5 steps to start trading cryptocurrency like a pro
If you are reading this, you have probably heard of cryptocurrencies or more specific, the top trending cryptocurrency called Bitcoin. Another concept that has probably led you to this article is trading, whether it is stocks, the foreign exchange market or cryptocurrencies. However, this trading ultimate guide mainly focuses on cryptocurrencies and how to get started trading them.
Instead of going into all the details and lengthy discussions of the blockchain, bubbles, regulations, temporary hype etc, the fact remains that people are making money trading cryptocurrencies and you could be amongst them. It can be extremely difficult to find an accurate step by step guide on how to start trading cryptocurrencies but let’s just say you came to the right place.
Here is a step-by-step guide for you to follow so that you can enter into the cryptocurrency markets and start earning today.
Step 1 – Choose a cryptocurrency exchange
Selecting a cryptocurrency exchange in 2019 to purchase your first cryptocurrencies can be a daunting and overwhelming process. After all, there are over 200 cryptocurrency exchanges in today’s market, with 24-hour trade volume in the billions. So, how do you make your choice?Here are a few attributes to look at while choosing your exchange of choice:
- Geographical location and their constraints;
- Transaction fees;
- Security, anonymity, and customer support;
- Ease of use and user interface;
- Volume and liquidity of the exchange.
Note that the above list does not cover all needed attributes to consider while choosing an exchange but are a good solid basis to start off with. We will now take a closer look at each attribute named above:Geographical location and constraints – Two key things to consider while looking at the Constraints of Geographical locations of a crypto exchange is: Firstly, is the exchange limited to a specific geographical location or is it open to most countries, including yours. Secondly, is the exchange legal in your country. It would not help you anyhow if you register on an exchange which you cannot access or trade legally.
Depositing cryptocurrencies onto an exchange located in a highly politicized or anti-crypto country probably isn’t the smartest idea and could potentially cause more headache and strife in the future than its worth.
Transaction fees – Another factor to consider is the fee’s charged by the exchange. If you plan on placing multiple trades on the exchange, this is an important factor to look out for.
Security, anonymity, and customer support – It is important to investigate the exchange’s history to find out whether the exchange has been subject to any past malicious attacks or phishing scams and also whether they engage with their community on a regular basis. While this may seem like common sense, avoid signing up for exchanges which have a known history of financial and security breaches, and who have disabled withdrawals for long periods of time.
It is advisable to look for exchanges with Two Factor Authentication (2FA) and Know-Your-Customer-Verification (KYC)
Volume and liquidity of the exchange – An exchange with a large volume of trading is usually a good indicator of a crypto exchange’s liquidity and overall ability to fill a user’s order at any point in time. Based on the type of trading you’re looking to do, liquidity is an extremely important factor.
Ease of use and User Interface – If an exchange has a good User Interface, it is a good indication that they care about their user base and ease of buying and selling.
A few exchanges to choose from are:
- Binance – How to start trading cryptocurrencies on Binance
- Coinbase – How to start trading cryptocurrencies on Coinbase
Step 2 – Choose a cryptocurrency wallet
After choosing your exchange, you need to create a crypto wallet to store and control your funds with. A cryptocurrency wallet is a place where you store encrypted passwords that represent your coins, it is the equivalent to storing money in a bank account.
There are several types of cryptocurrency wallets that provide different ways to store and access your digital currencies. To understand more about cryptocurrency wallets and how to decide which wallet is best for you, please read our guide on cryptocurrency wallets.
For beginners, we would recommend an online wallet for the ease of use and accessibility that they offer. An online wallet can be set up in a matter of minutes and function somewhat similar to online or mobile banking.
A few cryptocurrency wallets to choose from are:
It’s important to note that most exchanges have built-in wallets but it is best practice to store digital funds off exchanges as exchanges have fallen victim to hacks in the past. However, insurance companies are beginning to offer cryptocurrency insurance against theft.
Step 3 – Learn the skills of trading the crypto markets
You may or may not have some experience in trading the Stock or Forex (FX) markets, but the Cryptocurrency market is a whole different ‘game’. It is advised to study the cryptocurrency charts first before starting to trade them. It is advised not to assume that your skills attained by trading other markets will be sufficient and that your trading strategies will work the same in the crypto market. Traders often assume that skills and trading strategy’s developed in alternative financial markets can be applied to others, you need to take time and research each market respectively and it would help to have an experienced mentor! Book a FREE consultation with a mentor today.
If you are a new trader in general, it is advised that you either start with a demo trading account and train yourself, or get a expierence cryptocurrency trader as a mentor, such as the 1-1 bespoke mentorship service offered by our trading team which will make you familiar with the differences between the crypto and other markets. Whilst also getting you involved with the cryptocurrency markets to the point where you understand its movements and can predict it to start trading more effectively.
It is important to find a strategy for each trade you will make and apply these strategies in the cryptocurrency market. We have spent years developing ours, it may seem daunting at first but once you pick up the basics, picking up the rest of the knowledge can become a walk in the part.
Step 4 – Find a cryptocurrency to trade
After setting up your wallet, finding your exchange, and getting familiar with trading and the cryptocurrency markets you can now log onto your exchange and start trading. The fourth step includes choosing the cryptocurrency to trade. Before putting your money into any cryptocurrency, it is a good idea to first study the asset. Read our guide on how to evaluate different cryptocurrencies.
One of the best tools for this research is our cryptocurrency market cap page where you can find information on every coin and token available around the world. The data found there includes market capitalization, news, supply and trade volume. Listing them in chronological order of top cryptocurrency and can be used to know exactly what each coin represents and compare different cryptocurrencies with each other.
Tracking the latest cryptocurrency news daily is essential if you want to be successful in trading cryptocurrencies. Trading the news is very important when it comes to cryptocurrency trading, it’s important to use verified sources such as CoinDesk and CoinTelegraph. Learn how to start trading cryptocurrency news in our in-depth article.
Be aware of false market hype and cryptocurrency scams, such as false ICOs. It is advised to study the token or coin thoroughly to make sure that you are buying a legitimate asset which will not disappear overnight. If you are still hesitant in which coin to buy you can always start on the top cryptocurrencies listed by market cap as they are the most popular at the moment with most people trusting them.
Step 5 – Start trading
After you have completed all the above steps, you are ready to start trading. Here are a few steps to remember before setting off into the cryptocurrency trading universe:
You don’t have to buy a whole coin. cryptocurrencies allow traders to buy fractions of coins. This is a feature not a lot of new traders know, thus demotivating them not to start trading due to the high price of coins such as Bitcoin (BTC). You simply do not need to buy 1 whole Bitcoin (BTC) and can simply buy a fraction of a Bitcoin (BTC). This is the same across most of the tokens created in the cryptocurrency market.
Most of the top coins are expensive, so consider buying fractions of these coins to start if you don’t want to start trading with enormous amounts of money. Rather consider and predict which cryptocurrency is most likely to increase in and retain value and focus less on its current price.
If you would like to own for example 10 Litecoin (LTC), you can periodically buy additional fractions and grow your portfolio whilst still keeping your balance. This is also a good strategy to optimize the average price, known as dollar-cost averaging.
Keep in mind that the cryptocurrency market is volatile at this stage of its life! There is always the chance that the market will move rapidly in any single moment. Thus, include this into your trading strategies and adapt as the market changes.
Don’t trade with money that you cannot afford to lose! If you have been in the trading scene for a while you will hear this phrase a lot. This term must not be misinterpreted. This phrase does not mean that you must be willing to lose this money, it only means that if the worst-case scenario plays out, you will not feel the impact of losing this money and still be able to live your life as before losing this money.
If you have the mentality that you can lose this money, you have already made your first mistake. The aim is not to be comfortable with losing money, but if this happens, you still have a basis to work from and not have to start from scratch again.
Cryptocurrency trading is still in its infant stage, if you can stick out the learning curve, you will be glad you started. Always stay calm and do not attach emotions to trading, have a strategy and follow it. Stay open-minded and do not let your emotions stop you from making trades.
The hardest part of cryptocurrency trading is that all-important first step to getting started. At starttrading.com we make this step that little bit easier, you have to start trading alone. We provide the right guidance and support through 1-1 bespoke accredited mentoring to take your trading to the right level. Simply book a FREE consultation with a mentor so that we can give you the help you need today!