Cryptocurrency trading becomes more popular as time goes on. One of the main reasons is the high level of volatility that can bring you more significant returns compared to traditional currency trading. These days, there are plenty of cryptocurrencies and platforms where they can be traded, so anyone interested can find something for themselves. If you want to know how cryptocurrency trading works, continue reading.
What are cryptocurrencies and which ones are real?
While CFD Forex is still as popular as ever, cryptocurrencies are a thing of their own. Cryptocurrencies are digital currencies that operate on blockchain technology, and unlike traditional currencies, they are decentralized. With cryptocurrencies, there are no bank-associated costs, and transactions are less expensive. What is more, different loans and trading strategies can be written onto specific blockchains.
Right now, the most expensive cryptocurrency in the world is Bitcoin. Other popular options include:
- Ripple XRP
- Tether and others
When making a cryptocurrency transaction, you have to use private and public keys that work similarly to passwords and are generated by your cryptocurrency wallet. A private key belongs only to you, and its purpose is to approve any transactions that are sent from your wallet. With a public key connected to your cryptocurrency wallet, people can send cryptocurrency to you.
What are the steps you have to take?
The world of cryptocurrencies may seem mysterious to people who are just starting to get involved, but the process is actually not too difficult. If you are interested in this kind of trading and ready for the risks associated with it, there are several steps that you should take regardless of the chosen cryptocurrency:
- Create your brokerage account
The first step to trading is to create a crypto brokerage account by choosing one of the popular options on the market. When creating an account, you have to provide your personal details, such as your date of birth, social security number, and email address.
- Adding funds to your account
Once you have created an account and signed up, the next step is for you to connect your bank account and add funds. Depending on the crypto brokerage you choose, you will be able to choose how you can do this. For instance, with the help of wire transfer, debit card, or other ways. Some funding options are cheaper or even free on certain platforms, so it’s something you should pay attention to.
- Select your cryptocurrency
One of the factors you should consider before choosing a cryptocurrency is how risk-tolerant you are. The so-called large-cap cryptocurrencies, such as Ethereum and Bitcoin, are more predictable and associated with less risk. Smaller cryptocurrencies can go through extreme highs and lows, but they can bring more returns in a short time to investors who are risk-tolerant.
- Find the right strategy
If you are a beginner, choosing the right trading strategy is the most challenging part. There are many trading indicators you can select from, and it’s important to study this topic thoroughly. Some of the popular cryptocurrency trading strategies for beginners include the golden cross/death cross, dollar-cost averaging, and RSI divergence. Studying different strategies allows you to find the perfect one for you and make sure that you minimize the risks.
- Use a suitable cryptocurrency wallet
Regardless of whether you plan to keep your cryptocurrencies for a while or you are trading them actively, you need to have easy access to them when they are needed. A lot of beginners don’t know that cryptocurrencies can be stored on both offline physical devices and software wallets, depending on your requirements and preferences. Whether you choose one or another, they offer a high level of security. At the same time, hardware wallets are considered the safest option out there. There are many free software wallets that you can download for your iOS or Android device and use to store your cryptocurrency.
High risk and a chance of extreme returns
With new cryptocurrencies appearing and older ones hitting thousands of dollars, it’s not surprising that so many people are interested in this type of trading. There are a lot of ways to get involved in cryptocurrency trading, and now it is easier than ever. You can get incredible returns, but because of high volatility, the risk is always present, so it’s something to be aware of.
What are your thoughts on cryptocurrencies? Tell us what you think and whether you want to get into cryptocurrency trading in the comments.