Cryptocurrency has gained popularity for its futuristic abilities and low-cost investments. A recent study found that over 21% of adults have invested in, traded, or sold cryptocurrency. Since it may be difficult to understand how to trade cryptocurrency as a beginner, we’ve created this guide.
With it, we’ve investigated everything you need to know about buying and trading cryptocurrency. That way, you can start earning even as a beginner.
Now, are you ready to get started? Here’s an in-depth look into crypto investing:
How to Trade Cryptocurrency
People often think trading cryptocurrency is difficult, although that’s not necessarily true. Trading cryptocurrency is no more complex than trading stocks or bonds. To guide you through how crypto trading works, we’ve listed five easy steps below for you:
Create a Cryptocurrency Brokerage Account
You’ll want to start by creating an account with a known crypto brokerage like Robinhood, Coinbase, or Webull. Each of these brokerages has an easy interface that beginners love and offer many forms of cryptocurrency. However, not every brokerage has these features, so it’s important to do your research on the brokerage you select.
For example, look at the reviews and customer complaints. Also, look at the account minimum, and if the brokerage offers a commission, and if so, what percent? Knowing these details can help you make an informed decision on which brokerage is right for you.
To make an account, you’ll need to provide the brokerage with a few personal details like you would with any stock brokerage. Generally, the brokerage will ask for your name, address, date of birth, and social security number. To finalize your account, you may need to add an email address or a phone number.
Finance Your Account
Once you’ve created your account, you need to fund it with money from a bank account. Many brokerages are able to link a bank account through your debit card or wire transfer.
However, a wire transfer tends to be the popular option. After all, most brokerages offer it for free, whereas linking with a debit could cost you up to one to two dollars.
Choose a Cryptocurrency
When you hear cryptocurrency, you’ll likely think of Bitcoin or Ethereum. Now, you aren’t wrong, but there many other cryptocurrencies, including Binance Coin, Tether, and XRP, that are just as good and popular.
To trade, you’ll need to allocate your money to one or more of these currencies. The best way to decide which currency is for you is to research each one. You can start by joining cryptocurrency communities online or reading about each currency and why it is good or bad to choose for your circumstances.
Traders tend to assign most of their money to larger cryptocurrencies like Bitcoin because they’re more predictable and easier to evaluate. However, most traders don’t just stick with the popular currencies; they also invest in smaller currencies since they can be of higher value. So choose one popular and one smaller currency to start with, then expand your portfolio when necessary.
Select a Strategy
Four trading strategies are used within the market; these are often called active trading methods. Active trading is often defined as buying and selling cryptocurrency to gain money from the market’s unstableness. To find out which active strategy is best for you, we’ve listed the four popular methods below:
Scalping is certainly the most short-term strategy out of the bunch. In this trading method, a person holds on to coins for a couple of minutes or a few seconds before trading them. This trading strategy aims to gain a small number of profits throughout the day.
The best time to implement this strategy is when the market is the most active. That way, you’re chances of making a profit increase due to the market’s price influxes. However, this strategy is certainly risky and time-consuming since you have to buy and then sell minute by minute.
Day trading is commonly referred to as intraday trading since traders often buy and sell their assets within the same day. To achieve this type of trade, a person must hold their coins for at least a few hours before trying to sell them.
To make money off of this trading method, you must use technical indicators to help you identify market shifts and current trends. It’s likely you’ll only make a small sum from this strategy on a daily basis; however, over time, it can grow your assets exponentially.
Plus, day trading keeps you away from the overnight market and its unpredictability, which is good for any beginner. Although any short-term strategy is risky, so before choosing this method, ensure you understand the market thoroughly.
Swing trading is popular among busy professionals due to the lack of dedication this method needs. After all, swing trading is a strategy where a person holds onto their assets for a few days or, at most several weeks.
Since you’ll be holding onto your coins for more than a day, you don’t have to worry about the daily market shift or tracking the market down to the second. Swing trading makes it easy to grow a profit because this strategy looks at the short to medium-length trends.
Of course, you’ll want to utilize analytic trend software to help you determine what the optimum time to sell is. However, beyond that, this method is perfect for individuals who live busy lives but want to start trading cryptocurrency.
Position trading is often referred to as trend trading due to the length of time you hold onto your assets. To gain a profit with this strategy, a person will usually hold onto their cryptocurrency for a month to five months. To succeed with this method, you’ll need to look at the long-term market shifts and trends.
People who implement this strategy are not worried about daily fluctuations. Instead, they are only concerned about the major market price shifts and events that could improve or have negative repercussions on the market.
This strategy allows busy professionals to leave their investments and look at them periodically over time. It’s defiantly the best trading strategy for those that want to dedicate little time to trading. You just need to stay in the know about the overall market, and you’ll be good.
Store Your Cryptocurrency
When you’re actively trading, you’ll need to store your cryptocurrency on the exchange to retrieve your profits. If you’ve selected a mid-to-long-term strategy, you should purchase a crypto wallet.
Crypto wallets come in both software and hardware options. While both are secure, hardware wallets provide the best security since they store your currency on a physical device that’s offline.
However, hardware wallets can be expensive and sometimes hard to find, whereas software wallets are easily available on ios and Android devices just with a click of a button. Software wallets can even be used for free or as little as five dollars a month, making them the best choice for people on a budget.
Cryptocurrency Legal FAQs
Cryptocurrency may be a fun project to invest in, but that doesn’t mean it doesn’t have legal requirements and regulations. Here are some commonly asked questions to help you:
How Is Cryptocurrency Taxed?
Cryptocurrency is seen like stocks and other property in the eyes of the government. That means general property principles apply to cryptocurrency.
So if you gain income from cryptocurrency, you are required by law to pay taxes on the amount you earned. The tax rates for cryptocurrency are the same as capital gain taxes for stocks.
Should I Keep Records of My Cryptocurrency Earnings and Losses?
Yes, always keep your records for tax purposes. Crypto trading is just like stock and bond trading; you need to have the records of your original purchase, how much it sold for, and the total value of the currency. Keeping these records will help you fill out your tax forms easily and efficiently.
Invest in Crypto Today
Cryptocurrency is often thought of as the currency of the future. By buying and selling it, you can earn a modest profit that will undoubtedly raise in value with every passing year. The key to how to trade cryptocurrency is to pick the right strategy for you.
If you want a short-term strategy, choose day trading, or if you want a long-term strategy, choose position trading. The strategy you choose will affect when you trade, what metrics help you sell, and the approximate amount you’ll earn per day.
Now, for more information about cryptocurrency traders, visit our website today. We provide the latest news and company reviews on technology.