Cryptocurrency Trading for Beginners [2021] - Complete Guide

Published Nov 14, 21
4 min read

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The only difference is the long time periods between opening and closing a position. Trades set up through this strategy could take months and sometimes years. It is an ideal strategy for investors favoring a more hands-off approach. This strategy is sometimes called ‘HODL’ (or Hold On for Dear Fife) in cryptocurrency.

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A crypto trader would invest in a coin or token and hold it even when the prices are plummeting. Such a trader would thus be called a ‘Hodler.’ Margin trading (trading with leverage) Margin trading is not a trading strategy but rather a trading method. Adopted from the traditional stock market, it involves a trader using borrowed capital to open positions on a trading platform.

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If you score a win, the reward is much larger, and the reverse is also true. If the trade goes sideways, you also lose a lot more. ℹ️ When trading cryptocurrencies with margin, you will come across the following common terms – margin, leverage, and liquidation. is the amount of capital you stake in a position.

is the price at which a trade is automatically closed when the price moves against your position. The larger the leverage, the closer the liquidation price to the entry price. To better understand leverage, assume you enter a trade with 5x leverage. This means that your trade’s position size is 5 times the capital you staked from your own pocket (i.

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What differs is the level of risk. There are different kinds of risks, and in this section, we will discuss those related to cryptocurrency trading. Perhaps the most widespread of all is the risk that a given asset’s market price or the overall crypto market will swing unexpectedly and negatively affect your market position..

It could be caused by the failure of a trading platform or malfunction of a trading application etc.. Refers to a loss incurred due to a failure in the entire trading system. Closely related to the market risk, but this one is much direr given that it is caused not just by the market downturn but also the collapse of crucial systems within the marketplace.

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That was a systemic failure that led to a market meltdown. Now that you understand the kind of risks you are most likely going to encounter, you should factor them every time you are about to make a trading decision. Portfolio management Professional traders rarely have just one asset within their portfolio.

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And that’s where portfolio trackers come in. They are software applications for desktop, tablet, and mobile devices that help track every kind of investment you make in the crypto market. By tracking your portfolio and measuring your performance, you can easily improve upon it and make better trades. As the saying goes, you can’t improve what you can’t measure.

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You also want to know how much you are gaining or losing from a particular trade or investment. Keep in mind that you could have to maintain multiple portfolios. As a trader, you might employ different trading strategies simultaneously, meaning you are actively trading while at the same time swing trading and/or position trading.

They all work in tandem to offer you real-time data you can use to make better trading and investment decisions. How to pick the best cryptocurrency exchange There are hundreds of cryptocurrency exchanges in the market today. Some are centralized (a company runs them), while others are decentralized (a community runs them).

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But here are a few factors to consider when choosing the best crypto exchange for a beginner: This is the number of assets supported as well as the sizes of the different order books. The volume of trades will give you an idea of the popularity and the reliability of the exchange you are considering.

Let’s consider that you opt for daily trade or scalp. As we mentioned above, in this strategy, you will need to enter and exit multiple positions in a day to make a profit. This profit is dependent on your trading fees and buys/sell spreads. The lower the fees, the higher the profit margins (given other factors are kept constant)..

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This could be credit cards, wire transfers, other cryptocurrencies (crypto to crypto deposits), etc. Some platforms support a wide range of options, while others have limited options.. This is especially important in cryptocurrency. Do not compromise on this factor. A trading platform needs to have the best security in place to secure its assets and those of its customers.

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