What is cryptocurrency and cryptocurrency trading, how to begin trade?

Cryptocurrency is virtual money, payments which take place in a decentralized (uncontrolled) system.

This is the result of computer calculations; electronic registers storing information about how much a user has a cryptocurrency and where he transfers it. Cryptocurrency is stored in special electronic wallets.

With the advent of the Internet, there have been periodic attempts to create digital currency around the world. However, no one trusted these projects - and they did not gain popularity. They were too easy to fake.

The first cryptocurrency, Bitcoin, was able to solve this problem using blockchain. This system has been compared to a large book containing all the records of what is happening with the cryptocurrency. And every bitcoin owner has an independent, but identical copy of this book to others.

The entries in all the books are true and the same. Neither banks, nor the government, nor the creator of the cryptocurrency can fake these records. In other words, there is no single controller in the blockchain, the system is controlled by many participants. The system, built on mathematical calculations, protects digital currency from counterfeiting or hacking.

Today, cryptocurrencies are gradually becoming a serious competitor to the traditional financial system. Ordinary modern money issued by central banks is not backed by gold or other precious metals.

Central banks do not control the exchange rate of national currencies, but they can influence the amount of money in circulation and other parameters. Cryptocurrency, in comparison with conventional currencies, is transparent, and its quantity is limited by mathematical formulas, and not by the interests of states.

As the popularity of cryptocurrencies grew, huge investment flows were drawn into this area. The infrastructure began to develop. The popularity of digital money grew, followed by a rise in value. Traders and speculators who were actively involved in this process could not pass by.

Trading is cryptocurrency trading, most often it is carried out on specialized platforms, the so-called exchanges, but in recent years, derivatives from cryptocurrency have begun to be added to the listings of traditional exchanges and numerous brokerage companies. It also contributed to the development of the market.

The most popular coins
The most popular coins

The cryptocurrency market is different from the traditional market and not everyone wants to learn the intricate terminology of the market, study the blockchain, etc. It was difficult for these people to start trading cryptocurrency on traditional cryptocurrency exchanges.

With the advent of cryptocurrency derivatives, the situation has changed. Now almost everyone can start trading cryptocurrency with a brokerage company. And you don't need to study blockchain for that. You can open an ordinary and familiar terminal and trade. At the same time, not only cryptocurrencies, but also traditional and familiar financial instruments and currency pairs are available to you on one trading account with a brokerage company.

Litecoin Moving Average Deviation
Litecoin Moving Average Deviation

What do you need to trade cryptocurrency?

It all depends on your goals, objectives, capabilities, your experience. Why do you want to start trading cryptocurrency?

If you want to invest for a long period of time, then in this case you will have to learn the basics of the functioning of the cryptocurrency market and open an account on a cryptocurrency exchange. Start a cryptocurrency wallet, and before that, study their features, types and types. Only in this case you will be able to secure your investment. Unfortunately, hacking is not rare. Every month, cybercriminals steal thousands and millions of dollars worth of cryptocurrencies from wallets, exchanges and other platforms.

If your goal is short-term speculation and you want to start trading cryptocurrency to profit from short-term price changes, then this is completely different. In this case, you do not need to study all the basic functioning of the cryptocurrency market. To start trading cryptocurrency, you can simply open an account with your familiar and familiar brokerage company.

Yes, not all brokers provide the ability to trade cryptocurrencies. Many companies have added only 3-5 major tokens to the list, but still there are companies that offer a fairly wide selection of cryptocurrencies and fairly attractive trading conditions.

Therefore, if you do not know how to start trading cryptocurrency, then the first step is to find a suitable brokerage company. It will be, in every sense, a properly start trading cryptocurrency, since they provide demo accounts for novice traders. In this case, you will be able to start trading cryptocurrency without investing your funds and without risk.

Bitcoin Cash Stochastic Oscillator
Bitcoin Cash Stochastic Oscillator

Main tradable cryptocurrency

Despite the fact that there are now over 2,000 cryptocurrencies, Bitcoin continues to dominate altcoins.

Over the past 13 years, a lot of digital coins have appeared on the market, and it is possible that in the future, some of the altcoins may put an end to Bitcoin's leadership. But until that time has come. Bitcoin continues to hold the lead across the board.

The reason for the popularity of Bitcoin lies in its transformation. At the beginning of its journey, bitcoin was simply an implementation of blockchain technology, and was of interest to a narrow group of people.

Now the coin is a real exchange commodity with the properties of a defensive asset that allows you to preserve value. Bitcoin mining has evolved from a hobby for computer geeks to a new economic industry.

Bitcoin MACD indicator
Bitcoin MACD indicator

How to analyze cryptocurrencies?

There are two main methods of market analysis:

  • technical analysis.
  • fundamental analysis.

While the cryptocurrency market is different from traditional financial assets, it also operates on a supply and demand basis. It is the dynamics of supply and demand that are the main driving force behind the value of digital coins. Therefore, the classical methods of analyzing the traditional financial market are also applicable and actively used in the cryptocurrency market.

If you do not know how to start trading cryptocurrency, then the first thing you need to do is learn the basics of these two analysis methods.

Technical analysis involves the use of a graphical model to predict further price movement. This is a fairly common approach among traders, since it is enough to have access to price movement charts for a certain period to use it.

Fundamental analysis is more time-consuming. In this case, the trader first analyzes not charts of price changes, but internal and external factors that affect its dynamics. With regard to the cryptocurrency market, these can be parameters such as the speed of transactions, the team that created the project, the popularity and relevance of the project, competition, etc.

In this case, you need to evaluate how the event in the present will affect the course after a certain time. This method of analysis requires more time from the trader, and it works more efficiently over a long distance.

Ethereum Bollinger Bands
Ethereum Bollinger Bands

Trade planning

Planning is the key to success in any activity. The trading direction is no exception. At the initial stage of professional activity, a trader's trading plan is the first personal document that contributes to success. Developing a trading plan is a properly start trading cryptocurrency.

In this case, a trading plan is drawn up in each case individually. Everyone has their own goals, objectives and motivation, so there cannot be a single template. The main components of a trading plan are: motivation, general goals, trading strategy, money management, etc.

Ultimately, a trading plan can change the whole attitude towards trading. Especially if you are a beginner and just start trading cryptocurrency. In essence, he turns the mentality around, shifting priorities from chasing quick money to becoming a professional in a new business. By creating trading plans, we begin to work effectively and reliably insure ourselves against "accidental" losses. Trading consists of many factors that need constant monitoring. Therefore, following a trading plan is a vital part of this business.

General trading strategies

There are countless ways to profit from cryptocurrency trading. Trading strategies will help you organize these techniques into a single structure that you can follow later on. Thus, you will have the opportunity to constantly monitor and optimize your strategy.

Since the number of different trading strategies is so large that it is not possible to name their exact number, we will consider only some of the most common ones.

At the same time, when choosing a trading strategy, you should be guided exclusively by your own characteristics and preferences. You may not be able to immediately choose a trading strategy for yourself and you will have to try and test several in order to understand what exactly you need. If you are still a beginner and are not interested in how to start trading cryptocurrency, you better test your ideas on a demo account. This will protect your funds.

A demo account is a properly start trading cryptocurrency.

Bitcoin Relative Strength Index (RSI)
Bitcoin Relative Strength Index (RSI)

There are both passive and active trading strategies.

Active trading strategies require more time and attention. We call them active because they involve constant monitoring and portfolio management. It can be an intraday trading strategy based on technical analysis, technical indicators, etc.

It could be swing trading. This is a type of long-term trading strategy that involves holding positions for several weeks or a month. In a sense, swing trading is in the middle between day and trend trading.

It can be trend trading (position trading). This is a strategy that involves holding positions for a longer period of time, mostly for at least several months. As the name suggests, trend traders try to take advantage of market trend directions. This type of trading is done by entering a long position in an uptrend and short in a downtrend.

Scalping is one of the fastest trading styles. Scalpers don't try to use big moves or long trends. This strategy focuses on high frequency trades with small changes in the price of an asset. Such trading involves the formation of deals on spreads between supply and demand, liquidity gaps or other shortcomings in the market.

Passive investing strategies provide a more relaxed approach and do not involve active portfolio management, reducing the investment of time and attention. While there are differences between trading and investment strategies, trading ultimately means buying and selling assets in the hope of making a profit from it.

Buy and Hold is one of the passive investing strategies in which traders buy assets and hold them for a long time, regardless of market fluctuations.

This strategy is used in long-term investment portfolios, where the idea is to simply enter the market without considering the duration of holding the assets. The idea behind this strategy is that for a sufficiently long storage time, timing and entry price will not matter much.

These are the main directions and strategies used in the market. To decide on a strategy, you need to study in more detail the features of a particular strategy and try. Only in practice will you be able to understand whether this strategy suits you or not.

The financial services provided by this website carry a high level of risk and can result in the loss of all your funds. You should never invest money that you cannot afford to lose