Because cryptocurrency is such a volatile asset, many investors enjoy trading it. Trading cryptocurrency can provide much higher returns than traditional investments if you can time the market correctly.
Cryptocurrency traders frequently have one of two objectives: to accumulate Bitcoin or to profit in USD. In a crypto bull market, it's relatively easy for your portfolio's USD value to rise, but it's more difficult for Bitcoin's value to rise. By actively trading your cryptocurrency, you run the risk of losing it to the market. Due to the volatility of cryptocurrency prices, it is not uncommon for traders to lose money quickly when trading cryptocurrencies.
How to Trade Cryptocurrency
Take a look at the 5 steps to cryptocurrency trading.
Step 1: Open an account with a cryptocurrency brokerage
Unless you already have cryptocurrency, you'll need to open an account with a cryptocurrency brokerage. Binance, Coinbase, bybit and Cryptocom are among the best cryptocurrency brokerages available. All three of these options provide a simple user interface as well as a wide range of altcoins to choose from.
To open an account, you'll need to provide personal identification information to your crypto brokerage, just like you would with a stock brokerage. When creating an account, you will need to provide your Social Security number, address, date of birth, and email address.
Step 2: Make a deposit into your account
After you've registered with a cryptocurrency brokerage, you'll need to link your bank account. Most cryptocurrency brokerages accept bank funding via debit cards and wire transfers. Wire transfers are typically the least expensive way to fund your account.
Step 3: Select a cryptocurrency to invest in
The majority of active cryptocurrency traders put the majority of their money into Bitcoin and Ethereum. Because these cryptocurrencies move more predictably than smaller altcoins, trading with technical indicators may be simpler.
Many cryptocurrency traders invest a portion of their capital in smaller altcoins. Although small and mid-cap cryptos are riskier than large-cap cryptos, they have a greater upside potential. Many small altcoins have risen more than 1,000% in a matter of months, making them appealing investments for risk-averse investors.
Step 4: Decide on a strategy
There are numerous trading indicators to choose from, and most traders consider multiple factors when buying and selling cryptocurrency. If you're new to investing, you should think about buying a cryptocurrency trading course.
If you're a seasoned trader, you may already have a stock trading strategy. Cryptocurrency trading strategies are similar to stock trading strategies. Elliott Wave Theory is a personal favorite trading strategy that many traders employ. Because Elliott Wave Theory focuses on the psychology of market sentiment, it works especially well for speculative assets such as cryptocurrencies.
Step 5: Store your cryptocurrency
If you're actively trading cryptocurrency, you'll need to keep your funds on the exchange in order to access them. If you intend to keep your cryptocurrency for the medium to long term, you should get a cryptocurrency wallet.
There are two types of cryptocurrency wallets: software wallets and hardware wallets. Both are secure, but hardware wallets provide the most security because they store your cryptocurrency on a physical device that is not connected to the internet. Many investors trust Ledger as a great hardware wallet brand to store their crypto assets on. If you're looking for a free software wallet, there are several options on iOS, Google Chrome, and Android.
Atomic wallets is one of the best software wallets for cryptocurrency traders. The mobile wallet protects your digital assets with secure 3-factor authentication, providing comparable security to other wallets on the market. Furthermore, Atomic wallets allows you to buy, sell, and earn interest on digital assets directly from your wallet.
The Benefits and Drawbacks of Investing in Cryptocurrencies
The high volatility of cryptocurrency attracts investors. It is not uncommon for the price of a cryptocurrency to fluctuate by more than 10% in a single day. This is great if you want high returns, but if you're a risk-averse investor, cryptocurrency may not be for you.
Trading Cryptocurrency vs. Stock Trading
Cryptocurrency trading is frequently regarded as more risky than stock trading, but this is dependent on the stocks or cryptocurrency being traded and how it is traded.Trading options can be just as risky as trading cryptocurrency.
Before you trade cryptocurrency, you should be aware that you run the risk of losing money to the market. If you truly believe in the future of cryptocurrency, investing in it for the long term may be more beneficial than trying to time the markets.
DISCLAIMER
The author's or anyone else's views or opinions expressed in this article are for informational purposes only and do not constitute financial, investment, or other advice. Investing in or trading in crypto assets carries a financial risk.
IMAGE CREDIT
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