CRYPTO-TRADING: BEGINNERS GUIDE

The change in the world’s economy has created opportunities for new businesses like crypto-trading – trading with cryptocurrencies. People are leveraging on this opportunity to maintain financial stability, and diversify the economy.

Before now, it was quite difficult to trade cryptocurrency because finding a merchant who accepts cryptocurrency was almost impossible. However, the case is different these days as there is a drift in world economy.

Here in this article, you will get the necessary information you need on crypto-trading.

WHAT IS CRYPTO-TRADING

Crypto-trading is the transaction between cryptocurrencies. Cryptocurrency is a virtual currency designed to work as a means of exchange. In other words, It operates on a digital medium, which takes the form of tokens or coins.

Cryptocurrency is transferrable online without a go-between, and uses cryptography to verify and secure transactions. Also, cryptocurrency is stored in a digital wallet, online on your computer or any other automated hardware.

To avoid transaction fee, people use cryptocurrency for quick payments. It can be used to pay for hotels, jewelry, apps, flights, college degree, computer parts, etc.

Trading with a cryptocurrency requires utmost caution to avoid being a prey for scammers.

TYPES OF CRYPTOCURRENCY IN CRYPTO-TRADING

There are different types of cryptocurrency but here, we will discuss eight cryptocurrencies. They include:

  • Bitcoin (BTC)
  • Litecoin (LTC)
  • Ethereum (ETH)
  • Riple
  • Bitcoin cash
  • Ethereum classic
  • Zcash (ZEC)
  • Stellar Lumen (XLM)

Bitcoin

This is one of the most popularly known cryptocurrency used for crypto-trading because of its originality. Created in 2009 as an open source software.

Bitcoin uses blockchain technology, which allows users make transparent transactions. Every user can view these transactions; however, they are secured through the blockchain algorithm.

Bitcoin has no centralized authority figure. Users control all transactions, which enables anonymous transactions without any bank interference.

Litecoin

This cryptocurrency is seen as an alternative to Bitcoin. Litecoin is an open source payment network just like other cryptocurrencies that is completely decentralized – no central authorities.

However, one obvious difference between Bitcoin and Litecoin is that the coin limit for Bitcoin is 21 million and Litecoin is 84 million.

Ethereum (ETH)

Ethereum is an open source cryptocurrency based on blockchain technology. Created in 2015. One focus of Ethereum is to run code of any decentralized application as well as tracking ownership of digital currency transaction.

Ripple

Ripple is a global settlement network released in 2012 that is designed to low-cost method of transaction. It acts as both a cryptocurrency and a digital payment network.

Unlike other currencies, ripple allows exchange of any type of currency, from USD and Bitcoin to gold and EUR.

Bitcoin cash

This is just an extension of Bitcoin. The sole aim of this digital currency is to increase certain features of Bitcoin. Its target is to increase the size of blocks and allow the processing more transactions faster.

Ethereum Classic

This is also another version of Ethereum blockchain, which runs smart contracts on a similar decentralized platform. Its value token known as classic ether is used to pay users for services or products.

Zcash (ZEC)

This is another digital currency that built on the original Bitcoin code base. Emphasis on privacy is one core feature and differentiation of Zcash. Users can send and receive Zcash without compromising the identity of the sender, receiver or the amount transacted.

Stellar Lumen (XLM)

This is an open source network founded by Jed McCaleb, with the native currency created in 2014.

Stellar Lumen is an intermediary currency that enables currency exchange. It allows users to send any currency owned by them to someone else in a different currency.

Note: Users of cryptocurrencies other than Bitcoin can exchange coins for BTCs. Also, there are Gift Card websites such as Gift Off. This website accepts about 20 different cryptocurrencies. Through gift cards, you can basically buy anything with cryptocurrency.

Crypto-trading

FEATURES OF CRYPTOCURRENCY

  • Unlike U.S Bank deposits, cryptocurrencies are not backed or insured by government. A cryptocurrency stored online does not have the same protections as money in a bank account. If you keep any cryptocurrency in a digital wallet owned by a company, the company will likely get hacked, and government will not assist in helping you get your money back, but the case is different for money in a bank account.
  • The value of cryptocurrency changes constantly, most times on an hourly basis. The worth of an investment can increase or decrease anytime because there is no guarantee for stability.

Read Also: 9 Features every good Cryptocurrency must possess

As a beginner

Don’t just rush into crypto-trading. You need to be smart and calculative. Also, you should check the following precautions below.

  • Find out what is on board – Bitcoin, Ethereum and Litecoin top the list for tradability and ease of use. However, there are also Zcash, Ripple, Monero and several more to keep an eye on. Do your research well and find out what is growing and focus your attention there. Do not start chasing clout.
  • Accept volatility – in crypto-trading, cryptocurrencies are famously volatile. The price of Bitcoin, for example, went from $3,000 down to $2,000 and then leapt up to nearly $5,000, all within three months in 2017. Whilst this means risk is high, it also means the potential for profit is great too. It’s always sensible to check the volatility of the exchange you decide to go with.
  • Understand blockchain – You don’t need to understand the technical complexities, because as a beginner, you need to understand the basics first and then experience will boost your status. Do well to respond to news and announcements that may help you predict future price movements. It is essentially a continuously growing list of secure records (blocks). Cryptography secures the interactions and then stores them publicly. They serve as a public ledger, cutting out intermediaries such as banks

HOW TO START CRYPTO-TRADING

Do not be scared of ambiguity, crypto-trading is as easy as every other form of trading you know. You just need to understand how it works.

Here is a quick guide to get you trading cryptocurrency:

  • Determine if you want to own the cryptocurrency, or just have a hunch that its value will go up or down.

If you want to own the currency, you need an exchange. To do this, try Hodly – it is a simple, user friendly app.

If you want to speculate on the price, you need a broker.

  • Fund your account
  • But the cryptocurrency you want, or open a trade in its price.

Congratulations, you are now a cryptocurrency trader!

Remember, you can run through the purchase or sale of cryptocurrencies on a broker demo account. Unfortunately, you cannot practice on an exchange.

Crypto-trading generally revolves around speculating on it’s price, rather than owning any of the actual coins. For this reason, brokers offering forex and CFDs are generally an easier introduction for beginners, than the alternative of buying real currency via an exchange.

Crypto-trading

THINGS TO CONSIDER WHILE CRYPTO-TRADING

The cryptocurrency platform you opt to do your trading on is one of the first things to consider before making any important decision you will make. The exchange will act as a digital wallet for your cryptocurrencies, so don’t dive in without doing thorough routine check and considering the factors below first:

Apps & Software

Day traders must constantly tune in so as to increase online presence because reacting just a few seconds late to big news events can make the difference between profit and loss. That’s why many brokers now offer user friendly cryptocurrency mobile apps, ensuring you can stay up to date whether you’re on the train, or making your sixth coffee of the day.

The crypto-trading platform you sign up for will be where you spend a considerable amount of time each day, so look for one that suits your trading style and daily needs. Exchanges like Coinbase offer in-depth platforms, such as their Global Digital Asset Exchange (GDAX). It’s always worth setting up a demo account first to make sure the exchange has the technical tools and resources you need.

Security

Always check app reviews and reviews from other traders to make sure the cryptocurrency exchange is secure. If your account is hacked and your digital currency is transferred out, it is not recoverable. So whilst secure and complex credentials are half the battle, the other half is fought by the trading software.

Fees

Each exchange offers different commission rates and fee structures. As a day trader making a high volume of trades, just a marginal difference in rates can seriously cut into profits. There are three main fees to compare:

  • Exchange fees – This is the fee you will pay before using their cryptocurrency software. What currency and coins you’re trading can influence the rate.
  • Trade fees – This is your charge for trade between currencies on their exchange. A marker fee is the cost of making an offer to sell. A taker fee is the cost of taking an offer from somebody.
  • Deposit and Withdrawal fees – This includes your charges when you want to deposit and withdraw money from the exchange. You’ll often find it’s cheaper to deposit your funds. Also keep in mind some exchanges don’t allow credit cards. Using debit/credit will usually come with a 3.99% charge, a bank account will usually incur a 1.5% charge.

However, these facts make up your decisions, and it is not one to take lightly. Do the maths, read reviews and try the exchange and software first. Coinbase is widely regarded as one of the most trusted exchanges, but you can trade cryptocurrency on Bittrex, which is also a sensible choice. CEX.IO, Coinmama, Kraken and Bitstamp are other popular options

INVESTMENT IN CRYPTO-TRADING

Just like other investments, in all your crypto-trading, know that cryptocurrency does not have the same protections as when you are using U.S dollars. Beware of scammers because such payments are not refundable.

Also, in investing in cryptocurrency, no one can guarantee you will make money. Pay no attention to any promise guaranteeing you massive return and profit. The popularity of an investment does not guarantee its credibility. Do not invest what you cannot afford to lose.

Furthermore, calculate the risks, and review and scan the company you want to invest in.

PAYMENTS IN CRYPTO-TRADING

You can make payments on crypto-trading using cryptocurrency and it is totally different from the normal traditional methods. You must be aware of these differences to avoid scammers.

  • Unlike credit and debit cards that have legal protections, you do not have the same legal backup when you make payments with cryptocurrency. However, if you pay with cryptocurrency, you can only get your money back if the supposed seller sends it back. Asides that, cryptocurrency payments are irreversible. Also, before buying anything with cryptocurrency, know the reputation of the seller, location, and a contact of someone if issues arise.
  • In addition, learning how the seller calculates refunds helps you know if refunds are offered considering how the value of cryptocurrency changes constantly.
  • Furthermore, some information will likely be public. Although cryptocurrency transactions are anonymous, the transactions may be on a public ledger. Both the transaction amount and wallet addresses are used to identify the users.

CRYPTO-TRADING SCAMS

Any form of transaction that involves exchange is accompanied with scams. As people are embracing the crypto-trading, scammers are finding more ways to leverage on that by offering ridiculous investment and business opportunities. You must be careful and conduct thorough research on your investments. You should watch out for people who:

  • Promise free money in dollars or cryptocurrency.
  • Exaggerate about their company.
  • Promise big payouts.
  • Guarantee that you will make money because there is no sharp-sharp-money in crypto-trading.

CRYPTOJACKING IN CRYPTO-TRADING

This is when scammers use your computer or smartphone’s processor to “mine” cryptocurrency for their own benefit without your permission. They can put malicious code into your device simply by you visiting a website.

Cryptojacking is very common in crypto-trading as you will notice the changes in your phone if you are observant. Here is what to do, if you notice your device is slower than usual:

  • Close sites or apps that slow your device
  • Close apps or sites that drain your battery
  • Use antivirus software, and read reviews before installing an online tool.
  • Do not install apps from unprotected site.
  • Do not click links if you don’t know their destination.
  • Have a browser extension or ad blockers, which will help defend against cryptojacking.

REPORT SCAMS

You can report any suspicious activity involving cryptocurrency to:
• The U.S Securities and Exchange Commission (SEC).
• The Commodity Futures Trading Commission (CFTC) on their official website.

CONCLUSION

Like every other business, crypto-trading has its own rules, which when followed gives you an edge in the business. Anyone can crypto-trade, you do not require a certificate to do that. But, you must understand that cryptocurrency involves risk. You must learn to calculate your risks before venturing into crypto-trading because not all risks are worth taking.

Read Also: CryptoCurrency; The Business of the New Economy

About the author

Agim Amaka is a writer at Dailyngn.com. With vast knowledge in writing, she dishes out quality content and articles for blogs, websites, and posts for various social media platforms. As an extraordinary writer, she is very much concerned about her audience, readers and clients.
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