As cryptocurrency becomes mainstream, more people feel comfortable taking the risk as an investment opportunity. In 2021, one in ten people in the US invested in cryptocurrency. Most of those cryptocurrency traders have entered the market in the last year.
But cryptocurrency trading can be tricky for newcomers who don’t understand the crypto market. So, doing your research before investing your money is essential. Read this crypto guide to learn how to start investing in cryptocurrency to avoid beginner mistakes.
What Is Cryptocurrency?
Cryptocurrency is a digital asset powered by blockchain technology. Each time crypto trades, it creates a record of the sale in the blockchain. Since they operate on the blockchain, crypto is decentralized and has little government oversight.
Cryptocurrencies like Bitcoin are traded through exchanges. A cryptocurrency’s value is based on its last transaction. The ease of transactions and lack of government involvement makes it simple to trade.
How to Start Trading for Beginners
The first step to trading crypto is to sign up with a crypto brokerage. You will be required to provide your personally-identifying information like your address and social security number. Next, you must connect your bank account to that brokerage to fund your purchases.
Once you have an account, you can select any currency offered and invest. You’ll want to decide on your trading strategy, so you know when to buy or sell.
You’ll also want to store your crypto safely. In some cases, you will keep your cryptocurrency in a crypto wallet on the exchange so you can easily buy and sell it. Or you could have a hardware wallet that physically stores your crypto to prevent theft.
Choose a Trading Method
The simplest way to trade cryptocurrency and earn returns is to follow the buy low and sell high method. Most cryptocurrency brokers will show you a specific crypto price, like the graph price, so you know the recent trends. But high and low prices are relative, so the goal is to spend the least and make the most.
When creating your strategy, you must decide if you will be trading short-term or long-term.
Short-term trading or day trading is where buy and sell on the same day. It can provide quick gains and reduce some risks. But it is very time-consuming and could result in large losses.
Long-term trading will require you to know the long-term market patterns. This strategy is easier to learn and can overcome small mistakes over time. But it limits your short-term earning potential and carries long-term risks.
You can also use more complicated strategies like technical or fundamental analysis to get an excellent idea of the trends in the market. These strategies use methods like moving averages and trendlines to illustrate the state of the market. As a result, you can better know when to buy and sell.
Regardless of the strategy you choose, you have to have a plan and stick to it. With such volatile prices, it is easy to make buying and selling decisions based on emotions, but this could hurt you in the long run.
Know the Risks
Cryptocurrency is highly volatile, meaning the market fluctuates a lot. This high volatility means it’s a great way to earn high returns, but it could also result in huge losses. You must plan accordingly and know when to cut your losses to avoid losing everything.
Save This Crypto Guide
With this crypto guide, you should understand what cryptocurrency is and how it works to know what you are investing in. You should also consider the different crypto trading strategies to determine which works best for you. These strategies will help you deal with the risk of trading cryptocurrency and help you meet your investment goals.
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