The recent rise of cryptocurrencies saw an unprecedented amount of individuals passing through the proverbial veil to transition from conventional to digital investments. Yet, it seemed that many of these traders did not know a thing about cryptocurrency trading basics.
Having new traders in the cryptocurrency space brought about both positive and negative aspects, since these bright eyed individuals were eager to profit from the phenomenon – which was at its peak in the last two months of 2017.
This led to the rise of initial coin offerings (ICOs), where bad actors used this new method of crowdfunding to their advantage, giving birth to scandals such as Confido, AriseBank, and perhaps the most notorious of them, BitConnect – which did not only complete its ICO but went on to manipulate users’ funds in what could be considered as a Ponzi scheme for months before its eventual crumbling.
These issues just went on to show just how little it takes for fraudulent parties and scam artists to take crypto away from unsuspecting investors. This pointed to the fact that more information and education was needed in a space that was a wild wild west of sorts.
The interest of new users has since died down a bit with the value of Bitcoin now flirting with the $8435 range, less than half of its $20,000 all-time high in December 2017. However, due to the ever fluctuating nature of cryptocurrencies, it is only a matter of time before the value starts at a bullish run again, raising user interest with it.
Therefore, we thought that it was about time for us to compile a short list of dos and don’ts for those who are new to the cryptocurrency industry.
The purpose of this post is to pose suggestions to potential investors and traders to save them from potential ruin like this Reddit user unfortunately experienced, if we help to minimize the chances of this occurring, we’ve done our part.
Learning the basics of cryptocurrency investing and trading
When you start learning cryptocurrency trading basics, there is a lot that you will be required to take in. It could be overwhelming at times, but it can be broken down to a few simple steps that we will be talking about here today. Let’s start!
1) Learn cryptocurrency trading basics:
So you want to invest in cryptocurrencies, how do you buy them?
You can’t just walk to your local newsstand purchase cryptocurrencies (unless you’re in Australia).
Cryptocurrency trading has grown to become a well-established industry with multi-million dollar businesses running in famous cities of the world.
To buy cryptocurrencies, you need to go to a cryptocurrency exchange. You can simply do so by visiting their website, or in many cases, downloading their app.
Coinbase, Binance, Bittrex, Bitstamp and Kraken are some of the most famous worldwide exchanges to trade cryptocurrencies. You can begin learning about them by going through their websites, and studying additional resources online.
For beginners, Coinbase remains the easiest as it has a very easy to use mobile app, but it charges a higher rate than other “complicated” exchanges. That being said, since the world of cryptocurrencies is an ever evolving one and information changes dynamically, you should make the decision to go with an exchange by learning about it thoroughly.
Once you have found an exchange that suits you, you can go ahead and register with it, complete its verification procedures (which may take some time), and you will be all set.
Pro Tip: Most of these exchanges allow you to access your cryptocurrency information easily, but as you start holding different cryptocurrencies, you might need an additional wallet.
You are better off taking your cryptocurrencies and tokens out of the exchange and holding it on an external wallet, hardware or software. If you are unsure of what a wallet is, see below.
*Think of the wallet as an interface to “see” your cryptocurrency online. This is basically where you can store the information about your cryptocurrency holdings. As with your other online properties, you should protect your wallet access information and private keys to the utmost level, and use additional authentication wherever necessary.
This is the first section of the cryptocurrecny trading basics, lets move onto second section.
2) Learn as much as you can, even if you think you know a lot:
After being set up with an exchange, you might just want to dive in and get your hands on that crypto already. But there is some more information that you need to know first.
We understand that you might have been listening to the advice from that friend of yours who has been going on and on about cryptocurrencies, but there is no good reason to blindly trust it: it is your money that you are risking after all. Why shouldn’t you take charge of deciding where to put it?
Do your due diligence. If are interested in investing in famous cryptos such as Bitcoin or Ethereum, take your time to learn more about them by going through a few sources in order to ensure whether they are the right fit for you.
Pro Tip: Prominent investors say that one should invest 1% of their net worth in Bitcoin and hold that for the long term.
Pro Tip: Understand your investing objectives, are you using crypto as part of your long term portfolio or day to day trades? Know yourself and what you are capable of doing.
This is the second section of cryptocurrency trading basics, lets move onto section three!
3) Be wary of ICOs and new coins:
If you hear about a new digital coin and want to invest in it, then it gets trickier from there. Not much information will be available besides a few online sources, and that is where you must be thorough.
For new coins, start evaluating from their website. See if the information, including the detailed whitepaper, is properly presented. Even if you cannot truly understand the technical details, you can assess the basics by seeing if there are any typos, haphazardly put together sentences, or anything else that seems out of place.
Check if the team members behind the new project hold any experience. Search for their online profiles, sepcifically, check their linkedin and what they have done in the past.
Similarly, check if the project has any online social media properties where users are discussing it.
Lastly, do yourself a favor and search online about the company and check if anyone, at any other platform, is talking about it. Check those pages and preferably look for ones on discussion sites such as Reddit, as that is where you can get additional information.
Pro Tip: Be extremely wary of projects that offer unprecedented profits while not properly defining how they will obtain those gains for you.
Pro Tip: Many investors can find prominent channels for projects on reddit, telegram, twitter and maybe facebook.
This is the third section of cryptocurrency trading basics, lets move onto section four!
4) Practice patience:
Whether it is about buying a famous cryptocurrency or a new altcoin (coins other than Bitcoin), do not ever do it just because “everyone else is doing it”, or if you are doing it out of the fear of missing out on an opportunity.
The same practice applies to when the coins you already hold start going up in value, and you either sell them instantly or try holding on to them just so you could make more profit. Sometimes, when you sell them too soon, you miss out on additional profit that you could have gained; while at other times, you do not sell them quick enough and suffer losses.
While following your instincts is commendable, that notion needs to be revisited here.
There is no definite way to tell whether a cryptocurrency will rise in value or tumble down, but you can get an idea of what is about to happen if you follow the updates from various exchanges, specifically, by checking metrics like volume, price and change in percentages over 7 day periods in regards to growth or loss.
Additionally, learn from the respective forums of each coin, track the news, and get yourself in social discussions. If you have a question, then go ahead and post it in a subreddit and seek further information.
Remember, since it is your money that is at stake here, you need to take out time to plan your actions on what to do with it. Acting hastily towards your investments may not end well.
This is the fourth section of cryptocurrency trading basics, lets move onto section five!
5) Don’t Stress:
If you are stressing about your money in the cryptomarkets, you’ve done something wrong. Never invest more than you can afford to lose. We’ll say it again for added emphasis. NEVER INVEST MORE THAN YOU CAN AFFORD TO LOSE.
By practicing these simple points, you should be able to perform basic trading activities. There is a lot of information that can be posted here, but as we mentioned earlier, you need to start with the basics.
Keep in mind that you are navigating through an industry that in itself is in the phase of evolution, and so you will need to be on your feet at times to determine what to do with the information that is thrown at you. However, at times like that, remind yourself that is just a part of trading and investment, and by assessing certain situations with a calm mind, you will be able to make the most difficult of decisions with relative ease.
This is the fifth section of cryptocurrency trading basics, lets move onto section six!
6) Start Small:
A key aspect of cryptocurrency trading basics is to keep it simple. The cryptocurrency industry is complicated enough as it is. No need to add more complexity.
The more coins you have to keep track of, the less chances you have of making profit and the higher chances of loss. Start with a few coins that you understand and can track on a regular basis. The simpler you keep things, the safer your money is and the higher your chances of producing gains.
Pro Tip: It’s all fun and games until the tax man comes knocking. Make sure you understand the tax ramifications of your buys and sells and make decisions accordingly.
For advanced information and to learn more about trading, exchanges, and all things cryptocurrencies, be sure to check out our other posts.Follow us on Social Media: