Cryptocurrency Trading

Feeling anxious about missing out? Here's a swift strategy to swiftly kickstart your cryptocurrency trading journey.

Determine whether you aim to possess the cryptocurrency or speculate on its price movement. If you opt for speculation, you’ll require a broker.
Deposit funds into your account.
Purchase the desired cryptocurrency or initiate a trade based on its price.

Congratulations, you are now a cryptocurrency trader!
Trading crypto generally revolves around speculating on it’s price, rather than owning any of the actual coins.

How To Trade Cryptocurrency

Choosing the right cryptocurrency platform for your trading activities is a critical decision. The exchange serves as a digital wallet for your cryptocurrencies, so it's essential to carefully consider the following factors before making a decision. Certain brokers focus primarily on cryptocurrency trades, while others may offer a more diverse range of products. For instance, Space Trading provides conventional cryptocurrency trading via Forex or CFDs, but also offers innovative products like cryptocurrency multipliers. These multipliers offer higher leverage, consequently increasing both risk and potential reward. Such innovative offerings could make a significant difference when engaging in cryptocurrency day trading.

Apps & Software

Remaining continuously informed is crucial, as even a slight delay in response to significant news events could mean the distinction between profit and loss. This is why numerous brokers now provide user-friendly cryptocurrency mobile applications, enabling you to stay updated whether you're commuting or taking a break. The cryptocurrency trading platform you choose will be where you invest a substantial portion of your daily time. Hence, it's essential to select one that aligns with your trading approach and requirements.

Security

Be sure to review feedback to ensure the security of the cryptocurrency exchange. In the event of your account being compromised and your digital currency transferred out, they will be irretrievable. While robust and intricate credentials are crucial, the effectiveness of the trading software also plays a significant role.

Fees

Each exchange features distinct commission rates and fee structures. For day traders engaging in a high volume of trades, even a slight variance in rates can significantly impact profits. There are three primary fees to compare: Exchange fees: These fees cover the cost of using their cryptocurrency software and can vary based on the currencies and coins being traded. Trade fees: This encompasses the charges incurred when trading between currencies on the exchange. A maker fee refers to the cost of placing an offer to sell, while a taker fee is the cost of accepting an offer from another party. Deposit & Withdrawal fees: These fees are incurred when depositing or withdrawing funds from the exchange. Typically, deposit fees are lower than withdrawal fees. Additionally, it's important to note that some exchanges do not accept credit cards. Transactions made with debit/credit cards usually come with a 3.99% charge, while bank account transactions typically incur a 1.5% charge.

Final Word On Brokers

This decision requires careful consideration. Conduct thorough calculations, review feedback, and test the exchange and software before committing. While Coinbase is often recognized as one of the most reliable exchanges, Bittrex is also a prudent option for trading cryptocurrency. Other popular choices include CEX.IO, Coinmama, Kraken, and Bitstamp.

Cryptocurrency Trading For Beginners

Before selecting a broker and experimenting with different platforms, there are a few fundamental concepts to grasp. Understanding and acknowledging these three factors will increase your chances of success when entering the cryptocurrency trading arena. Identify growth opportunities: Bitcoin, Ethereum, and Litecoin are among the top choices for tradeability and user-friendliness. However, there are also other cryptocurrencies like Zcash, Das, Ripple, Monero, and many more worth monitoring. Conduct thorough research to identify emerging trends and focus your attention accordingly. Embrace market volatility: Cryptocurrencies are renowned for their volatility. For instance, the price of Bitcoin fluctuated from $3,000 to $2,000 before skyrocketing to nearly $5,000, all within a span of three months in 2017. While this heightened volatility entails increased risk, it also presents significant profit potential. It's prudent to assess the volatility of the exchange you opt to engage with.

Wallets

If you want to own the actual cryptocurrency, rather than speculate on the price, you need to store it.

Strategy

Once you’ve decided on a broker, got familiar with your platform and funded your account, it’s time to start trading. You’ll need to utilise an effective strategy in line with an efficient money management system to make a profit. Below is an example of a straightforward cryptocurrency strategy.

Swing Trading

This simple strategy relies on attentiveness. The concept involves closely monitoring for a correction within a trend and seizing the opportunity to capture the movement out of the correction and back into the trend. A correction occurs when candles or price bars overlap. While trending prices tend to fluctuate rapidly, corrections typically do not.

Tips

Even with the right broker, software, capital and strategy, there are a number of general tips that can help increase your profit margin and minimise losses. Below are some useful cryptocurrency tips to bear in mind.

Utilise News

Short-term movements in cryptocurrencies are highly responsive to significant news events. For instance, when news regarding government regulations or cryptocurrency exchange breaches surfaces, prices typically experience sharp declines. Conversely, if a major corporation announces plans to integrate a particular currency into its operations, prices can swiftly surge. Having awareness of relevant news and the ability to react promptly provides traders with a competitive advantage over the market.

Technical Analysis

Analyse historical price charts to identify telling patterns. History has a habit of repeating itself, so if you can hone in on a pattern you may be able to predict future price movements, giving you the edge you need to turn an intraday profit.

Study Metrics

Here's a key cryptocurrency tip: Assessing the ratio of total wallets to active wallets along with the present trading volume allows you to estimate the current value of a particular currency. This enables you to make informed decisions based on the current market price. The more precise your forecasts, the higher your potential for profit.

Trade On Margin

If you foresee a specific price movement, utilizing margin trading allows you to borrow funds to amplify potential profits if your prediction proves correct. Different exchanges impose diverse margin requirements and offer varying rates, so conducting thorough research beforehand is advisable. Bitfinex and Huobi stand out as two of the more widely used margin platforms. Keep in mind, engaging in trading or speculation using margin magnifies both potential gains and losses.

Rules & Taxes

The digital market is relatively new, so countries and governments are scrambling to bring in cryptocurrency taxes and rules to regulate these new currencies. If you’re not aware of these before you start trading, you may find yourself in a spot of expensive bother further down the line. Remember, Trading or speculating using margin increases the size of potential losses, as well as the potential profit.

Rules

Many governments are unsure of what to class cryptocurrencies as, currency or property. The U.S in 2014 introduced cryptocurrency trading rules that mean digital currencies will fall under the umbrella of property. Traders will then be classed as investors and will have to conform to complex reporting requirements. Details of which can be found by heading to the IRS notice 2014-21.

Taxes

On top of the possibility of complicated reporting procedures, new regulations can also impact your tax obligations. The U.S, the ‘property’ ruling means your earnings will now be deemed as capital gains tax (15%), instead of normal income tax (up to 25%). Each countries cryptocurrency tax requirements are different, and many will change as they adapt to the evolving market. Before you start trading, do your homework and find out what type of tax you’ll pay and how much.

Risks

Nevertheless, using bots comes with its challenges. To prevent potential losses due to computer malfunctions and unforeseen market fluctuations, it's important to maintain a certain level of monitoring over your bot. Additionally, employing bots can be costly. Despite offerings like BTC Robot providing free 60-day trials, you typically incur monthly subscription fees that cut into your profits. Moreover, if you require professional programming services to set up your bot, there will be additional expenses. Furthermore, ongoing updates to adapt to market changes also come at a cost. Therefore, while bots can enhance your cryptocurrency profits at the end of the day, it's essential to recognize that there are no shortcuts in life and to be mindful of the associated risks. Perhaps, they are most beneficial when integrated into an established and effective strategy that can be automated seamlessly.

Education

The most beneficial cryptocurrency trading tutorial is the one you create for yourself using a demo account. Initially, this provides an opportunity to test your chosen brokerage and platform before making any commitments. Furthermore, demo accounts serve as ideal environments to rectify errors and hone your skills. Since you typically trade with simulated funds, any mistakes won't impact your actual capital. Once you've refined your strategy and addressed any issues, you can transition to trading with real funds. Online resources also offer a variety of cryptocurrency intraday trading courses, as well as numerous books and ebooks. Absorbing more information enhances your preparedness and increases your likelihood of maintaining a competitive edge in the market.

Key Points

Consider this as your roadmap to cryptocurrency day trading, helping you bypass common obstacles encountered by many traders. When selecting your broker and platform, prioritize factors such as user-friendliness, security, and fee structures. Regardless of your choice, ensure that both technical analysis and market news are integral components. Additionally, stay vigilant regarding regional variations in regulations and taxes to avoid unexpected profit losses.