How to Start Trading In Cryptocurrencies

Cryptocurrencies have taken the world with a storm, and perhaps you’ve always desired a piece of the action. However, you’re probably wondering, how to start trading cryptocurrencies? You’re not alone. The good news is that you don’t need to be a professional trader to invest in crypto. However, you do need to know how the market works as well as the do’s and don’ts.  Below, we give you a step-by-step guide on how to go about it.

Step 1: Understand Cryptocurrencies

Cryptocurrency is a type of money built using blockchain technology and is decentralized, meaning no single institution like a bank or government controls it. Blockchain is adigital ledger that records every transaction, with each transaction confirmed by multiple decentralised computers spread across the world.

There are thousands of cryptocurrencies, primarily divided into Bitcoin (the pioneer crypto and the market bellwether), altcoins like Ethereum, Solana, XRP, BNB, Cardano etc, Stablecoins like USDT (Tether) and USDC, and Meme coins like Dogecoin, Shiba Inu, DogWifHat etc.

Step 2: Choose the Right Crypto Exchange

Like fiat currencies and commodities, cryptocurrencies are exchanged in structured platforms known as exchanges. These platforms can either be centralised exchanges (CEXs) or Decentralised Exchanges (DEXs). Centralised exchanges are more appropriate for beginners because they are intuitive. They work more or less like a stockbroker, enabling users to buy, sell, and trade crypto.

Some popular beginner-friendly exchanges include: Binance, OKX, Coinbase, Kraken, Bitstamp etc. You can also buy and sell cryptocurrencies through peer-to-peer platforms like Paxful or Binance P2P.

When picking an exchange, consider:

• Ease of use – Is the interface user-friendly?
• Security –  Security is a hot potato in the crypto industry. Several hacking incidents have resulted in billions of dollars’ worth of losses and even led to the collapse of some exchanges. A good exchange should have multiple layers of security, including 2-factor authentication, cold storage at the minimum.
• Number of supported coins – Ensure the exchange lists the crypto you want to trade.
• Fees – Trading fees, withdrawal fees, deposit fees often add up to substantial sums, especially if you are a repeat trader. Therefore, ensure that the exchange you choose offers competitive fees on your transactions.
• KYC:  Typically exchanges require their users to provide identification details by way of Know Your Customer (KYC) verification. The process will likely require you to upload an ID, take a selfie, and verify your phone or email.

Step 3: Fund Your Trading Account

With your account all set up and KYC verification done, you will need to fund it. Most exchanges offer several funding options:

• Bank transfer
• Credit/debit card
• Mobile money (in some regions)

Remember that the fees will be different depending on how you pay. Bank transfers are normally cheaper but take longer, whereas card payments are faster but typically cost more.

Step 4: Learn the Types of Crypto Trading

Buying low and selling high isn’t the only thing you can do when trading crypto. There are multiple ways to trade, and each one has its own risks and strategies. We look at the different trading styles below:

1. Spot Trading

Spot trading involves buying cryptocurrencies at the current market price and holding it in your wallet for a period as you wait for it to appreciate. Once the price gets to a level you are comfortable with, you can sell your coins and profit from the price difference.

2. Margin Trading

Margin trading is where the exchange lends you funds to enable you to trade larger amounts than you actually own, which can translate to high rewards. However, it is a high-risk type of trade where you can easily lose large amounts of money in a matter of minutes. It is advisable that beginners keep off margin trading due to the level of risk exposure involved.  

3. Futures Trading

When you trade futures, you buy and sell standardized contracts that obligate you to buy or sell an asset at set price on a set date in the future. You can go “long” if you think it’ll rise or “short” if you think it’ll fall.

4. Day Trading / Swing Trading

As the name suggests, this is a type of trade where positions are opened and closed within a single day. Here, you buy and sell cryptocurrencies within short timeframes, and profit from price swings.

Step 5: Know How Charts Work

Obtaining technical analysis skills is an essential part of being a successful trader. You do not have to know how to trade cryptocurrencies using all the tools out there, but it’s good to know the basics of how to interpret crypto charts. Most platforms have candlestick charts that demonstrate how prices have changed over time.

To get started, here some basic terms you should understand:

• Support and resistance: A support level is the mark at which the coin’s price tends to bounce off during a downturn. Conversely, a resistance level is the upper barrier beyond which the price struggles to break. A breach of either of these price levels often signal the beginning a stronger momentum.

• Volume:  The volume is the amount of an asset traded during a particular time frame. A rise in the volume during an uptrend or a downtrend signifies a stronger momentum. Conversely, we know the momentum is weakening when the trading volume declines. momentum.

• Relative Strength Index (RSI):  This is a momentum indicator that tells you if a coin is overbought or oversold. It operates on a scale of 0 to 100, with levels above 70 indicating overbought conditions and below 30 indicating oversold conditions. The 50-point mark serves as a pivot with levels above 50 indicating control by the buyers and below it indicating control by the sellers. 

• Moving Average Convergence Divergence (MACD):  This indicator measures the moving average price of two different time frames -one long and one short. When the MACD line goes above the signal line, we know that the bulls are in control. Conversely, if the MACD line goes below the signal line, it shows the momentum is shifting towards the downside. 

You can learn more on technical analysis using online educational resources including YouTube tutorials

Step 6: Manage Your Risk

Cryptocurrencies are not for the fainthearted. They have a reputation for being highly volatile, and their prices can fluctuate rapidly, sometimes in minutes. That’s why risk management is so important.

Here are some golden rules.

• Invest only what you can afford to lose. 

• Use stop-loss orders to reduce potential losses.

• Diversify your portfolio by investing in multiple coins, thereby spreading the risk. 

• Take profits regularly in small bits instead of waiting for the perfect high which might never come or even expose you to greater risk

• Avoid chasing pumps: Be ambitious, not greedy. If a coin has already gained decent double-digit figures, it’s time to cash out the profit. Don’t wait for it to hit triple digit percentage gains because not only does it rarely happens but it also raises your risk of losing it all because cryptos are notoriously volatile.

Step 7: Keep Your Crypto Safely

After you’ve purchased your cryptocurrency, you need to determine where to keep it.

• Exchange Wallet: This is the most convenient way, but it is also risky due to a history of hacking or shutdowns of some exchanges.
• Software wallets: Software wallets like Trust Wallet and MetaMask, offer greater control and are suitable for daily use.
• Hardware wallets: Hardware wallets like Ledger, Trezor offer long-term security but are typically more expensive.  Also, you will lose all your crypto if you lose your pass key. 
  If you want to trade frequently, maintaining some cash on an exchange is OK. However, if you plan to invest for the long run, move your cryptocurrency to a private wallet where you have authority over the keys.

Step 8: Stay informed

Things move fast in the cryptocurrency market. Watch out for new in that front including decisions by regulators like the Securities and Exchange Commission (SEC), new institutional adoptions, exchange bankruptcies, hacks etc, which can cause prices to plummet or rise overnight.

Step 9: Have a Trade Journal

At some point, every trader experiences financial loss. Professionals included. However, it is the action you take next that makes all the difference. Persevere through setbacks, and instead take it as part of a learning curve. That’s why it’s important to have a personal trading journal to record and keep track your trades, your emotions, your outcomes. Over time, your decision-making will get sharper.

In Conclusion

You should not look at investment in cryptocurrency as a get-rich-quick scheme. Be patient, disciplined, and always be willing to learn, because it will ultimately pay off in this high-risk, high-reward market. With an open mind and a healthy dose of caution, learning how to start trading in cryptocurrencies can be a rewarding and fulfilling experience.

So, take your time and start with baby steps as you learn from the numerous online resources and study the industry. Marshall the resources while appreciating the risks involved. Once you are adequately equipped and comfortable, start trading