Cryptocurrency Trading Basics for Beginners

Cryptocurrency Trading Basics for Beginners

Tired of traditional finance? Enter crypto, where digital assets offer the lure of speculative profits, decentralization transforms finance, and blockchain technology provides the rails for a monetary revolution.

Bitcoin isn't the only game in town—there's a whole world of cryptocurrencies out there, with new ones popping up all the time. If you're thinking about trading, it might feel like a lot to take in. Just remember: while these digital currencies can be exciting and full of potential, trading them isn't a guaranteed fast track to making a fortune. It pays to get clued up first, and that's why we're here—to help break down the basics and get you started on the right foot.

Crypto Basics: Beginner Guide to Cryptocurrency

Cryptocurrency is a form of digital money that's protected by complex code, making it extremely hard to fake or spend more than once. These currencies typically operate on a decentralized system, the blockchain, which is a shared database spread across multiple computers.

One key aspect of cryptocurrencies is that they're not created by governments or banks, so they're designed to be independent from central control.

👉 For a more in-depth understanding, we encourage you to explore our comprehensive guides: "Cryptocurrency Explained" and "Blockchain Explained".

Before we jump into the nitty-gritty of trading cryptocurrencies, let's first get a handle on what "trading" really means. At its heart, trading is about buying and selling things. These could be physical products, services, or financial goodies like stocks and, yes, cryptocurrencies. There's a bit of a myth out there that trading is all about quick deals, but that's not the whole picture—it can be a short sprint or a long marathon depending on your approach.

Just like there are many ways to cook an egg, there are lots of trading styles — day trading, swing trading, and trend trading to name a few.

👉 We've unpacked these styles in other articles, which you can check out when you're ready to dive deeper: Scalping, Day Trading, Overview of Cryptocurrency Trading Styles, Battle-Tested Crypto Trading Strategies.

In a nutshell, trading cryptocurrencies is about trying to guess where the price will go, and making your move—either by trading contracts that bet on price changes or by actually buying and selling the cryptocurrencies themselves.

As for where you can trade, there are platforms galore. For those looking for the more traditional setups, there's Coinbase, Binance, Kraken, and Bybit. If you're leaning towards the road less traveled, you might check out decentralized spots like Uniswap, PancakeSwap, Curve, and dYdX.

The main goal? To make some money, hopefully, through smart trades over time.

This is a bit different from investing, which is more of a wait-and-see game. But don't worry, we'll get into all that as we go along.

Is Trading in Crypto Different from the Stock Market?

Stocks and cryptocurrencies are fundamentally different beasts. Owning a stock means you have a slice of a company, with rights to a piece of their profits and assets. Stocks are old school, embedded in the traditional financial system and linked to actual companies making real products or providing services.

Cryptocurrencies are the new kids on the block. Each one plays a specific role in its digital domain, acting as digital cash, a valuable reserve, or a token with a job to do.

👉  Curious about the nitty-gritty of coins versus tokens? Take a look at our explainer: Coins vs Tokens and The Many Faces of Digital Tokens.

When it comes to playing it safe, the stock market is your guy, with layers of regulation and formal exchanges like the NYSE or LSE keeping things on the level. Companies have to keep the books open and honest for their shareholders.

Cryptocurrencies, though, march to the beat of their own drum. They're more of a wild west, with different countries making up the rules as they go — or sometimes calling for an outright ban. This means crypto can give you more privacy and fewer rules to follow, but it's also more of a playground for risk-takers.

Cryptocurrency prices tend to be far more volatile than stocks, often driven by speculation rather than underlying business performance. Stocks are more steady-eddie. They move with the rhythm of business life — earnings reports, market trends, and the like. However, stocks still carry risks from factors like poor management or industry changes.

Now, you might ask, with the wild west of crypto's ups and downs, why bother? Well, there are some pretty sweet perks like the market that never sleeps, the thrill of potentially striking it rich, the buzz of being part of a community, and the excitement of riding the wave of cutting-edge tech.

Where to Learn How to Trade Cryptocurrency

Fortunately, there's an abundance of resources available for learning how trade cryptocurrency. A simple search for "crypto trading for beginners" on Google will yield many results. However, not every course is worth investing your time and money. If you're not keen on spending a lot or becoming an expert in algorithmic trading right away, you might want to start with more affordable courses offered by platforms like Udemy and LinkedIn Learning. These sites also host a variety of courses to help you pick up technical and fundamental analysis skills, along with recommendations for books that you can read in your own time to gain a more comprehensive understanding of the nuances of trading.

How to Invest in Crypto: Investing in Crypto for Beginners

Before we delve into the best ways to put money into crypto, it's important to understand how investing and trading are different.

The key distinctions between these two approaches include the methods of acquiring crypto, the duration for which assets are held, and the tactics used to make a profit.

Investors adopt a strategy designed for the long haul, where they buy cryptocurrencies with the intention of holding onto them for years, hoping their value will increase.

On the other hand, traders aim to capitalize on the market's short-term ups and downs by frequently buying and selling.

While investors focus on growing their wealth over an extended period through assets that may gain in value, traders are in the game for rapid earnings by navigating the market's inherent volatility, often within days or a few weeks.

The underlying strategies are also distinct: investors typically assess the long-term potential and real-world utility of projects, whereas traders concentrate on analyzing market trends and patterns through charts and studying the psychological dynamics of the market.

So, if you're ready to put your money into crypto instead of just trading it back and forth, here's your how-to guide to get going.

The initial step is understanding where to purchase and safely keep your crypto. It's essential to look into different wallets and pick one that suits your needs.

👉 For more in-depth information, we have two informative articles you can check out: "Cryptowallets Explained" and "Review of the Best Hardware Wallets."

The good news is that accessing cryptocurrency investments is easier than ever, with various exchanges at your disposal, similar to traditional investment platforms. Setting up an account can be done swiftly.

Nevertheless, like any investment, careful study of any cryptocurrency before committing funds is crucial. You'll want to focus more on fundamental analysis to evaluate the future prospects of a coin or token. Diversifying your investment across multiple cryptocurrencies might be a strategic choice.

To steer clear of falling for hype-driven pump-and-dump traps, it's advisable to be cautious with lesser-known cryptos that receive a lot of attention on social networks. When assessing the risk of a cryptocurrency investment, be wary of advice from social media "experts" who may not prioritize your financial well-being.

While using a well-known and trusted platform can reduce the danger of fraud and cybersecurity threats, the unregulated nature of the crypto industry means that risk can never be fully eradicated.

When choosing an exchange or investment platform like Coinbase, Bybit, or Kraken, consider security, fees, trading volume, minimum investment levels, and the variety of cryptocurrencies on offer.

👉 We've got plenty of reviews on these platforms on our blog, should you need more details. You may want to start from “How to Choose the Best Exchange for Trading Crypto

The amount you decide to invest in crypto will depend on several personal factors including your budget, risk appetite, and investment strategy, as well as the specific minimum investment thresholds and transaction fees of the exchanges.

Cryptocurrency is versatile — it's not just an asset you can hold for the future but also one you can use for purchases. How you handle your crypto will be influenced by your investment objectives and approach.

You might want to adopt a strategy like the Stash Way, which emphasizes regular, diversified investments over the long term. Alternatively, consider the Dollar-Cost Averaging method, which involves investing fixed amounts at regular intervals to mitigate the effects of market volatility and average out the cost of entering the market.

There's a lot to learn before diving in, so it's wise to start educating yourself now, especially before something as volatile as bitcoin potentially takes off even more.

How to Start Crypto Trading

Suppose you decide that the best course of action for you is trading rather than investing. Well, fair enough and below are the steps to get you started. We've already mentioned some points earlier, but it's worth going over the key essentials again for clarity.

  • Step 1: Choose a Crypto Exchange

The first thing you need to do is pick a good exchange. Some of the big names include Binance, Coinbase, Kraken, OKX, and KuCoin. It's a bit like choosing a bank to open an account with. When you set up your crypto trading account, you'll need to fill in some details, so have your info ready.

👉 By the way, you can link up to 15 different exchange accounts to Bitsgap and manage them all through one streamlined interface! Forget about the hassle of switching between various platforms. Just connect your exchange accounts to Bitsgap with an API key, and you're good to go. Plus, it's incredibly secure. Since Bitsgap launched in 2017, it's maintained a stellar security record with no hacks. We constantly update our security measures to ensure your funds and personal data remain protected. But that's not all – Bitsgap provides you with advanced trading tools that you won't find on regular exchanges, including smart trading options and automated bots that can adapt to any market situation. Want to dive in? You can start with a 7-day free trial, and there's even a demo that's free forever.
  • Step 2: Put Money in Your Account

Once your account is up and running, it's time to add some funds. You can use your debit card or a bank wire to transfer money into your new digital wallet.

  • Step 3: Pick Your Crypto

The majority often sticks to well-known ones like bitcoin and ether because they're a bit more stable. But don't overlook the smaller altcoins; some have shot up by over 1000% in a single month, making them tempting for trading too.

  • Step 4: Get Your Strategy Sorted

Having a solid trading strategy is key. You can use trading indicators along with good fundamental and technical analysis to try and rake in profits. If all this sounds Greek to you, consider taking a cryptocurrency trading course to get up to speed.

  • Step 5: Keep Your Crypto Safe

The final step is making sure your digital coins are stored securely. You've got options here: digital wallets come in software and hardware varieties. For top-notch security, hardware wallets, which are like ultra-secure USBs for your crypto, come highly recommended.

Bottom Line

Alright, we've gone through the basics of cryptocurrency trading and what you need to kick off your own trading journey. If you're itching to learn even more about trading crypto, the Bitsgap blog is packed with insights and tips. Want to keep your finger on the pulse of the latest crypto trends? Come hang out with us on YouTube, Discord, and Telegram — our communities are bustling with activity and info. Or if you're ready to dive right in, head on over to the Bitsgap platform and start your crypto trading adventure today!


Where Can I Learn Crypto Trading?

There’s a wealth of resources available to guide you from the basics to more advanced levels. You can explore a variety of sources for your cryptocurrency trading education. These include engaging in online classes and instructional content from sites such as Coursera and Udemy, delving into specialized books, joining active online communities on platforms like Reddit and Discord, keeping up with the latest insights on blogs and news outlets like CoinTelegraph, watching informative YouTube channels, and practicing on trading platforms that offer educational resources.

Is There a Reliable Cryptocurrency Trading Guide?

Certainly, a wealth of trustworthy guides and educational materials for cryptocurrency trading is available. Given the dynamic and ever-evolving cryptocurrency landscape, it's crucial to consult guides that are both current and produced by reputable sources. Renowned websites such as CoinDesk, CoinTelegraph, and The Block are not just sources of news but also offer a trove of informative articles and tutorials covering different facets of crypto trading.

How to Learn Crypto Trading?

Grasping crypto trading requires blending theoretical knowledge with hands-on practice. Start by studying blockchain technology and familiarizing yourself with major cryptocurrencies. Follow market news and price charts to understand factors impacting volatility. Leverage online courses, books, forums and social media to further your knowledge. Hone your technical analysis skills using trading platforms and simulators to practice without financial risk. Prioritize risk management techniques like stop-losses and diversification in this turbulent market. Stay up-to-date on trends by following crypto news outlets and experts. Begin trading small amounts when ready, review your trades to learn, and scale up slowly as you gain confidence through experience. Remember that crypto is highly volatile, so only invest what you can afford to lose and let logic, not emotion, drive your decisions. Continual learning and adaptation is key to becoming a savvy crypto trader.

Is Trading in Crypto Difficult?

Crypto trading poses challenges for many, particularly those new to financial markets or unfamiliar with the volatility of cryptocurrencies. Factors like round-the-clock trading, the need for technical know-how, ever-present security risks, and a complex regulatory landscape can make crypto intimidating. Maintaining emotional discipline is critical with such a volatile asset class. The array of advanced trading tools and emphasis on risk management also have steep learning curves. Finally, the complexity of the underlying blockchain technology itself can deter some individuals.

Is Trading in Crypto Different from the Stock Market?

The crypto market differs significantly from the stock market. Stocks trade during fixed hours on weekdays, while crypto trades 24/7. Stocks see volatility but less extreme price swings than highly volatile cryptocurrencies. The mature, regulated stock market offers stability versus the emerging, loosely regulated crypto market. Stocks are valued on company performance, cryptocurrencies on factors like tech developments and adoption. Stocks represent company ownership, cryptos are digital assets on a blockchain. The stock market offers diverse financial instruments, crypto focuses on digital currencies but is expanding into new products. Opening a brokerage account can require minimum deposits to trade stocks, but crypto trading can start small. Stocks rely on regulated custodians, cryptos use digital wallets dependent on users safeguarding keys. Knowing these key differences allows more informed decisions when allocating capital between these very distinct markets.

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