Cryptocurrency trading is more popular than ever and a huge number of investors are looking to jump on the crypto hype to make easy money. But it is very important to understand that crypto trading is no get-rich-quick scheme as most people think.
As a beginner cryptocurrency trader, you have to do your research to be positive about the cryptocurrencies you choose to invest in. You most definitely do not want to put your money into something that you do not believe in. In this article, I am going to examine all the necessary steps you should take as a crypto beginner. However, in the end, it is up to you to take them. But first, let’s start with some basic facts about the cryptocurrency market.
Cryptocurrency market is open 24/7
Unlike fiat currencies, cryptocurrencies can be traded 24/7. Trading volume differs during the day as traders from different countries enter the market at a different time. These changes have, however, a very low significance.
Crypto market is very volatile
The cryptocurrency market can skyrocket or fall down even by tens of percent in a matter of minutes or hours. It is completely different from stock or classic forex markets and it is important to realize that investing in cryptocurrencies puts your capital at high risk. The crypto market is probably the most welcoming one, even for beginners. Nevertheless, you still need to understand that the huge price spikes cryptocurrencies experience on a regular basis do not always bring a desired profit. In fact, they can also have a devastating effect on the investors’ capital. Now, I am going to teach you how to significantly reduce the risk. However, you always have to be aware of the crypto market volatility.
1. Find a broker where you can trade cryptocurrencies
Searching for the best crypto broker is not an easy task. There are many crypto companies and their offers vary. The main aspects you should consider when choosing a broker are following:
- Trust & Regulation
If you come from a European country, the broker should be regulated by the CySEC, a regulatory body which oversees all the broker’s activities. They also provide full deposit insurance up to 20 000 dollars. Investors from Australia should be looking for brokers with ASIC license.
The less you pay in fees the more you can earn. So it’s only logical to find a broker with the lowest fees possible. Most brokers charge an amount equal to a spread for opening a position. A spread is the difference between what you pay for a cryptocurrency coin and what you get when you decide to sell it to the broker. Apart from that, many brokers charge a swap when you stay in a position overnight. Such brokers are usually best for day cryptocurrency trading and brokers with no swaps are best for a long-term holding.
- Cryptocurrencies you want to trade
If a broker does not offer cryptocurrencies you desire to trade, there is no point in creating an account. Therefore, do not forget to check whether the company of your choice offers all the cryptocurrencies you plan to trade.
Leverage can help you benefit from small price movements of cryptocurrencies. It is a very powerful tool when used by professionals, however, beginners should only use it with great caution or not at all. Fortunately, the cryptocurrency market is volatile enough to make a good profit even without it.
TOP 5 Rated Cryptocurrency Regulated Brokers on our web
General warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 65-84.94 % of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money
The comparison above doesn't cover all brokers out there. We might be partners with some of the listed companies
2. Select your cryptocurrency
If you haven’t chosen the cryptocurrency you want to trade, now is the time. Selecting a digital coin with the highest potential is a very important step. You do not want to choose a cryptocurrency you don’t have faith in. When you do your research about cryptocurrencies, there are several things you should look for:
- Infrastructure (App development, Cloud storage, Virtual Private Networks, funding, etc.)
- Technology (Quick transaction process, firm and easy to use UI that is easy to adopt, etc.)
- Development team (Skilled and experienced, solid amount of developers, etc.)
- Growing popularity (Rising demand for the cryptocurrency, more people using it, media coverage, etc.)
These are the most important general rules when determining a cryptocurrency’s potential. Some of them are more important than others, but the cryptocurrency you select should meet at least 3 of these criteria.
3. Determine where the price is. Is it low or high?
Is the price now at its 45-week low? Or is it at its maximum? You probably know the saying “buy low, sell high”. Let me show you a great example of what I mean on the Ethereum chart which displays the price movement from the beginning of the year 2017 to 12.6.2017.
Wow, that looks really great, doesn’t it? That seems like a really good investment to make…Until…
The price went down to half in a one-month time. It is definitely true that there might be situations when a value of a cryptocurrency with a good technology, funding and media exposure keeps rising for a long time. However, such investments are very risky for beginner traders because it is hard to determine how long the growth can last. We surely do not want to end up chasing highs and go with the excessive optimism when it actually is the only thing pushing the price up.
4. The best way to approach crypto trades not only as a beginner
One of the best investors of all time, Warren Buffett, once said:
Be Fearful When Others Are Greedy and Greedy When Others Are Fearful
And this is a great way to approach the cryptocurrency market. Are others dumping coins for a relatively low price? Great! It might be a good time to buy them. Is the market optimism fake? Well, now might be a good time to lock in those profits and get out of the trade safely.
5. Determine your target sell price
Traders buy coins of a cryptocurrency when they consider it’s price to be low. Now, once you are in a trade and the price goes up, you have to think about the best time to get out of the trade (if you speculate on the price growth). You do not want to hold onto it until the end of days. The best time for leaving is when the prices are going too high and the investors are getting carried away. One way to determine this moment is by asking yourself “Do I honestly believe the coin is worth more?”. If you think that there is currently no more space for the cryptocurrency to grow, it is time to get out of the position.
6. What affects the price of cryptocurrencies
There are many fundamental influences that can drive the price of cryptocurrencies down or up. The main of them are as follows:
- Government Regulations
Whenever any government makes a public statement about the regulation of a cryptocurrency, the market always reacts to it. Do you remember when China banned ICOs? The price of Bitcoin and other cryptocurrencies dropped down rapidly. Therefore, it is very important to keep an eye on such events, whether you are a beginner or a skilled trader.
- Media exposure and other influencers
Generally, cryptocurrencies gain in value when they receive a positive media exposure. It is simply because more people are interested in buying the coins. There are also individuals who can influence the price of cryptocurrencies. Such people are usually extremely well-recognized in the field of finance and investing. So, when the CEO of the biggest American bank J.P. Morgan – Jamie Dimon publicly stated that he thinks that Bitcoin is a fraud that will eventually blow up, it was no wonder that the Bitcoin market took a big hit. Because of this statement, J. Dimon received many negative comments suggesting that his statements were intended to manipulate the price of Bitcoin.
- Wider Mainstream Acceptance, New firms backing up the project
Has just Amazon, eBay or other huge international firm announced that from now on they will accept payments in Bitcoin? Great! You probably know what that means for the market… Similarly, when big companies like Microsoft, Intel or others provide their name and finance, it is another reason for the price to go up.
- Technological Changes and Innovations
With every new technological change, there is a high chance that it might significantly affect the price of a cryptocurrency. For example, if a new security protocol that will make the cryptocurrency even more reliable, secure and scalable is scheduled to be released, it might induce a positive response of the market.
- State of other markets
It should be no surprise that cryptocurrencies react to other markets’ developments as well. In the past, cryptocurrencies tended to benefit from crashes of other markets. Gold and Japanese yen are no longer the only instruments categorized as the safe havens investments.