Why do humans do anything? It can be argued that the biggest force driving people in the world today is to make money. Whether it is a hacker looking for a new gap, an employee striving for a promotion, or a small business seeking to make a profit, money makes the world go round.
Isn’t trading cryptocurrency a risky affair? Indeed, it is. But because it is far less stable than other forms of currency, it offers the potential for far greater gains.
Traders try to increase their cryptocurrency stock or exchange it for USD to make a profit. You can only have one or the other, not both, as the market can move either up or down, determining the best times to buy or sell crypto. Market trends are referred to as bull (rising) or bear (declining) markets. You should be familiar with this if you have traded on the stock market. We will discuss this concept first as it is important to grasp basic market trends if you want to trade crypto.
As well as buying or selling, e.g., Ether OR Bitcoin, you can also trade one form of cryptocurrency for another, e.g., Ether FOR Bitcoin. Because cryptocurrency prices change rapidly (are not stable in the way the USD is), it is possible to lose all your gains in crypto trading.
We will also provide a guide for beginners on how to buy and sell, i.e., trade, cryptocurrencies, and briefly touch on strategies.
Bull Markets And Bear Markets
The terms bull and bear may be confusing to the person new to trading, and even someone who has been buying and selling currency for some time but has used these words without knowing their background. Here is a delightful explanation that should help you tell the two apart.
Demand is greater than supply in a bull market and prices increase, with traders feeling confident and purchasing more crypto. Trader confidence fuels more investment in the specific crypto. Although bumps and minor fluctuations occur along the way, the overall trend is a rise in the value of the crypto. But at some point, a decline may occur and is often the result of negative news reports that affect market confidence.
The end of a bull market is followed by a bear market. Supply exceeds demand, prices decrease, and traders begin to sell their crypto at a loss. Inexperienced traders are advised not to trade during a bear market.
Eventually, the market reaches its bottom point and starts to increase again. External factors will continue to play a role in how it rebounds. The advantage of purchasing during a bear market is that crypto is available at a lower price. When the market rises again, this crypto will be more valuable.
The terms bull and bear markets are typically only used when the upward or downward movements reach 20%, due to the instabilities that take place, and in line with more long-term trends.
A Crypto Trading Guide For Beginners
With some understanding of markets, we can look at trading for novices. We will focus on the steps involved in trading cryptocurrency to help the beginner who wants to start trading e.g., Bitcoin. Follow these steps and you will soon be trading. Along the way, you will learn numerous strategies, such as “to hodl”.
Sign Up With A Crypto Exchange
You will have to select a crypto exchange if this is the first time you start buying crypto – this site looks at the best exchanges in 2022. The crypto exchange will need certain personal information from you before they can start doing business with you. This is according to legal requirements for the ‘Know Your Customer” criteria for crypto exchanges.
Deposit Into Your Crypto Account
Connect your bank account to the cryptocurrency exchange. You will usually be able to make payments with wire transfers. Some exchanges accept payment via debit card.
Select Your Cryptocurrency
The most popular cryptocurrencies are Ether and Bitcoin. This is because these two cryptos have a good history and tend to fluctuate less than some altcoins. OKX provides a Crypto Converter Calculator so that you can make comparisons.
A simple trade could involve cashing out to USD or another fiat currency. The more complicated your trade, the greater the risk.
There are buyers and sellers, meaning that one must lose, and one must win. Once a price has been agreed upon, the trade occurs through the crypto exchange. Buyers seek to purchase for lower prices and sellers try to sell at higher prices. When buy orders exceed sell orders, the crypto price will increase and vice versa.
Some traders work with bots using software that offers automatic trading. Bots follow a process to give you the best returns according to the investment aims you have stated.
Store Your Crypto
Crypto is stored in a wallet, for example, a Bitcoin wallet if you plan on holding Bitcoin crypto for a length of time, versus faster-paced in and out trade. You can select between a hardware wallet and a software wallet. A software wallet is stored online, while a hardware wallet is housed on a physical device that does not operate online. This makes the latter safer.
Going Long and Going Short
Going long or short are strategies used by traders. The more time you spend trading and the more research you do for yourself, the more strategies you will learn. When you purchase an asset and let the price increase before selling it, you make a profit. This is to go long.
When you go short, you start by selling the asset at a certain price. When its price has dropped below what you sold it for, you buy it back and benefit from the price decrease.
Experience as a trader is acquired over time. Bear in mind that the crypto market is notoriously volatile. Only trade as much as you can afford to lose.