Are you thinking about investing in Bitcoin or some other cryptocurrency? If you are, it could be a lucrative pursuit.
Someone who invested just $100 in Bitcoin in 2009 would have over $48 million today.
However, there’s more to investing in cryptocurrency than many people realize. That’s why we’ve put together this guide on cryptocurrency trading for beginners—to give you the information you need to succeed.
So what do you need to know?
Keep reading to learn about ten tips for trading cryptocurrency that will make the whole process easier.
1. Be Clear on What Cryptocurrencies Are
Too many people invest in cryptocurrencies without understanding what they are. While jumping on trends and bandwagons can be a good thing, many people get caught off guard by bumps in the road.
Cryptocurrencies are digital currencies that people use to buy everything from goods and services to actual money. Think of them as virtual casino chips.
Whereas traditional currencies rely on institutions like banks and the Financial Reserve, cryptocurrencies are centralized. This takes the power away from massive organizations and gives it to the individual.
Having even a basic understanding of cryptos will help you make smarter investment strategies, as well as avoid falling into the traps that many casual traders get themselves into.
2. Know the Best Cryptocurrencies
Most people have heard of Bitcoin, but the reality is that it’s just one of many types of crypto. As of 2021, there were more than 5,500 types of cryptocurrencies across the world that people invest in.
Bitcoin is the most popular cryptocurrency because it’s also the most widely traded. That being said, some other popular currencies are becoming more and more popular. These include:
- Ethereum (ETX)
- Stellar (XLM)
- Tether (USDT)
- Cardano (ADA)
- Ripple (XRP)
- Uniswap (UNI)
Most beginners choose to invest in one of these cryptos, but you can purchase coins in any currency that piques your interest. Generally, however, the coins listed above are some of the safer ones to invest in.
3. Choose the Right Trading Platform
Investing in Bitcoin or another cryptocurrency is similar in some ways to trading stocks. You need to find a platform that will allow you to buy, manage, and sell the contents of your portfolio.
VirgoCX, Coinbase, and Gemini are some of the most popular trading platforms. All of these are safe, reliable, and give you easy access to your portfolio.
To get started with one of these platforms, all you have to do is create an account. You’ll fill out some personal information then connect your bank account. After that, choose an amount to invest and you’re all set.
The major trading platforms are all comparable with one another. That being said, it’s a good idea to read some reviews before committing to one. If you end up making a lot of money, you want to ensure that you’ll be able to access it.
4. Be Efficient With Your Investments
In the traditional stock market, sudden drops and spikes are normal. Most of the time, these occur over the course of days. With Bitcoin and other cryptos, these sudden changes can happen in a matter of hours or even minutes.
It’s essential that you go into crypto trading with a plan. If you’re up for the challenge of being a short-term investor (more on that later), make sure you have the time to respond to sudden market fluctuations.
It’s worth practicing a bit with smaller investments to get the hang of things before going full throttle. This will also allow you to observe another benefit of crypto training—the ability to perform microtransactions that you can’t on the stock market.
5. Diversify Your Portfolio
One common investment strategy that people use for traditional stocks is to diversify their portfolios. This is also a good strategy to use when investing in cryptocurrencies.
Instead of investing everything into one particular currency, spread it out across the board. This will ensure that you have a safety net in case one of the currencies plummets or goes under altogether (yes, that can happen).
Currencies like Bitcoin and Ethereum are “safer” than some of the other newer cryptos. There’s still some amount of risk that goes into investing in them, but nowhere near the amount that other currencies have.
Consider investing in some of these safer options, as well as some that are high-risk high-reward. That way, the bulk of your funds will stay safe, but you’ll also have the chance to make a lot if one of the riskier currencies takes off.
6. Times Change
Many people cite Bitcoin as an example as to why you should invest in coins when they’re down. While that’s a solid investment strategy for many regular stocks, it doesn’t apply to all cryptocurrencies.
The fact is that some coins never return to their former glory. Crashes are common, but some never recover after them.
One example of such a coin is Aurora. The currency reached an all-time high price point in 2014, only to crash down to an exponentially lower position soon after. Today, the coin is essentially worthless.
No one can predict the future, and perhaps one day, Aurora will shoot back up again. But don’t hold your breath, and understand that times and coins change.
7. Don’t Rely on Your Emotions
One rule that applies to both regular stocks and cryptocurrencies is to never rely on your emotions to make decisions. You need to be as objective as possible—even if something feels wrong at the moment.
For example, if you invest $500 in Bitcoin only for it to crash the next day, investing more might seem crazy. But as any investor can tell you, getting cold feet is not going to get you more money. Investing more is.
The same goes for when you sell early or make an unsuccessful trade. Allow yourself a moment of sadness, but get over it as fast as possible so that you can recoup your losses and net a profit.
Having a clear head and not being subjective is especially necessary for cryptocurrencies. Coins that grow over 2000% in a couple of weeks are not anomalies.
8. Understand the Risks of Going Short-Term
As mentioned, Bitcoin and other cryptos experience fluctuations that can drive experienced stockbrokers mad. If you’re not in it for the long haul, make sure you know what you’re getting yourself into.
Many day traders spread out small amounts across the board. With time and practice, you’ll find this to be the safest way to quickly make money. Putting all your money into a single risky stock is the same as gambling.
You’ll also want to take the time to ensure that you have the proper skills and understanding before you start investing in the short term. Otherwise, you’ll quickly bring your portfolio down to nothing.
9. Look for Other Ways to Mitigate Risk
Besides diversifying your portfolio, you’ll want to look for other ways that can help you mitigate the risk that goes along with cryptocurrencies.
Some people turn to bots that conduct transactions on their behalf. It saves them from having to waste time micromanaging everything, but the bots also act in an impartial and objective nature that helps many people maximize profits.
People that choose to handle everything themselves need to stay up to date with even the smallest of market fluctuations. Price alerts are one way to do this. Many apps and trading platforms can provide you with an update if something happens.
10. Keep up With Industry Trends
Aside from following market trends, you’ll want to make sure that you pay attention to industry trends in general.
Many people turn to the cryptocurrency community for help. There are tons of great blogs and websites that you can follow where people discuss the latest trends and events. Following these can help you stay informed.
Many apps and platforms also have news sections. If you invest even a small amount into the currency, you should stay up to date with the things that happen to it. Doing so can give you the foresight to act in a certain way, increasing your profits in the long run.
Use This Guide on Cryptocurrency Trading for Beginners
If you’re interested in investing in fields that have seen massive amounts of growth in recent years, cryptocurrency might be the way to go.
Before getting started, make sure that you understand how to go about investing. Use this guide on cryptocurrency trading for beginners to help you out.
Are you interested in learning more tips for trading cryptocurrency? If so, spend some time checking out the rest of our site.