There are thousands of cryptocurrencies in circulation, so it can be difficult to know where to start if you want to capitalize on their volatility and engage in trading. However, crypto trading should not be viewed as a simple method to get rich quickly; you must be knowledgeable about the subject, so we’re here to provide you with a quick summary of the fundamentals of how to study cryptocurrency.
How to Study Cryptocurrency
1. DYOR: Do your own research
The first guideline for cryptocurrency trading is to do your research. Each cryptocurrency has unique characteristics and use cases (some don’t even have a true use case! ), so always analyze why you believe the price of that cryptocurrency will climb in the future. Read their whitepaper to learn more about the project and the founders’ ambitions, or read what other investors have to say about the coin before investing!
2. Only invest money you can afford to lose
Finally, all cryptocurrency trading is risky because there are no assurances in life. And, while the volatile nature of cryptocurrency allows for enormous wins, it can also lead to big losses. Don’t invest your entire life savings, especially if you’re new.
3. Diversify your portfolio!
Following on from our last point, it’s crucial to remember that if your transaction fails, it won’t damage your entire portfolio. That’s why you should buy and sell a variety of assets rather than place all your eggs in one basket with a single token.
Taking things a step further, consider using the barbell method, which involves investing 80% of your assets in low-risk investments and 20% in higher-risk products. This strategy is considered to allow your gains and losses to balance while still ensuring that you profit overall.
4. Understand the order book
Understanding an order book helps you grasp how Bitcoin trades are structured. In any trade, there are winners and losers, and you should buy low and sell high.
When there are more purchase orders for an asset than sell orders, the price often rises since there is greater demand for the cryptocurrency. In contrast, when more people sell than buy, prices fall. Many exchange interfaces, like Wirex’s, display whether there are more sales or purchases in the market as a red or green color on the graph. This might help you determine whether it’s a good time to buy or sell.
5. Undertake technical and fundamental analysis
Technical and fundamental analysis are the two primary trading analysis approaches used to better understand cryptocurrency behavior. Fundamental analysis examines current economic and financial issues that may influence the token’s price, such as news events like the government declaring an increase in inflation rates. Alternatively, technical analysis examines the complete price history of the token.
6. HODL through the dips
HODL is an important phrase in the growing list of cryptocurrency slang. It began in 2013 when a tipsy forum member posted a topic titled “I AM HODLING” (a typo of holding) to express his intention to keep Bitcoin no matter what. Since then, HODL has stuck around and is now used as an acronym for Hold On for Dear Life, referring to the view that cryptocurrencies represent the future and should not be sold during market downturns.
There are hundreds of tales out there of people who acquired Bitcoin early on and sold it when the price hit a few dollars, never expecting it to reach the current price—proof that if you HODL, you may earn even more than you expected!
7. Consider market cap, not just price
It’s vital to consider market capitalization in terms of price because the price of one share isn’t a fair indication of a company’s entire value, size, or profitability. In cryptocurrency, a market cap is calculated by multiplying the number of accessible coins circulating (which may increase over time if tokens are still created) by the current price, which is usually in dollars.
As a result, a corporation may have a low price per share due to the large number of available shares while maintaining a high market value, or a high price per share with a low market cap.
We rank cryptocurrencies based on market capitalization rather than price per coin.
8. Learn various trading strategies
There are other trading options available beyond simply buying and selling cryptocurrency as you see fit. This includes day trading, margin trading, and swing trading, to mention a few, and it’s critical to learn what works best for you and the advantages of each before implementing it as your approach.
How to Trade Crypto for Beginners
There are various options for trading and investing in cryptocurrencies. This crypto trading guide explains how to begin trading crypto on a centralized cryptocurrency exchange.
So, how do you get started in crypto trading? First, keep in mind that local restrictions and tax laws differ widely over the world. You can then proceed with the instructions listed below.
Basic Steps in Crypto Trading
Step 1: Signing up for a crypto exchange account
It is critical to select a cryptocurrency trading platform properly. The most common sort of trading platform is a bitcoin exchange. Traders typically evaluate the reputation, compliance, security, functionality, and listed cryptocurrencies on these exchanges.
To open a crypto exchange account, you must provide personal information and pass the Know Your Customer (KYC) verification process. KYC in cryptocurrency refers to the process of validating your identity by providing personal information to meet regulatory requirements. Accounts should be configured with strong passwords, two-factor authentication (2FA), and other security procedures.
Step 2: Adding funds to an account
Funds are typically added to a cryptocurrency exchange account via wire transfer, debit or credit card, or by transferring a cryptocurrency balance from an existing cryptocurrency wallet. Once you have the funds, it is as simple as purchasing specific cryptocurrencies and holding them on the exchange until their prices change sufficiently to sell them, hopefully for a profit.
Step 3: Selecting a crypto to trade
Many expert crypto traders carefully select cryptocurrencies based on technical and fundamental analysis. Consider cryptocurrency trading to be similar to buying a car. Technical analysis examines the car’s speed, engine performance, and mileage to anticipate how it will function in the future, whereas fundamental analysis examines the car’s brand, reviews, and safety features to establish its overall dependability and worth.
While both approaches aid in determining if the purchase is beneficial, they focus on distinct factors: performance statistics and the car’s intrinsic value. Now, let’s grasp these differences in the Bitcoin context:
- Technical analysis: Technical analysis for cryptocurrencies involves examining past price movements, trading volumes, and other market data to detect patterns and trends. They use charts and technical indicators like moving averages and candlestick charts to forecast future price moves. They want to make short-term trading decisions based on trends observed through charts and market emotion.
- Fundamental analysis: When traders conduct fundamental analysis on cryptocurrencies, they look at factors such as the development team, practical uses, the technology behind it, market adoption, partnerships, regulatory compliance, and the overall health of the blockchain to determine the asset’s intrinsic value. Their purpose is to assess the cryptocurrency’s long-term potential and viability as an investment.
Step 4: Making a trade
Making your initial transaction or purchase entails picking a trading pair, such as USD/BTC, which implies you’re exchanging fiat US dollars for Bitcoin. Before confirming an order, traders must specify the kind of order (market or limit) and the amount.
Step 5: Storing cryptocurrency
Traders hold Bitcoin funds for immediate trades on the exchange. Long-term Bitcoin balances are best stored in a cryptocurrency wallet, with a hardware device being the most secure alternative.
FAQs
How do I start learning cryptocurrency?
Create and fund your account. Once you’ve decided on a broker or exchange, the next step is to open an account.
Buy cryptocurrency. After you’ve set up and validated your account, you can make your first cryptocurrency purchase.
Can you make $100 a day with crypto?
If you’re new to cryptocurrency day trading, here’s what you should know to start making money. The most effective technique to make $100 per day with Bitcoin is to invest around $1000 and wait for a 10% increase on a single pair. This is a more reasonable approach than spending $200 and expecting 50% growth in the pair.
Is crypto easy to learn?
Understanding the fundamental ideas of Bitcoin, blockchain technology, and digital currencies can take anything from a few hours to a few weeks with beginner-friendly materials such as articles, explainer videos, or beginning courses.
Conclusion
When it comes to cryptocurrencies, one of the most difficult problems for investors is not getting swept up in the frenzy. Analysts continue to warn investors about the volatility and unpredictability of cryptocurrencies. If you’ve decided to learn how to study cryptocurrency, you should conduct research just like you would with any other investment.
Consider why you’re interested in this particular investment niche, and become acquainted with cryptocurrencies and blockchain technology to better assess whether this type of investment opportunity is profitable for you.
