Cryptocurrency trading is significantly rising in popularity due to its widespread acceptance as a medium of exchange in different economies. However, crypto trading is tricky, and it can be a high-risk or high-reward investment since cryptocurrencies are volatile. If you make an uninformed decision, you can experience significant losses. In this guide, we provide crypto investing tips for complete beginners.
Select a Cryptocurrency Exchange
As a novice trader, the first thing you should do is to choose an appropriate crypto exchange or broker. There are two types of crypto exchanges which include centralized and decentralized. A crypto exchange is also known as a platform where you can buy and sell any cryptocurrency of your choice. A central exchange is owned and controlled by a central entity, and it allows traders to purchase cryptocurrencies using fiat currency. This type of exchange is ideal for beginners.
On the other hand, decentralized exchanges allow traders to trade crypto assets directly without going through a centralized system. When selecting a crypto exchange, there are different things you should consider like the type of payment accepted, cost of the transaction, ease of use, and security. After choosing your preferred exchange, you need to sign up for an account on the platform.
The next step is to choose the ideal cryptocurrency to trade online. There are more than 1300 cryptocurrencies currently available on the market. With so many options available, brokers at www.sortter.com explain that you need to be diligent when choosing crypto pairs. You can achieve this by using a crypto exchange comparison tool to choose the financial products that fit your needs and goals. This tool helps you compare different service providers and uses advanced algorithms to help you pick the ideal crypto exchange, investment broker, and digital bank.
A crypto exchange comparison tool provides you with critical information about various services offered such as available products, depositing options, trading fees, and other features of the platform. As a beginner, it’s essential to choose one crypto and avoid trading in several cryptocurrencies since this can be confusing. You need to take time to master the terminology used and improve your trading skills.
Do Your Research
Before you start trading, make sure you do your research and try to understand the various aspects involved in cryptocurrency trading. Every trader needs to know these. You must understand the intricacies of a specific cryptocurrency. When you invest in cryptocurrency, you should know that fundamental analysis is vital.
You need to do some research to understand the performance of the crypto during a specific period which can involve anywhere from a few weeks to a few months. Additionally, don’t easily trust the advice you get from self-proclaimed crypto experts. When conducting research, you must not trust random sources. Instead, you should follow the information provided by licensed financial advisors. This research will also help you boost confidence before you begin trading.
Create a Trading Plan
You must treat crypto trading as a business which means you should create a trading plan and stick to it. This is a blueprint that will dictate how you buy or sell your cryptocurrency. Make sure your trading plan includes market focus, analytics, and a risk map. The roadmap also helps you remain focused and target trades that fit your goals and guidelines. With an appropriate trading plan, you can align your trading strategy and manage risk to reduce potential losses.
Target Prices and Stop-Losses
Losses are inevitable when trading crypto. You can, however, limit the risk by using the stop-loss order option which automatically stops the trade once it reaches the ceiling. It is designed to protect your investment. Cryptocurrency trading is not a get-rich-quick scheme, so never allow greed to influence your decisions.
Additionally, don’t allow emotions to dictate your decisions since you can end up losing even more money. Most importantly, only invest in the money you can afford to lose. You may, for example, be tempted to invest more money by following sensational headlines, but the result may be disastrous. Other stories may be enticing as well, but respect your instincts and don’t bow to pressure.
The other important aspect you should consider is to avoid timing the market since it is impossible to enter the market at will and exit without experiencing losses. You must be prepared for the ups and downs of the crypto world since you cannot control it. Furthermore, you should avoid margin trading where you borrow money from the broker or exchange to increase your investment and trading results. When the market gets too volatile, you should know when to stop and exit to prevent further losses.
Avoid Cryptocurrency Scams
Before you enter the world of crypto trading, you should be wary of scams. Every year, thousands of crypto investors lose their hard-earned money to scammers. Therefore, it is vital to prove the exchange’s legitimacy before signing up for an account. When you are a newbie, don’t trust any individuals that offer ridiculous sums of money. Check the broker’s website for customer reviews to prove its authenticity.
Choose an Ideal Storage Method
You must keep your investments in a secure place since crypto exchanges are prone to hacking. If you trade crypto through an exchange, you can transfer your money to a cold or hot wallet. A hot wallet operates on devices connected to the internet, but this option can expose you to the risk of hacking.
A cold wallet involves any storage media like a USB or hard drive which is not connected to the internet. However, you should be very careful about your crypto wallet keys. Once you lose them, you may never recover your cryptocurrency. The challenge with a crypto wallet key is that you cannot copy it like car keys. Don’t share your key with anyone, and always avoid leaving the wallet open.
When you decide to venture into cryptocurrency trading, you must understand the basics first. Do your research and choose the ideal exchange and cryptocurrency that suits your needs. Create a trading plan and stick to it to achieve your desired goals. Finally, do not pay attention to self-styled crypto experts and always use credible sources.