How to master the art of cryptocurrency trading? Cryptocurrency trading can be one of the most exciting investment vehicles around, but it’s also one of the most complex. Thankfully, there are plenty of ways to learn this skill, from self-education to formal education to real-world mentorship. Here are five proven steps you can take to master the art of cryptocurrency trading.
5 Proven Steps to Master the Art of Cryptocurrency Trading
1) Learn the Basics
First and foremost, you’ll need to learn how cryptocurrency trading works. No, you don’t need to know how ECDSA public/private key pairs are generated, nor do you need to understand elliptic curve cryptography or hashing algorithms.
But at least familiarize yourself with what cryptocurrencies are, and why they have value. Then learn a bit about market dynamics (how people buy/sell them) and related concepts like the order book (where different orders are placed). Finally—and most importantly—learn how market volatility can work for or against you. If you really want to become a master trader (or hedge fund manager), understanding these three things will be critical.
Not enough? Ok, fine. Here are two more things you should understand before getting into cryptocurrency trading: transaction fees and risk/reward ratios. Transaction fees are based on whether you buy or sell cryptocurrencies, and they’re typically denominated in either Bitcoin or fiat currency (like USD).
As for risk/reward ratios, that concept is simple: If a cryptocurrency’s price rises from $1 million to $10 million per coin over a year, how much money did you make compared to how much money you put in? For example, if it increased 100%, your risk/reward ratio would be 50x. And if it increased 1000%, your ratio would be 100x.
2) Pick Your Exchange
If you’re trading cryptocurrency, it’s probably not on your local exchange. For example, Coinbase is available in 32 countries around the world—but only nine of those countries have access to their exchange. And in each country, there are usually only two or three exchanges.
So if you live in a country where one cryptocurrency is dominant (like Germany, where Ethereum is popular), you might have trouble finding a place that will take your money in exchange for another digital currency. If you’re trading cryptocurrency, it’s best to pick an established and reputable exchange where you can make fiat deposits (and withdrawals).
When you first sign up for a cryptocurrency exchange, you’ll need to provide some personal information—such as your name and address—as well as proof that you are who you say you are. That’s so the exchange can comply with Know Your Customer (KYC) laws which ensure that digital currency exchanges aren’t being used for money laundering or fraud.
After filling out all those forms, you may have some questions about how everything works, so look into reading some articles on trading cryptocurrency and understanding how it works before you start trading. And remember: don’t invest more than you can afford to lose!
So You Want To Be A Crypto Trader?
3) Start Small, Stay Focused
If you’re trying to learn about cryptocurrency trading for fun, or as a hobby, you might start out by buying a few dollars’ worth. (At press time, one bitcoin was going for $16,300 on Coinbase—if you had your heart set on buying $1 million worth at today’s rates, it would cost you more than $250.) Once you understand how cryptocurrency works and what types of cryptocurrencies exist (there are lots),
it can be easier to navigate whether it makes sense for your long-term investing strategy. If not? You could always resell them in a few years when their value appreciates further. Next, think about whether you’re comfortable with high levels of volatility. Some cryptocurrencies are much riskier than others, and even seasoned cryptocurrency traders can sometimes be caught off guard by rapid swings in value—which may only be magnified in smaller or newer markets.
It’s also important to consider how your trading style fits into your overall investment portfolio. You might choose a more volatile coin with plenty of upside potential if you see it as a way to diversify your holdings or hedge other investments you have—but always do your research and make sure you understand everything before moving forward.
If you’re looking for more potential upside, it might make sense to diversify your holdings across multiple cryptocurrencies. You can do that easily by buying one of a wide range of crypto baskets—market-weighted collections of coins offered by companies like Crypto20 (Crypto20), Caspian, and Iconomi (CVC). These baskets can help reduce risk if one or two assets in your portfolio are tanking while giving you even more exposure if they’re surging.
4) Find a Strategy That Works For You
Cryptocurrency trading is a tricky field and requires a strategy that works for you. No two traders are alike, so it’s important to find a trading method that fits your personality and personal goals. If your primary goal is short-term profit, you might want to consider day trading cryptocurrency instead. Most people who successfully trade cryptocurrency use technical analysis; it’s an active investment strategy that uses charts and market data to predict future movements in price.
One popular online resource for learning more about technical analysis is Investopedia’s Technical Analysis Course. Before you start making trades based on fundamentals such as supply and demand, make sure you have a solid grasp on technical indicators like moving averages, relative strength index (RSI), Bollinger bands, and Fibonacci retracements.
Before you decide on a strategy, it’s important to understand what cryptocurrency is and how it works. The most common type of cryptocurrency is bitcoin, but there are more than 1,000 other cryptocurrencies in circulation. Just like fiat currency—dollars, euros, and yen—cryptocurrencies use blockchain technology for trading purposes. Blockchain is essentially a public ledger that records every transaction made within its network.
The unique design makes it extremely difficult for any single entity to manipulate data or corrupt blockchain entries. The system also doesn’t require an intermediary party or central server to validate transactions and prevent double-spending within its network; instead, all users act as their own trustees by cryptographically verifying that they have sufficient funds before sending funds on their behalf during transactions.
5) Get an Accountability Partner
There’s a famous saying in business that goes, Nothing happens until someone sells something. Similarly, nothing about cryptocurrency trading is going to happen if you don’t do something. That’s why having a friend or family member who is willing to be your accountability partner can be invaluable when it comes to getting started with cryptocurrency trading.
Not only will they keep you motivated and accountable, but also provide additional input regarding what coins you should invest in as well as other ideas for turning a profit on cryptocurrency investments. All in all, finding an accountability partner is one of the best steps that anyone can take toward mastering all aspects of cryptocurrency trading.
If you don’t have anyone who can serve as your accountability partner, that’s OK! You can search for other cryptocurrency trading groups on Facebook and Twitter and get involved with their conversations. Getting to know people in your social circles who are into cryptocurrency is a great way to keep yourself accountable for taking action and reaching your goals.
If you’re really motivated, turn these new relationships into trading partnerships. With an accountability partner or a small group of partners supporting you along the way, there’s no reason why someone shouldn’t be able to master cryptocurrency trading within a few months’ time.
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5 Proven Steps to Master the Art of Cryptocurrency Trading