What is Cryptocurrency Trading?

A cryptocurrency is a decentralized digital currency used as a medium of exchange. Cryptocurrencies use blockchain technology to secure the transactions, control the supply of additional units, and corroborate transfers. These digital currencies are stored in wallets.  The first cryptocurrency, Bitcoin was launched in 2009 by an individual or group using the pseudonym Satoshi Nakamoto.

A cryptocurrency is a decentralized digital currency used as a medium of exchange. Cryptocurrencies use blockchain technology to secure the transactions, control the supply of additional units, and corroborate transfers. These digital currencies are stored in wallets. 

The first cryptocurrency, Bitcoin was launched in 2009 by an individual or group using the pseudonym Satoshi Nakamoto. Bitcoin has gained a lot of traction since its inception. After the launch of Bitcoins, many new cryptocurrencies entered the market. These new cryptocurrencies are called ‘altcoins’. Altcoins are alternatives to bitcoins.

Cryptocurrencies have gained popularity among traders. The volatile nature of cryptocurrencies has provided good opportunities for traders to profit from cryptocurrency trading. 

What is cryptocurrency trading?

Cryptocurrency trading is a process of exchanging one cryptocurrency with another, buying and selling coins, and exchanging fiat currencies with cryptocurrencies. Before you start crypto trading, you should ensure that you have a cryptocurrency wallet and have access to an exchange that allows you to buy, sell, or trade cryptocurrencies.

Cryptocurrency trading is a 24-hour market. When you begin crypto trading, you will first start by buying your first crypto with a fiat currency. For example, you may wish to buy Bitcoins in exchange for USD. Once you have invested in one cryptocurrency, you can begin cryptocurrency trading between Bitcoin and Ripple or any other cryptocurrency pairs.

How to trade cryptocurrencies?

There are two ways to trade cryptocurrencies. One way is to buy cryptocurrency on an exchange platform. In this kind of trading, you will be the owner of your cryptocurrency and wait for the crypto price to rise and then sell it for some amount of profit. 

Another way is to trade a Contract For Difference (CFD) in a particular cryptocurrency. A CFD is a derivative product in which a broker agrees to pay a trader the difference in the value of underlying security between the opening and closing dates of the contract. 

You can hold the cryptocurrency for the long-term or the short-term. For example, when trading a Bitcoin CFD, you will also predict the BTC/USD pair. There are various differences in buying cryptocurrency and trading CFDs on cryptocurrency. 

When you buy cryptocurrency, you will store it in a wallet. But, while trading CFDs, the position is held in your trading account, which is regulated by a financial authority. When you trade with CFDs, you will have greater flexibility. CFDs are more established and regulated financial products.

How to choose the right trading platform?

There is a list of key things that you have to look for choosing a trading platform. They are :-

Available Currencies: Among various cryptocurrency trading pairs, Bitcoin to USD pair is the common one. There are other pairings available as well. It may be available on one platform and not on the other. So, whenever you choose a cryptocurrency to trade, make sure it is supported by the platform. 

Leverage: Leveraging refers to the amount of money you are allowed to trade above your initial deposit and by how much you can multiple gains. For those who want high rewards and are ready to take the risks, can choose higher leverage. Higher leverage is not for beginners in trading. Common leverage is in a ratio of 20:1 with crypto. Also, this depends on your chosen platform. 

Hedging: Hedging reduces the risks involved in taking an offsetting position on your primary asset. It offers insurance and reduces the possibility of any loss. 

Minimum Investment: It is the minimum amount you can deposit and invest with. In these criteria, different platforms will require different minimum investments. So, you need to choose the one that suits your budget. 

Customer Support: You need a platform that answers all your queries whether big or small. So, always choose an exchange that offers a big support team.  
Instant Liquidity: As the market is volatile, when you wait for a longer time for your buy order to be fulfilled, there is a higher risk of the drop in price.

How to trade cryptocurrencies on an exchange?

Trading cryptocurrencies on exchanges is a simple process :-

  • You can either transfer your existing cryptocurrency to your exchange account or you can use it to buy cryptocurrency with fiat currency. 
  • The cryptocurrency exchange will hold your cryptocurrency. 
  • You will also find other cryptocurrency prices.
  • Once you choose your desired trade, you can place your buy or sell orders.
  • The exchange will then find a buyer or seller of your match to begin trading. 
  • The exchange will then complete your transaction. 

What hours of the day can you trade cryptocurrencies?

You can trade cryptocurrencies 24/7. These cryptocurrencies are traded on the regulated cryptocurrency exchange platform. USA, Russia, and the UK are the three biggest crypto trading states. The European market hours may tend to be busy times for cryptocurrencies.

The Asian market hours are also volatile at times, even on weekends. There are big movements in the cryptocurrency prices during Sunday nights, it may be damaging for the people trading on the European time zones.

Final Word

If one cryptocurrency performs disastrously, it does not affect the overall value of your assets. Whenever such a scenario is created, you have to analyze why the value of a particular cryptocurrency is rising or falling before you invest in it. When you set up a buy or a sell order, ensure that your numbers add up. It is because even the smallest of typos can lose your huge amount. And when you trade with an exchange, make sure you will send the coins to the correct address.

Renuka
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