Although Bitcoin was invented in the first place as an alternative means of payment, its current volatility prevents it from being adopted at a mass scale. Constant price fluctuations undermine all the benefits that it provides, and the same thing can be said about all its derivatives such as Litecoin, Ethereum, Ripple and others. However, this aspect opens the doors to advantages of another sort and makes it possible to make good profits by simply purchasing and selling the right coins at the right time.
In this article, we are going to share some tips that can help you get started in such a risky business as cryptocurrency trading.
Cryptocurrency trading tools
First of all, let’s overview the landscape of basic tools that you will need on a daily basis when starting your journey as a cryptocurrency trader.
There are many services where you can buy cryptocurrencies for fiat. Below we have listed some of the most popular and reputable platforms.
- Coinbase. One of the most reputable platforms for purchasing crypto. Apart from Bitcoin, it also supports a range of popular cryptocurrencies such as Litecoin, Ethereum, EOS and a few more along with online wallets for their storage.
- Binance. One of the leading cryptocurrency exchange platforms. It has the biggest daily trading volumes, the widest geographical coverage and the biggest variety of digital assets supporting local fiat currencies.
- Local Bitcoins. This service works across the world and helps those who want to buy Bitcoin find those who sell it within their own region.
Select cryptocurrency wallet
Another important element for every trader is a wallet where cryptocurrencies are stored. Basically, cryptocurrency wallets can be divided into 2 key groups:
- Hot wallets. These are web wallets that allow accessing your cryptocurrencies online, browser-based and mobile wallets, software wallets that you install on your desktop. Typically, they have quite a user-friendly interface, but their security is not very high as it’s much easier for hackers to get a grip on your funds when they are stored online. Coinomi, Metamask, Jaxx, Exodus, and Coinbase are some examples of hot wallets’ providers.
- Cold wallets. These are the wallets that have no access to the internet, that’s why they are regarded as the most secure ones. However, they are not so user-friendly and require some technical expertise. Trezor and Ledger Nano S are the two most popular providers.
Select cryptocurrency trading platform
Cryptocurrency exchanges are aplenty. The variety of options may be truly disorienting for a newbie, but when you know what to look out for, the task may become easier. Here are some important aspects that you should consider when selecting a platform for exchanging cryptocurrencies.
- Geographical limitations. See if the platform supports your region.
- Security. Find out if a platform has ever been hacked and if the funds were refunded in case of a breach.
- Stable coins’ support. USDT and similar stable cryptocurrencies can be a good option to fix your profits.
- Transaction fees. See how much you have to give away on every transaction.
- Daily trading limits. If you want to trade big amounts of crypto, learn beforehand what are the limitations of the selected platform.
Top 7 things to keep in mind when trading crypto
- Buy low, sell high. Don’t follow the crowd. If you see that the price for a specific coin has significantly increased, most likely, it will drop soon, so it’s not the best moment for a purchase.
- Buy at rumors, sell at news. In the world of cryptocurrencies, the price of any asset tends to grow as rumors about some significant events begin to spread and it drops after the event actually occurs.
- Only invest as much as you can afford to lose. If you are a newbie in this business, your risks are even higher due to the lack of experience, so invest only as much as you are ready to lose.
- Beware of FOMO. This abbreviation stands for the “fear-of-missing-out”. The cryptocurrency market is highly manipulative, so don’t give way to emotions and don’t rush to buy along with others.
- Diversify your portfolio. Follow the golden rule and never put all the eggs into a single basket.
- Set up stop losses for short-term trading. Look out for a dedicated option on the selected exchange platform.
- Watch Bitcoin. Since Bitcoin domination has always been pretty high, most altcoins follow its pattern.
Many people have called cryptocurrencies a scam and predicted their failure. Yet here they stand with more and more people getting involved in this industry every year. Every new “bullrun” sends Bitcoin’s price higher and higher along with all other alternative coins. This is one of the key reasons why it’s worth considering cryptocurrencies as an alternative investment target.
However, note that we do NOT give any financial advice here and only pursue educational goals. Investing in cryptocurrencies is quite a risky business, so always make your own research and don’t follow other people’s opinion. This rule is relevant at all times.