You’ve probably heard of Bitcoins and other cryptocurrencies which are becoming more and more popular among traders because of their high potential of bringing profit. Find out more about this booming market and see which the essentials of cryptocurrency trading are.
What is cryptocurrency trading?
Are you familiar with forex trading? If the answer is yes, then you should know that cryptocurrency trading is a similar process, the only difference being that instead of buying and selling fiat currencies, such as US dollars or Euros, you purchase and sell cryptos, like Bitcoin or Ethereum. In other words, you trade cryptocurrency when you exchange a crypto that you own into another type of cryptocurrency and then exchange it back when the prices change in order to gain profit. You can do that by buying the underlying from a cryptocurrency broker, through CFDs via an online forex broker, or by purchasing a share from a publicly listed security related to a cryptocurrency.
If you’re a beginner, pay a crucial attention to the online broker you’ll choose, as they play a big role in your chances of gaining profit! For example, TradeFW.com is one of the leading cryptocurrency brokers which can provide you a friendly and professional trading environment, good leverage, as well as 24/7 assistance from a team of experts. In such a volatile market, these are some features that you need in order to succeed!
What do you need to trade cryptocurrency?
The process itself is extremely easy and it only takes two main components: one (or more) cryptocurrency wallet and one (or more) cryptocurrency exchange to trade on. The cryptocurrency wallet is where you store your virtual coins, while the cryptocurrency exchanges are the actual actions of buying/selling cryptos.
Long-term and short-term cryptocurrency trading
What type of trader are you: a long-term or a short-term trader? If you don’t know yet, let’s find out more about each category so you can have a better understanding on what they imply.
Long-term traders are the ones who buy and hold their cryptos over a long period of time (weeks, months or years) so they can study the price trends and make the best decision based on the information they gathered. It goes without saying that this method is less risky. On the other hand, short-term traders embrace the insane volatility of the market and buy/sell cryptocurrencies over the period of a few hours or days.
The advantages and disadvantages of trading cryptocurrencies
Here are some of the advantages you’ll have as a cryptocurrency trader:
- The possibility of trading cryptocurrencies 24/7! As they are decentralized, it means that wherever you are, at any hour, in any day – you can trade your favorite virtual coin. The market never sleeps and neither should you!
- They are 100% secure, even their name says it! They were built with security and privacy in mind, so you don’t have to worry about the privacy of your data or any unexpected fraud issues.
- Transactions are extremely quick, permanent and have low costs.
- Cryptocurrency isn’t inflationary.
- Since this is one of the most volatile markets, trading cryptos can lead to huge profit.
Be equally aware of the disadvantages it comes with:
- Cryptocurrency is only accepted by some vendors.
- If you lose a virtual coin, there will be no way to take it back as there is no universal system which takes care of such issues.
- The market being so volatile isn’t always a good thing, as the value of the coins can change dramatically over a very short period of time which can lead to a significant loss.
- Even if your data is safe and private, cryptocurrency is not anonymous.
Cryptocurrency trading – challenging, but worth it!
To sum up, as any type of trading, the cryptocurrency market comes with its challenges, risks but also with a list of substantial advantages that can change your financial life overnight. If you do your research, find the right broker and understand the basics of the process, everything will be in your favor. With a bit of courage and luck, everything is possible, so you might as well just try it!