: Look for a Suitable Cryptocurrency Exchange and Sign Up
Cryptocurrency trading is done on a crypto exchange or a crypto trading platform, without this medium crypto trading will not take place. A crypto exchange is a peer-to-peer (P2P) platform that allows users to trade cryptocurrencies directly with other buyers and sellers based on current market prices.
Cupid Technologies launched Moneyca, a P2P crypto exchange platform where beginners and professionals alike can trade cryptocurrencies like BTC, ETH, USDT, and other digital assets. An additional feature of Moneyca, which you'll rarely find on crypto exchanges, is the buying and selling of gift cards on the platform.
Transactions on Moneyca are lightning fast, reliable, secure, and offer a friendly user interface which are major criteria beginner crypto traders should use in choosing a crypto exchange.
There are two main types of crypto exchange; Centralized exchange (CEX) and Decentralized Exchange (DEX).
- Centralized Exchange (CEX)
A centralized crypto exchange relies on a central authority and works by matching buyers and sellers to execute transactions and then charges a fee for each trade. Such exchanges are best for beginner crypto traders because they are often user-friendly making it easy for newbies to navigate the platform with ease. CEXs also follow high governance standards and offer a wide range of trading pairs. They also have a higher number of users.
Examples of CEXs are Binance, Coinbase, Huobi, Bithumb, and Kraken. If you plan to sign up on any of these centralized exchanges, you will be required to share your personal information such as address, date of birth, Social Security number (in the US), driver’s license or any official ID, passport photograph, and email address, among other things known as KYC (Know Your Customer).
The downside of CEXs is that user funds are held on the platform which makes them vulnerable to malicious hacks. Another disadvantage is high transaction fees and slow transactions.
- Decentralized Exchange (DEX)
Decentralized crypto exchanges are not controlled nor rely on a central authority rather they match users – buyers and sellers – through an automated system that enables them to execute transactions as peer-to-peer (P2P) enabled through smart contracts and blockchain technology. DEXs are harder to use for newbies because of their professional interface which makes it best for professional crypto traders.
The advantage of DEXs includes lower transaction fees, faster transaction speed, and higher security because user funds are not locked on the platform rather it is locked in the user’s crypto wallet. Its disadvantages include low volume, low liquidity, and the absence of a trusted intermediary for conflict resolution.
Examples of DEXs are Uniswap, Pancakeswap, dYdX, DexGuru, and OKX.
Looking for a suitable crypto platform to trade your crypto is a crucial first step for every beginner. Since you already know the two main types of exchanges it will be easier for you to find one that is suitable for you by exploring both options.
Step 2: Fund Your Account
The second step in this guide for cryptocurrency trading for beginners is funding your account and this is something you will have to do after you have created and verified your account on the crypto exchange where you would like to start trading. Funding your account is very easy, it can be done using debit cards and wire transfers but the latter is the most cost-effective way to deposit money into your account.
The money that you deposit into your account is what you will use to buy crypto and begin your crypto trading journey which takes us into the next step.
Step 3: Choose a Cryptocurrency
Choosing a crypto is easier said than done and this is because there are thousands of cryptocurrencies in the market so it can be hard or get confusing to just pick a few out of the many options. Although picking a crypto to buy and start trading may seem like the third step in trading crypto as a beginner before that, you would have to do a lot of research on the coins to pick and start trading. So, after funding your account, dive into deep research to choose a crypto when that is finalized you can then head to the next step.
Pro Tip: Choose a crypto based on the criteria of performance and its longevity in the market.
However, if you are left confused about which crypto to choose you may want to consider going for Bitcoin and Ethereum because they are the two most popular cryptocurrencies and thus have a lot of people trading them have a large liquidity, and are more predictable compared to smaller altcoins. Also, the majority of expert crypto traders prefer to trade Bitcoin and Ethereum.
But you cannot completely cast other smaller altcoins aside because they have been seen to rise to about 1000% in just a month, therefore they can be considered as good options while trading.
Step 4. Practice and Pick a Trading Strategy
By practicing and picking a trading strategy you have already started crypto trading. This is the step where you officially become a crypto trader. There are different strategies for trading crypto and I recommend that you practice all and pick the one that works best for you or combine the different strategies to make up one instead of learning a single trading pattern and continuing with it.
The four major trading strategies are:
- Scalping
Scalping is a short-term trading strategy that gives you a small but instant profit. This crypto trading strategy involves holding a coin for a few seconds or minutes and then selling it when there is a slight increase in the value of that coin. The purpose of scalping is to achieve small profits which are accumulated throughout the day. The best time to scalp is when the market is super busy because at this time the chances of getting profit are maximum.
- DayTrading
Day Trading strategy involves buying a crypto and holding it for a day. You will enter and exit the position within the same day. Technical indicators that can assist you in determining the current market conditions and identifying trends are necessary when engaging in this style of trading. Although this method of trading also yields small profits, it saves you from overnight market volatility.
- Swing Trading
Traders hold positions in the swing trading method for a few days or a few weeks. This kind of trading is based on short- to medium-term trends, which typically last 1 to 30 days. This kind of trading strategy can be used by someone who devotes their time to their job and is not active every day. Here, you don't need to be concerned about the daily fluctuations because swing trading involves holding the cryptocurrency for longer periods. The best profits can be earned, nevertheless, by following the trend and reviewing the daily analysis.
- Position Trading
Position trading strategy focuses on the long-term price shifts therefore you will hold positions for a long period. Additionally, analyzing weekly and monthly price charts can help you assess market patterns. The traders who use this form of trading technique are not concerned about minute price changes. In actuality, they simply pay attention to and act upon the big market trends.
A crucial first step in cryptocurrency trading is choosing a trading strategy. I have listed and explained the most used methods in crypto trading, it is now left for you to try them out and pick the one that works best for you.
You can earn significant profits in crypto trading by using the trading indicators in conjunction with the right fundamental and technical analysis. If you're looking for an automated cryptocurrency trading system, you might want to consider using Coinrule. Concerning your investing goals, cryptocurrency trading bots use a procedure that is intended to give you the biggest profits possible.
Step 5: Store your Cryptocurrency Securely
This is the final guide on how to trade cryptocurrency as a beginner and just like the others, it is a crucial step. This essential step involves securely storing your crypto in a safe place. You will need a crypto wallet for this and there are two types; hot wallet and cold wallet.
A hot wallet is a wallet that is always connected to the internet allowing you to store, send, and receive tokens. It is a software or mobile application. Examples of hot wallets are Trust Wallet and MetaMask, they are also referred to as software wallets. Whereas a cold wallet is a wallet that is not connected to the internet. It is an encrypted hardware device designed to store your crypto offline and whenever you need to send and receive tokens you will connect it to your computer. Examples of cold wallets are Trezor and Ledger Nano. They are also referred to as hardware wallets and they offer better security compared to software wallets.
So, you can safely store your Bitcoin, XRP, Ethereum, or any other crypto in either a hot or cold wallet or use both if you prefer.
Essential Crypto Trading Tips
The following are essential tips that will help you as a beginner in crypto trading:
- Diversify your investments
- Avoid Fear of Missing Out (FOMO)
- Keep up with the latest market trends and stay updated with cryptocurrencies
- Learn trading methods and staking
- Don’t put all your life savings into trading
- Do Your Research (DYOR)
Top 10 Crypto Trading Platform
The top 10 crypto exchanges are:
- Binance
- Coinbase
- Bittrex
- Crypto.com
- eToro
- Gemini
- KuCoin
- Kraken
- BitMart
- Huobi
These are the top 10 exchanges for trading crypto, as a beginner, you can begin your crypto trading journey with any of them.
Common Terms to Know as a Beginner Crypto Trader
Some terminologies are often used in crypto trading but as a newbie, they might sound strange to you and you must familiarize yourself with these terms as you begin this journey. These terms are:
1. Bull Market
This is when market prices are trending upward
2. Bear Market
This is the reverse of the bull market and is where market prices are crashing or on a downward trend
3. All Time High (ATH)
This refers to the highest price ever of a particular asset or the highest market capitalization
4. All Time Low (ATL)
Refers to the lowest price ever of a given asset or the entire crypto market.
5. Take-Profit Order (TP)
TP is a type of limit order that specifies the exact price at which to close out an open position for a profit.
6. Stop Loss Orders
A stop-loss order instructs that a coin be bought or sold when it reaches a specified price known as the stop price. Once the stop price is met, the stop order becomes a market order and is executed at the next available opportunity. Stop-loss orders are used to limit loss or lock in profit on existing positions.
7. Altcoin
Alternative coins or altcoin describes any coin besides Bitcoin
8. Fundamental Analysis
A method of evaluating the value of a given asset, as well as estimating its future performance. In the context of crypto projects, it takes into account such factors as the technological and innovative value of a product, the team behind it, or the token distribution model and its use cases
9. Technical Analysis or TA
Technical analysis is the practice of evaluating price charts and applying several market indicators to assess the condition of the market. Expert traders who want to use technical analysis to their advantage when attempting to predict future market moves are studying this in depth.
10. Limit Order
An order is made through an exchange to purchase or sell a particular item at a specific price or lower. A sell order will only be carried out at a chosen or lower price, while a buy order will be carried out at a target price or higher.
These are some of the common terms you should know as a crypto trader. Aside from the ones here, which other ones do you know?
FAQs
Can I trade crypto as a beginner?
Yes, you can trade cryptocurrency as a beginner. The experts and predictors we have today were once newbies just like you but with constant practice they became professionals. You too can if you follow the right trading practices.
Which crypto to invest in as a beginner?
An ideal crypto to invest in as a beginner would be Bitcoin and Ethereum but you must do your research to find other potential crypto in the market that you can invest in.
How much do you need to start trading crypto?
$20 to $100 or anything you can spare is a good amount to start with.
Conclusion
This wraps up the guide on cryptocurrency trading for beginners and I hope they have been helpful. However, do not limit yourself to this guide as there are concepts that you need to learn physically to become a fully-fledged crypto trader. Hop on YouTube or take online crypto trading courses on Coursera and Udemy to learn more.