Home blockchain technology Cryptocurrency Trading For Beginners 2020: Step By Step Guide

Cryptocurrency Trading For Beginners 2020: Step By Step Guide

Short Insights

  • More and more people have shown interest in benefiting themselves with profits through cryptocurrency trading
  • Cryptocurrency traders are involved in the buying and selling of coins such as bitcoin, Ethereum, etc., either through CFDs or an exchange. 
  • With the tempting market prices and possible profits, one must not mindlessly make investments. Choosing the right wallet, trading platform all play a part in ensuring one’s security.

The growth of cryptocurrency value is ever-increasing. More and more people have shown interest in benefiting themselves with profits through cryptocurrency trading. The innovation involved in the technology behind cryptocurrency, blockchain is sure to be credited. Crypto market trading is experiencing an explosion in its growth. Cryptocurrency beginners can seek out easy ways to start trading. Right knowledge gains and the understanding of trading basics, although it remains a primary tool.

What is Cryptocurrency Trading?

Trading cryptocurrencies is the same as trading fiat currencies. Cryptocurrency traders are involved in the buying and selling of coins such as bitcoin, Ethereum, etc. One can opt to trade via crypto exchanges or CFD. The only difference being that crypto exchanges lets one own the coins.

Trading cryptocurrencies via a CFD account

CFDs (contract for differences) trading enables the investment of cryptocurrency price variations without letting the owning of underlying coins. One can get full access to the underlying market by depositing a small amount, margin. Profit or loss calculation depends on the full size of one’s position. To provide a simple understanding of what CFDs are, they are utilized by investors for making price bets. Price bets as to whether the underlying asset’ price will rise or fall.

Trading cryptocurrencies via an exchange

To trade cryptocurrencies via an exchange one needs to set up an exchange account. And one can purchase the coins themselves. Through the account, opening up a position by putting the asset’s full value is required. Following this, one can store the tokens of cryptocurrency in their wallets, until one decides to sell. Buying and selling cryptocurrencies through exchanges involves learning the technology involved and also to make sense of the data. Many exchanges pose limitations on how much amount one can deposit. Also, maintaining an account has extra costs.

What factors must be considered while choosing a trading platform?

  1. Reliability: The reliability of execution and deposit must be considered primarily. Understanding if the platform is reliable enough to return profits must be considered. 

2. Fees and other charges: High fees are a major hurdle to making high profits. One must choose a platform where charges can be justified or are minimal.

3. User-friendliness: The ease of using the platform and a user-friendly interface are key criteria that help choose the best trading platform.

Two types of trading platforms exist namely prop platforms and commercial platforms. Commercial platforms are mainly for the day traders and retail investors. Ease-of-use and beneficial features including news feeds and charts are its characteristics. Whereas, Prop platforms, are developed by brokerages and have a customized design. This is to match their requirements and trading style specifically.

Few Popular Trading Platforms are as below:

  1. Interactive Brokers: This trading platform offers low fees and gives access to markets worldwide. It is one of the most chosen trading platforms.

2. TradeStationTradeStation is another popular trading platform amongst large traders. Also amongst those who prefer the execution of trading strategies utilizing the automated scripts. This platform is chosen mainly for its execution speed and its technicality. 

3. TDAmeritradeTDAmeritrade is a popular broker amongst both traders and investors. Also specifically to those who follow its acquisition of ThinkorSwim and Trade Architect platforms’ development.

However, the above-cited platforms account for less than a percentage of the total available platforms. There are plenty, one must choose the platform necessitating their benefits and requirements.

Things to know before taking up a trading position

1. Taking profit: Before starting to buy and sell crypto, one must be well-aware of the risk management practices. And for this, one must learn to use target profit orders. Target profit refers to the point at which one gets out of the winning trade before it varies. Also, one must know beforehand the maximum price at which one is ready to buy the cryptocurrency.

2. Position size and risk amount: One must know about their position size. It refers to the number of altcoin units one is willing to trade. Risk amount refers to the amount of money one can stand to lose in case of fluctuations occur.

3. Securing funds: If one chooses the trading strategy and trading platform that involves the owning of crypto, it is their responsibility to keep the traded cryptos safe.

Final Words

Lastly, to throw light on some of the possible vulnerabilities are hacks and unregulated exchanges. One must gain enough knowledge about the steps that need to be taken when hacks do occur. With the tempting market prices and possible profits, one must not mindlessly make investments. Choosing the right wallet, trading platform all play a part in ensuring one’s security.

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Umme Haani
Umme Haani is a writer for Thecoinrepublic. she contributes a researched piece on cryptocurrencies and updates. Umme is an aspiring engineer who immensely enjoys writing and technical writing brings the best of both worlds under one roof for her.

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