The word on the block is that crypto trading for beginners is the future. It has pretty much changed the landscape of many industries, from information technology to automotive.
The popularity may have even prompted you to try your luck at crypto trading. That’s a great decision, but you might wanna hit the brakes; there’s a lot to unpack here, and if you don’t get your ducks in a row, it will not end well for you. So, to help you make the most of crypto trading, we’ve written this comprehensive guide.
What Is Cryptocurrency Trading?
As the name suggests, crypto trading for beginners involves trading cryptocurrencies; the transaction usually takes place on a specific platform, like Coinbase, CoinDCX, Binance, and many more.
It’s important to mention that cryptocurrency trading differs from cryptocurrency investing, which brings us to the next part.
What Is the Difference Between Cryptocurrency Trading and Cryptocurrency Investing?
Due to the similarity in the nature of the transactions, it’s common to mix cryptocurrency trading with cryptocurrency investment. However, they are not the same.
For starters, the primary objective of trading is to gain profit within a specific time while you hold on to the assets for a long term in investing.
Secondly, short-term fluctuations don’t matter in investing, whereas analyzing these changes is a significant part of trading. However, one factor that binds trading and investing is knowledge. Therefore, you must fully grasp the concepts to leverage them to your advantage.
Crypto Trading For Beginners
There are four types of crypto trading strategies for beginners:
In scalping – or scalp trading – traders make frequent small profits from small price movements daily. Although the amount is less than what you’d expect, they add up to a significant profit when continuously earned.
According to professionals, the best time for scalp trading is when the markets are super busy because the chances of making big bucks are high.
Scalp trading consists of the following types:
- Crypto Range Trading
- Bid-Ask Spread
- Price Action
- Margin Trading
No doubt, this type of crypto trading for beginners is a profitable strategy. However, it isn’t without its cons, the biggest being the high trading fees.
2. Day Trading
The name day trading is self-explanatory. In this type, traders hold assets for just a day, entering and exiting the same position. While scalping doesn’t yield high risk, that’s not true with day trading.
Instead, day trading is a high-risk and high-reward activity; you can become crypto-rich quickly, but the rewards can be taken away just as quickly.
If you need help making a successful day trade, use tools like stock screening or trading simulator software.
The major disadvantage of day trading is that it’s not the ideal place to start if you’re a beginner; you can incur losses that’ll leave you practically empty-handed.
3. Swing Trading
Unlike scalping and day trading, the objective in swing trading isn’t to hold on to assets for a few hours but days or weeks. A transaction of this type can take anywhere between 1 to 30 days.
Experts recommend swing trading for those who don’t have time to commit to cryptocurrency trading fully. That said, you shouldn’t be completely cut off from the daily ups and downs of the market.
After all, you have to gain a profit.
One downside of swing trading is that you might miss out on profitable stocks. For instance, analyzing the market infrequently increases the chances of sleeping on profitable opportunities.
4. Position Trading
Position trading is another type where the trader holds onto the assets for days or weeks instead of hours. Position traders do not participate actively. Instead, they place up to only ten trades a year.
People who implement this strategy base their decisions on emerging trends. The central point is to spot an emerging trend, purchase it, and hold on to it until it peaks.
At that time, position traders will sell the trend for a profit.
Unfortunately, position trading is not recommended for those who have just entered the market, as it requires substantial capital. And if the trends reverse, it could yield disastrous results.
Things to Keep in Mind Before Trading Cryptocurrencies
There are numerous ways of trading cryptocurrencies. However, none will prove beneficial if you don’t play your cards right. For that reason, pay attention to the following tips:
Research the Company Thoroughly
This point applies to trading in general, not just crypto trading for beginners. If you’re buying stocks, gather as much information about the company as you can. And not just what they do or who’s the CEO; dig deeper and read the organization’s annual SEC filings.
Sign Up for a Cryptocurrency Exchange
If you don’t already own crypto, you’ll need to sign up on a crypto trading platform for beginners, like Coinbase and Gemini. To open an account on either of these, you’ll have to submit personal information, such as your name, address, date of birth, Social Security number, and more.
Select a Cryptocurrency
With over 7000 cryptocurrencies, choosing the one you want to invest in will be a massive task. However, narrowing it down based on its performance and longevity will simplify things. Being a beginner, stay away from cryptocurrencies you don’t know much about.
Ready. Set. Trade.
Trading cryptocurrencies is like opening Pandora’s box; the deeper you go, the more information you’ll find. However, as a beginner, this guide is enough to get you started.
So, if you feel like banging your head against a wall because you can’t understand cryptocurrency trading strategies, let this blog show you the way. And if you need additional help, you can always contact American Made llc. We’ll help clear up your confusion related to cryptocurrencies.
Frequently Asked Questions (FAQs)
There are over 500 platforms where you can open an account to trade cryptocurrencies. Each has its pros and cons, so research appropriately before choosing one.
No, Crypto Trading For Beginners Is Difficult. And That’s Precisely Why Experts Recommend Spending Significant Time Learning It Before You Start Trading.
The stock market is highly volatile, with the price going up and down in seconds. So, if you wish to trade in cryptocurrencies, make sure you have enough capital to bounce back with in case things don’t go as planned. That’s the only way in which you can trade in cryptocurrencies safely.