Cryptocurrency wasn’t always popular, but in the past several years, it’s become one of the most popular ways for people to invest their money. With 200,000 transactions happening per day on Bitcoin alone, there is plenty of opportunity to trade and make money.
So, are you interested in how to trade cryptocurrency without losing the money you invest? Read the information below to learn how to start trading cryptocurrency.
Create a Crypto Exchange Account
The first step to starting crypto trading is to create an account on a trading platform. There are many platforms available, so you must make your choice carefully.
There are some critical things to look for when making your choice:
- Great security
- Cryptocurrency options
- Deposit and withdrawal methods
- Trading features
- Customer support
- Legality in your country
There may be other factors to consider, so look at each platform to see what it offers and if a website meets your requirements.
Just remember that many platforms aren’t the most reputable. They have poor security measures and may not be legal in your area. If you can, stick to the more reputable options to make sure the platform you use doesn’t cost you money.
Examine Your Crypto Options
One of the best things about cryptocurrency is the number of them available. You don’t only need to rely on one Bitcoin account to trade. If the Bitcoin trading price and volume are bad, you can look elsewhere for trading.
At a bare minimum, explore the top 10 cryptos on the market. Other alternatives like Ethereum and Polygon are great options that experience the same price fluctuations and opportunities as Bitcoin.
As long as you can read the charts, you can find profitable trades if you pay attention. Think of watching several cryptocurrencies at a time to expand your options and increase the number of trades you make.
Investigate Trading Strategies
Once you open a trading account and better understand the cryptocurrencies available to trade, the next step is to learn more about your trading strategies. Some require constant attention, while others are more passive and involve long-term trades.
Here are a few strategies to consider.
Dollar-Cost Averaging
Dollar-cost averaging is one of the most popular strategies for trading crypto. It’s a long-term strategy where you look for promising cryptocurrency that you expect to increase in value over time.
Instead of dumping a ton of money in at once, you rely on the fluctuations in price. You purchase small amounts over time to gain exposure at different price levels to increase the amount of your overall holdings.
Eventually, in the future, you rely on the crypto being a higher value than it is today. At that point, you can cash in on your profit.
Day Trading
Day trading is excellent for investors who want to be active in the market. Instead of holding a crypto long-term, you actively trade it during the day to take advantage of price fluctuations.
This means you use charting tools to try and spot trends in the price. You look for opportunities at a low price and trade again later in the day at a higher price. The higher price will make a profit, not counting the trading fees.
Of course, this method is more risky. You never know what the market will do, so you must actively pay attention when trading.
Futures Trading
Futures trading is a way of buying cryptocurrency in the future. You agree with another party to buy or sell cryptocurrency at a specific price and future date.
Your goal is to buy crypto at a higher price in the future than it is today. You’re betting on a crypto currency’s price to head in a specific direction and make a profit when your buying contract completes.
Arbitrage Trading
Cryptocurrency prices aren’t uniform in every market. There are slight differences that result in different purchase prices for users of those markets.
Arbitrage trading takes advantage of those differences. Instead of buying and selling on one market, you buy on one marketplace and sell on another.
Your goal is to take advantage of that price difference to purchase a cryptocurrency at a lower price and sell it on a market where it’s priced higher.
High-Frequency Trading
High-frequency trading is the process of creating trading bots to trade crypto for you. Also, High-frequency trading works because of the speed that trades are made. Bots can watch markets much more closely and make trades immediately — something hard for people to do.
With the right high-frequency trading bot, you can program it to spot trading opportunities before you can spot them. The bot can then be in and out of the trade before you notice.
This type of trading is harder to handle since trading bots require a lot of knowledge to set up, so it’s better for more experienced traders who know the fundamentals well.
Create an Exit Strategy
Once you learn more about the trading strategy you plan to use and start trading, you may start making a profit. Unfortunately, some traders aren’t smart when this happens and keep doubling down.
Yes, you may get lucky and make more money. But in many cases, you’ll lose the money you made just as quickly.
Have a plan to take profit over time to avoid this problem. Doing this will help you take advantage of your earnings and keep trading on a fixed amount of investment money.
How to Trade Cryptocurrency: You’re Ready to Begin
Trading crypto isn’t a decision to take lightly. The markets are highly volatile, so a strategy that works today may not be successful in the future. That means it’s easy to make mistakes and lose your money.
But when you learn how to trade cryptocurrency correctly, you can minimize risk and make more successful trades. Follow the advice above to start your journey as a crypto investor with success.
Do you plan on investing in other areas outside of the crypto space? Head back to the blog to learn more details about getting started.