So, you’ve finally made a decision to begin your cryptocurrency trading profession, and you are already considering how you are going to invest your millions. There is no doubt that cryptocurrency is an exciting marketplace for investors, but sadly, success does not occur as simple as that.
Yes, it is true — some folks have made a lot of cash. But some individuals have lost plenty of money also.
For all those who are interested in learning cryptocurrency trading, then I am here to help you begin. This beginners guide will show you all that you want to know.
To begin with I will provide you some background info on if cryptocurrency trading started. Next, I’ll help you realize the gap between short-term and long term cryptocurrency trading, and the two of the benefits and pitfalls.
Following that, we’ll inform you the essential things which you have to be cautious of before you begin trading.Finally, I’ll explain to you how you can trade! This may incorporate a step-by-step manual with some helpful images.
From the end of studying this newcomer guide, you may have all the info have to go and exchange by yourself.
Quick Information on Building a Crypto Portfolio
- Easiest place to buy Bitcoin – Coinbase (Read full review here)
- Best trading platform – Binance (Read full review here)
- Another great trading platform – Kucoin
- Best way to protect your portfolio – Trezor Hard Wallet
- Safest coins to invest in – BTC, ETH, XMR, LTC
- Best app for tracking your portfolio – Blockfolio
What You Should Know Before You Start Trading Cryptocurrency
There are only a few things to know about trading cryptocurrency beyond what was noted above. Below are a few of the most important things to know before getting started:
- A cryptocurrency exchange is not part of the regular stock exchange. Below we will suggest using an exchange/broker Coinbase, but you can also use the related GDAX (the pro version of Coinbase with lower fees). Neither of these is the same as Wall Street and its exchanges (same general mechanics, different specifics, and different entities).
- A beginner might prefer to trade cryptocurrency stocks on the stock market (GBTC is a trust that owns Bitcoin and sells shares of it; trading this avoids you having to trade cryptocurrency directly). The main Bitcoin stock here in 2018 is GBTC. Be aware that GBTC trades at a premium (meaning bitcoins are cheaper than buying shares of the GBTC trust), which isn’t ideal. Also, cryptocurrency trading is a 24-hour market, where the traditional stock market is not.
- I think the simplest place to buy, sell, and store coins is Coinbase (and our tutorial below will help you get set up with that), but you can only buy, sell, and store Bitcoin, Ethereum, Litecoin, and Bitcoin Cash on Coinbase. If you are serious about trading cryptocurrency, you’ll need another exchange like Coinbase’s GDAX, Bittrex, Binance, or Kraken (and you’ll likely want to find a wallet to store your coins in).
- The cryptocurrency market is insanely volatile in 2018. You can make a fortune in a moment and lose it in the next whether you trade Bitcoin, another coin, or the GBTC Bitcoin trust. Consider mitigating risks, hedging, and not “going long” with all your investable funds. TIP: If you trade only the top coins by market cap (that is coins like Bitcoin Ethereum), or GBTC, then the chances of losing everything overnight are slim (not impossible, but slim). Other cryptocurrencies are riskier (but can offer quick gains on a good day).
TIP: There are a few sides to cryptocurrency. 1. you can trade and invest in it, 2. you can use it for transactions (anywhere a coin type is accepted), 3. you can break out a graphics processing unit and some software and mine coins. Those are all valid and interesting, but with that in mind, this page is focused on “trading” cryptocurrency (and therefore also investing in it). With that said, even if you want to do the other things with cryptocurrencies, you still need to be set up for trading.
About cryptocurrency mining: As mentioned, 1 way to put money into cryptocurrency is through cryptocurrency mining. That’s a legitimate way to begin investing if state you adore computer gaming and require a brand new rig and wish to invest in tiny quantities of cryptocurrency whilst perhaps earning back some of the price of the rig (and perhaps even breaking ) but that’s a completely different subject. The ordinary investor may wish to exchange USD to get cryptocurrency on a market and prevent the intricacies and investments of mining. In all circumstances, if you don’t currently have a fantastic rig with a fantastic graphics card, you will want to put down USD upfront anyhow.
What You Need to Know to Start Trading Cryptocurrency
For those who want to trade cryptocurrency despite the above notes:
- A beginner should start by choosing a company with a good reputation that offers an exchange and wallet (to help keep the process simple).
- A beginner should also start by trading prominent coins. Currently, in 2018, we are referring to coins like Bitcoin (BTC) and Ethereum (ETH). In the future, this could change.
Since the above is the case, a good start for any American wishing to trade cryptocurrency is starting with Coinbase.com (the most popular cryptocurrency website in America, and a service that offers a single platform for a Bitcoin wallet, Ethereum wallet, Litecoin wallet, Bitcoin Cash wallet, and a currency exchange).
After you master Coinbase, then you are ready for say GDAX and other exchanges like Bittrex, Binance, or Kraken.
TIP: A good first foray into cryptocurrency investing is the obvious, buying a major cryptocurrency like Bitcoin. After that, you’ll probably want to trade USD for crypto on an exchange like GDAX. Once you have done that, you could try trading BTC and ETH for other cryptocurrencies. Trading “crypto pairs” can be rewarding, but it is more complex and often more risky than just buying a single cryptocurrency as an investment.
TIP: Do not do “margin trading” unless you know exactly what that is and are an expert. Cryptocurrency is volatile; you can end up losing all your money in an instant if you aren’t careful.
TIP: If you don’t understand the tax implications of trading cryptocurrency tread very carefully. There are some nasty traps you could fall into when trading coins. For one, they are not necessarily considered “like-kind assets.” If that is confusing, then consider sticking with trading USD for coins in Coinbase until you grasp the concept.
As you must already know, Bitcoin became the first cryptocurrency as it premiered in 2009. But with just 1 coin accessible, you could not exchange it with any other cryptocurrency.
It wasn’t until a few years later when more and more cryptocurrencies were created that people started trading them. The idea is really simple. You trade one cryptocurrency for another, with the hope that the coin you buy increases in value.
This idea is just like the real-world stock market.
When people trade, they will need to utilize a cryptocurrency exchange. This is so sellers and buyers could be matched. By way of instance, if you’re holding Bitcoin and would like to market it to get Ethereum, a market can allow you to discover an Ethereum vendor to exchange with.
Exchanges will cost you a commission for doing so, which generally costs around 0.1percent for every transaction.
The”blessed” ones have made a critical sum of money doing so, and there are a lot of people which are currently trading cryptocurrency as a fulltime occupation.
Provided that you aren’t trading over you can afford to drop, there’s not any harm in giving it a go.
I shall now clarify what short-term trading is, together with its benefits and pitfalls.
Short-term trading is where you buy a cryptocurrency but only plan to hold on to it for a short amount of time. This can be anything from minutes, hours, days, weeks or even a few months!
You might buy a certain cryptocurrency because you think it will rise in price in the short term. In which case, you would then sell it for a quick profit if you thought the price was going to drop again!
Let’s look at some of the advantages of short-term trading.
The main advantage of short-term cryptocurrency trading is that it offers a really good opportunity to make high percentage gains. Unlike fiat currency markets, where prices usually don’t move by more than 1% each day, cryptocurrency prices can almost double overnight!
Now that cryptocurrencies have become so popular, there are now more than 1,500 different cryptocurrencies to trade. Which means one thing — more opportunities to make huge profits. Not only that, though, but there are large trading volumes for lots of coins.
As the cryptocurrency markets are so volatile, the prices can change very quickly. This means that if you want to perform short-term crypto trading, you will need to spend a lot of time analyzing the markets.
It’s super important to keep in control of your emotions — one thing you will learn when short-term trading is that you don’t always win. It can be very stressful when prices move differently to how you had hoped.
So, learning to accept losses is a big part of cryptocurrency trading. Nobody makes profits 100% of the time!
Short term cryptocurrency traders look for small gains in small price movements, so you will need to have quite a good analysis ability. This means being able to read trading charts and graphs. Which, if you are a beginner, can take a little while to learn.
Another disadvantage of short-term trading is that, for you to see good returns, you must make quite a large investment. Which is something that most of you beginners might not feel comfortable with.
Have you ever heard the word “HODL”? Well, if not, then we’ll assume you’re completely new to the crypto space! No, it’s not a word you’ll find in the dictionary, but you’ll certainly find it in crypto forums and community chat groups!
“HODL” is a slang word meaning to hold a cryptocurrency long term rather than selling it. Its actual meaning is “Hold On for Dear Life”. Usually, long-term crypto trading means to hold a coin for one year or more.
A great example of this would be the lucky investors who bought Bitcoin in 2011 when it was just $0.35. If they held on to it until late 2017, they could have sold their coins for almost $20,000 each! That’s over 57,000X your initial investment!
One of the main advantages of long-term cryptocurrency trading is that it’s easy and requires a little amount of time. You don’t need to understand complex trading charts or graphs as you’re simply looking to hold your coin for the long term.
Unlike short-term trading, where you need to constantly spend time checking the prices of cryptocurrencies, you can do it in your spare time. It’s simple, once you have bought your coin, you don’t need to do anything other than wait!
Another good advantage of long-term cryptocurrency trading is that you don’t need lots of money to get started. You can buy small amounts whenever you have some spare money, and let it grow over a long period of time.
This also allows you to avoid the stresses of market volatility, as you don’t need to worry about short-term movements in price.
One disadvantage of long-term cryptocurrency trading is that you might miss a good opportunity to make quick short-term gains.
Sometimes coins rise in value really quickly, only to fall straight back down. Short term traders will notice this and can make a quick profit.
So, just make sure you are keeping on top of cryptocurrency news to avoid this from happening.
Now that you know some of the advantages and disadvantages of both short and long term cryptocurrency trading, let’s have a look at some of the things you need to be careful of before you start.
The advantages of trading cryptocurrencies
Trading cryptocurrencies, while similar to trading fiat currencies on forex, comes with its own set of advantages.
- Cheap fees and fast exchanges. For each trade, the exchange platform you’re using will take a small percentage as commission for the service they’re providing. This is inevitable. Where cryptocurrency trades differ from their fiat currency equivalent is in the size of this fee. Because the fees for transferring cryptocurrencies (typically via wallet payments) are cheaper than credit card and bank transfer fees, market-trading fees are cheaper than forex-trading fees.
- Extreme volatility. Traders make profits when the price of the currency takes large strides upwards, and cryptocurrencies often experience large price movements. While this increases the risk (large price movements happen downwards as well), you can often make a lot of profit with a relatively small bankroll.
- Open all week. You can only trade stocks and commodities during business hours, and you can often only trade forex during weekdays. Cryptocurrencies, on the other hand, can be traded 24/7, anytime and anywhere, depending on the exchange.
How to Start Trading
As you are looking to trade cryptocurrencies, the first thing we need to do is get you some coins! The easiest way to do this is with Bitcoin, as almost every exchange accepts it.
If you decide to buy Ethereum instead, then you can still follow the guide below. However, wherever Bitcoin is mentioned, swap it for Ethereum.
If at this point you already have Bitcoin, you can skip to the next part of the guide!
The quickest way to buy Bitcoin is to use your debit or credit card with Coinbase. Coinbase are an exchange broker and will sell you Bitcoin at a really good rate. Although there is a 4% charge to use your card, it is worth it as you get your coins straight away.
Open an account at Coinbase
Go to the Coinbase website by clicking this link. You will need to choose a username and a strong password. You will also need to confirm your email address and mobile number.
Verify your account at Coinbase
Before you can buy Bitcoin at Coinbase, you will need to verify your identity. Follow our step-by-step guide below.
- Click on Buy/Sell at the top of the screen.
- You now need to add a payment method. Click on Add Payment Method.
- You will then be asked if you want to add a bank account or a debit/credit card. In this example we will add a debit/credit card as it is the quickest way to deposit.
- As Coinbase take security very seriously, you will now need to verify your identity. Click on Upload ID.
- You can upload either a passport, driver’s license or a government-issued ID card. Click on the one that you wish to upload.
- Next, you will be asked how you want to upload your ID. You can choose a webcam, mobile camera or a file upload.
- Once you have uploaded your ID, you will get the below confirmation.If the picture quality if not clear enough, you will be requested to upload it again.Add your payment method in Coinbase
- You will now need to enter the billing address for your debit/credit card.
- Now you will need to enter you debit/credit card details. Don’t worry — Coinbase never get to see your card details as the numbers are encrypted.
- Congratulations, you have now verified your identity and added a payment method! Now, let’s go and buy some Bitcoin.
Buying Bitcoin at Coinbase
- Click on Buy/Sell again at the top of the page. This time you will be able to see the four coins that you can buy. Click on Bitcoin.
- Scroll down and enter the amount (in fiat) you want to spend on Bitcoin. In our example we are buying 150 EUR worth. The amount of Bitcoin will update when you enter your amount.
- Finally, click on Buy Bitcoin Instantly, confirm the payment card that you added previously, and click on Confirm. That’s it, it’s as easy as that — you now own Bitcoin!
Now that you have some Bitcoin, we need to open an account at Binance. They are one of the most popular crypto exchanges for cryptocurrency trading and have more than 100 different coins available!
Open an account at Binance
- Visit the Binance website by clicking this link.
- Click on Register and follow the prompts. Binance is as basic as Coinbase — you need to enter your email address, mobile number and choose a username and password.
- Now that you have a Binance account, we need to deposit the Bitcoin that you just bought from Coinbase.
Deposit funds in to Binance
- Go back to your Coinbase account and click on Accounts at the top of the page. Then click on Send.
- You will then be asked to enter the address that you want to send your coins to. As you want to send them to your Binance wallet, we need to go back to Binance and get your Binance wallet address.
- Go back to Binance. Move your mouse over Funds and click on Deposits.
- Click on Select Deposit Coin, type in BTC and then click on Bitcoin.
- You will now see your Binance deposit address for Bitcoin. Copy it.
- Now, go back to your Coinbase account. Enter the amount of Bitcoin you want to send and then paste the Binance wallet address. Finally, click on Send. Your Binance account should be funded within 15 minutes.
How to trade cryptocurrency at Binance
Now that your Binance account is funded with Bitcoin, we are going to show you how cryptocurrency trading works. In our example, we are going to trade Bitcoin for NEO, but you can replace NEO with the coin you wish to trade with!
- Move your mouse over Exchange and click on Basic.
- On the right of the page, click on BTC and enter NEO (or the coin you want to buy). Then click on NEO/BTC. If the coin you want to trade with isn’t NEO, and instead it was ABC, then you would look for the pair ABC/BTC.
- You are now on the main trading screen for the coins you want to trade — this is where all the fun happens!
- To make a trade, you need to scroll down and look for the Buy NEO
- Before choosing how many coins you want to trade, you need to decide if you want to do a Limit Order or a Market OrderLimit Order: This is where you enter the price that you want to trade at. However, there is no guarantee that you will get your price matched.Market Order: This is where you take the current market price that is available at Binance. If this is your first time, Market Order is your best option.
- Now you need to enter the amount of NEO (or your chosen coin) that you want to buy.In our example, we are buying 10 NEO. As you will see, we will get the market price, as we chose Market.Finally, to complete your trade, click on Buy NEO.That’s it, you’ve just made your first ever cryptocurrency trade!
Just remember, you can change the above guide for the coin you want to buy.
What affects the price of a cryptocurrency?
Cryptocurrencies are volatile by nature. They are not as stable as currencies that have had centuries to develop. Bitcoin is the oldest coin on the market, and it has only been around since 2009. Nevertheless, there are a number of things that can affect cryptocurrencies:
- Regulation. If a government makes a statement or pushes for a particular regulation that affects cryptocurrencies, you can bet that the price will react to it (sometimes positively, often negatively). When China banned ICOs, the price of Ethereum fell by 41% in 15 days (from US$386.83/ETH to US$228.06).
- Media influence. Just like government regulation, exposure in the media greatly affects a cryptocurrency’s price. Whenever a public figure makes a statement regarding cryptocurrencies or a major retailer starts accepting cryptocurrency as a form of payment, you will see the market respond.
- Changes to the technology. When a cryptocurrency’s core technology is affected (either via an update or the finding of a flaw), the cryptocurrency’s price is also affected.
Trading cryptocurrencies works almost precisely the same as trading fiat monies, and it’ll help you to understand the concept supporting trading currencies. While gains are not ensured when trading, you are able to take action to safeguard yourself from significant losses and to enhance your knowledge of how markets move.
There is more to learn than could be crammed into this manual, but the only real way to learn is by doing. This generally means choosing a stage, putting aside some money you don’t mind shedding, and becoming to learning.