How should I trade crypto?
The cryptocurrency market is growing more and more every day. The profits in this market are incredibly high, the competition is super exciting, and the time it requires is less than one-tenth of what traditional jobs take.
As a result, the number of people active in the cryptocurrency market is constantly increasing, and one key question becomes more important: how to learn crypto trading for free?
In this article, we will explore the secrets of starting cryptocurrency trading. If you’ve recently joined the big family of DigiAlpha traders, don’t miss reading this!
How to trade crypto as a beginner?
A report from cryptorating.com says more than 90% of cryptocurrency traders lose money. These people don’t just fail to make money, but they also lose their starting investment. This might sound scary, but it shows the truth: if you don’t start buying cryptocurrency the right way, you will fail.
Here, we look at the steps of crypto trading for beginners. To invest successfully in cryptocurrency, you must follow these steps one by one.
1. Learn About Cryptocurrencies
One key feature of the cryptocurrency tradingis its deep connection with technology concepts. This characteristic makes cryptocurrencies different from other financial markets like stocks or Forex. Even if you want to work as a trader in this market, you need to understand cryptocurrency terms.
Here’s the deal: technological changes directly affect cryptocurrency prices. Let’s explain the importance of this with an example. Ethereum’s blockchain developers have planned a major update called Dencun for 2024.
This update will directly improve the scalability of Ethereum’s blockchain. Many experts believe that this upgrade could become a launchpad for the price of Ethereum (ETH). This development might create many opportunities for buying Ethereum cryptocurrency.
Make sure to read: What is cryptocurrency?
2. Learn Fundamental Analysis of Cryptocurrencies
In addition to learn crypto trading, you should dedicate enough time to learning fundamental analysis. Simply put, fundamental analysis helps you estimate the current and future value of different assets with reasonable accuracy. Your most important responsibility when investing in crypto trading is to protect your initial capital, and fundamental analysis plays a key role in achieving this.
Some principles of fundamental analysis are shared across financial markets, but there are factors that are specific to cryptocurrencies. For example, here are a few areas to focus on:
- Reviewing the White Paper: Study the foundational document of a cryptocurrency project.
- Researching the Founders and Developers: Learn about the people behind the cryptocurrency.
- Examining Key Investors: Understand who is financially backing the project.
- On-Chain Analysis: Analyze blockchain data to assess the health and potential of the cryptocurrency.
3. Learn Technical Analysis
Technical analysis is arguably the most important tool for success in cryptocurrency trading. Crypto tradingcan be seen as the art of seizing opportunities in the moment, and technical analysis is what develops this skill.
For example, if you want to analyze Bitcoin, the most significant cryptocurrency, you need to be familiar with various indicators and price patterns. The topics within technical analysis are very broad, and mastering all of them might take years. However, learning the basics of technical analysis is a priority for starting cryptocurrency trading.
There are many courses available on technical analysis. Additionally, you can self-learn its principles.
4. Choosing a Cryptocurrency Exchange
After completing the previous steps, the next phase is selecting a cryptocurrency exchange. Buying and selling cryptocurrencies happens through online platforms called cryptocurrency exchanges. To start trading cryptocurrencies, you need to either:
1. Choose an online cryptocurrency exchange, or
2. Create your own cryptocurrency exchange to earn income through it.
If you go with the first option, the key question is: How do you choose the best cryptocurrency exchange for trading? Here are some important criteria to consider when selecting an exchange:
- Trading Volume: The exchange should handle a large volume of cryptocurrency transactions.
- Variety of Cryptocurrencies: Look for an exchange that supports many tradeable cryptocurrencies.
- Security: Ensure the exchange has strong security measures to protect your assets.
- Customer Support: Reliable and responsive support is essential for resolving issues.
- Trading Tools: Check for advanced tools like charts, indicators, and order types.
- User Interface: The platform should be user-friendly and easy to navigate.
- Mobile App Availability: An app for trading on the go is a valuable feature.
Choose an exchange that fits your needs, whether you’re just starting or looking for advanced trading options.
Make sure to read:What is crypto exchange platform and how does it work
5. Create a Cryptocurrency Watchlist
The fifth step is creating your cryptocurrency watchlist. The market has thousands of cryptocurrencies, with new ones being added daily. It’s obvious that no trader can monitor all of them at once. Therefore, you need to select a few cryptocurrencies and add them to your watchlist.
Fundamental analysis plays a crucial role in building your watchlist. You should examine the core aspects of several projects and then add the best cryptocurrencies for monthly profits to your list.
While it’s important to update your watchlist over time, it’s better to focus solely on the cryptocurrencies in your current list for a while. This strategy allows you to concentrate on understanding and trading those assets effectively.
6. Choose a Cryptocurrency Trading Strategy
The sixth step is choosing your crypto trading strategy. Your strategy should match the type of cryptocurrencies you trade and your personal preferences. Even if you know technical and fundamental analysis well, choosing the wrong strategy can lead to failure.
Here are some common trading strategies for beginners:
- Scalp Trading: A quick method to make small profits by buying and selling very quickly.
- Swing Trading: Holding your positions for a few days or weeks to take advantage of price changes over time.
- Day Trading: Buying and selling within the same day to profit from daily price movements.
- Position Trading: Holding your positions for longer periods, from weeks to months, based on long-term trends.
Some strategies, like scalp trading, can be stressful and risky. You need to research each strategy and pick the one that fits your personality and goals.
You can also test different strategies to see which one works best for you.
Make sure to read: What is a crypto spot market?
7. Learn About Cryptocurrency Order Types
When buying and selling cryptocurrency on an exchange, there are different types of orders you can place. As a trader, you need to understand these order types and know their advantages and disadvantages. Choosing the right order type for buying cryptocurrency based on your trading goals is very important. Here are some of the most common order types in crypto trading for beginners:
- Limit Order: An order to buy or sell at a specific price or better.
- Market Order: An order to buy or sell immediately at the best available price.
- Fill or Kill (FOK): An order that must be filled completely immediately, or not at all.
- OCO (One Cancels Other): A combination of two orders, where if one is executed, the other is canceled.
- Trigger Order: A type of order that becomes active once a specified price is reached.
- Stop Loss Order: An order to sell a cryptocurrency when its price reaches a certain level to limit losses.
- Take Profit Order: An order to sell a cryptocurrency when its price reaches a certain level to secure profits.
9. Start Cryptocurrency Trading
Finally, it’s time to answer the question “How should I trade crypto?” After signing up and completing the identity verification process on the exchange, you can fund your account with fiat money (like your local currency) or cryptocurrency. Then, you can start buying cryptocurrencies.
We recommend starting with a small amount of capital when you begin trading. Gradually increase your investment as you gain experience. Never use money you need for daily living expenses for cryptocurrency trading. This ensures that you can manage risks and avoid financial stress while learning.
Make sure to read: Types of spot trading crypto exchange platforms
Conclusion
In this article from the DigiAlpha blog, we’ve tried to provide a clear and straightforward answer to the question “How to trade crypto as a beginner??” The reality is that learning crypto trading and trading itself have their own unique complexities. Although cryptocurrency trading gives you the opportunity to earn in dollars, keep in mind that success doesn’t come easily.
To start your cryptocurrency journey, check out our P2P Crypto Exchange Platform.