How to Get Started With Cryptocurrency Trading For Beginners
By: Sarah Kordyban
Tags: Investing Tips, Beginners Guide, Cryptocurrency, Beginner Trading, Cryptocurrency Investment

With many people making large profits on the crypto market, you might be enticed to dip your toes in the cryptocurrency pool full-time or on a side hustle basis. Unfortunately, the crypto market can be a scary place to start investing if you don’t understand what you are doing. Fortunately, there are many opportunities to succeed in this industry if you are equipped with the right skills. Before trading, it is recommended that proper research is done on the market, including some basic terminology that is common in the industry.

Start With Your Own Research

Before trading any cryptocurrency, it is crucial to understand what you are investing in and how the crypto market works. There are many resources available, including whitepapers, YouTube videos and even our blog. It is recommended that you start by researching three key areas.

1. The Cryptocurrency Market

Like the stock market, the price of cryptocurrency fluctuates based on the principles of supply and demand. A successful trader intends to profit by buying low and selling at a higher price. Although nobody can time the market perfectly, looking at historicals from a few months or even a year ago can help you to identify trends and leverage this to your advantage.

Cryptocurrencies typically occur in pairs. One example is BTC/USD, which shows the price of Bitcoin against the US dollar. There are many other commonly traded pairs that, with some knowledge, can help you leverage better deals.

2. Trading Cryptocurrencies

Purchasing cryptocurrencies on an exchange is the actual purchase of a coin. Once you make a purchase, you will need to have a secure wallet to store them until you decide to sell them. Alternatively, some traders explore the concept of futures trading, where you trade coins that don’t technically belong to you. In these scenarios, traders bet on whether the price will go up or down. Although traders can be significantly rewarded, the chance always exists that they will lose the entirety of their investment.

3. Basic Cryptocurrency Terminology

To truly understand the crypto market, you will need to talk like a true trader. That means learning some of the key phrases used in the industry. Here are a few terms to add to your dictionary.

HODL: Slang used within the crypto community that stands for “hold on for dear life” about holding an asset rather than selling it.

SAFU: The acronym “SAFU” originated from a misspelling of the word SAFE and is now used to refer to “Secure Asset Fund for Users.” This is an emergency reserve held to protect any assets that are invested.

Altcoin: Any digital currency that is not Bitcoin (BTC).

Blockchain: A blockchain is the digital ledger system first introduced in the Bitcoin whitepaper back in 2008.

Trading platform: An online location where buyers and sellers of cryptocurrency are matched to conduct transactions.

What To Look For As A Beginner Trader

Now that you’re equipped with some basic terminology surrounding cryptocurrencies, you might be wondering how you get started. Here is a simple four-step process for you to follow.

1. Find A Reputable Exchange

To begin trading, you will require a cryptocurrency wallet and an exchange. It is important to note that a cryptocurrency exchange is not the same as a regular stock exchange, meaning you’ll require a different platform to conduct these transactions. To keep the process simple, many traders have found it helpful to pick a platform that acts as an exchange and wallet in one. A more in-depth explanation of cryptocurrency exchange is to follow.

As a beginner trader, you will be presented with several cryptocurrency exchanges. It is recommended that you choose one with a good reputation. Reputable exchanges will directly impact how you trade, the community you are trading with, and your purchasing habits. The cost might be a little more, but it will pay off when you have the added security knowing that your investments are safe. In Canada, Bitbuy has been the trusted choice since 2016. But don’t just take our word for it. You can do your research about Bitbuy as a reputable exchange by asking these questions:

Are customers happy with the services provided?

Chance are there is something to be said about wisdom of the masses.

Has the platform been hacked recently?

If so, you should also ask if the platform has an insurance policy in place for hacks. Cryptocurrency is not regulated by the government, meaning investments lost through hacking might not ever be recovered.

Are people complaining about this platform?

Although complaints should be taken with a grain of salt, many criticisms or links in bad experiences say a lot about the platform.

Does the platform ask for ID or verification of identity?

While the other questions are pretty straightforward, this one might require a little bit of explaining. A platform asking for ID is usually a strong indicator of security, especially in Canada, since this aligns with the national law.

To find the answers to these questions looking on social media platforms like Twitter, Quora, or Reddit can provide you with some useful insights. Once you have selected a cryptocurrency trading platform, it is time to open your account. The registration process is easy and will usually only ask you to verify your email and phone number. Therefore, beginner investors have no reason you can’t try out a few before finding one that works for you.

2. Selecting Prominent Coins

New altcoins can provide substantial profit opportunities. However, as most traders will tell you, with more reward comes more risk. As a beginner trader, one word of wisdom is to stick to the more prominent coins since the likelihood of them disappearing from the market and the ability to make predictions about pricing are minimal. To get started, Bitcoin and Ethereum are two popular choices.

Bitcoin (BTC): The first cryptocurrency launched by someone (or someones) by the name of Satoshi Nakamoto. To this day, Bitcoin is still known as the king of cryptocurrencies.

Ethereum (ETH): Ethereum was created on a platform designed to create smart contracts and decentralized apps.

Other coins commonly available are Stellar Lumens (XLM), Ripple (XRP), Litecoin, Bitcoin Cash and EOS. As you learn about the industry and culture surrounding cryptocurrency, you can begin trading altcoins with smaller margins.

3. Ensure You Have Proper Security Measures in Place

Storing cryptocurrency requires a little more than an average wallet. Your wallet includes a private and public key, a string of letters and numbers that allow you to store, send and receive cryptocurrencies. As an overview,

Private key: A key that is kept private to the trader and gives access to individual funds.

Public key: A public key is an address that can be shared with public parties with the intention to receive funds.

You can store these keys in either a hot or cold wallet. A hot wallet will either be a wallet on your desktop, on an app or online (in conjunction with the exchange you are using). An online wallet is necessary to conduct trades; however, like anything on the Internet, the opportunity to be hacked still exists. So, when setting up your account, you should be mindful that you are creating a strong password and using 2 Factor Authorization (2FA) to secure your account against hackers. Setting up 2FA may require the verification of your phone number, where a code will be sent when you log in. The extra step might sound tedious now, but you will be thankful knowing your hard-earned savings are secure.

In addition to your hot wallet, it is recommended that you keep the majority of your funds in what we know as a cold wallet. This is a print out of your keys that have been encrypted and are now stored, not on the Internet.

4. Add Funds To Your Account

After your account has been set up, it will be time to add funds to your account. Methods of doing so may differ; however, most widely known platforms will offer opportunities to use Interac eTransfer or Bank Wire.

Picking Your Cryptocurrency Trading Strategy

Now that you’ve done your research, picked your exchange, set up security features and bought your coins, you are ready for an exciting part! That’s right; it is time to consider strategies for buying and selling cryptocurrencies. Rather than becoming overwhelmed with the information available, it is important to remember that there is no luck in trading. It is all about minimizing your risk and maximizing profit potential.

Hold on For Dear Life

One of the easiest strategies for beginner cryptocurrency traders is long term holding or “hodling” (as it were). To conduct this strategy, traders are encouraged to buy an asset and hold onto it. Yes, it is that simple! Little knowledge is required since this strategy works based on the premise that cryptocurrencies tend to experience significant growth over some time. Many have been successful in purchasing Bitcoin off a popular exchange and watching it grow.

Minimal supervision is required since looking at prices too often can cause you to take action too early or allow your fear to take over, causing you to lose out on added profit potential. At the same time, cryptocurrencies are known to be volatile in the short-term but may be more predictable in the long-term. It is important to note; growth is also not guaranteed, so to reduce your risk further, purchasing coins in smaller amounts (a process known as cost-averaging) can increase the chances of you buying “low.”

Day Trading

On the other end of the spectrum is a strategy known as day trading. As the name suggests, this beginner cryptocurrency trading strategy is the act of buying and selling an asset within the same day. Since cryptocurrency is so volatile, traders have the opportunity to play this to their advantage. To be successful, a proper plan is necessary, including setting appropriate stop losses. A stop-loss order is the request to buy or sell a given asset once it hits a predetermined price.

Day trading can be useful, but it is also riskier than the HODL strategy since traders are more involved with watching the markets and responding accordingly.

Swing Trading

A slightly longer-term beginner cryptocurrency trading strategy is swing trading. Rather than buying and selling a crypto asset within the day, traders will watch volatility waves over a few days or a week before taking action. To take advantage of these swings, traders will use technical and fundamental analysis to look for profit opportunities.

Trend Trading or Position Trading

This trend involves holding onto a cryptocurrency asset for a few months to take advantage of a directional trend. Trend trading is successful based on the premise that the cryptocurrency will continue to move in the movement’s direction. Unfortunately, this is not only the case, and trend reversals need to be accounted for. As one of our cryptocurrency trading tips for beginners, we encourage you to only leverage this strategy if you have the time to do the necessary research for technical indicators and manage your risk level to the best of your abilities.

Index Investing

One of the most common strategies for beginner investors in the stock market is taking advantage of exchange-traded funds (ETFs). A similar approach can be used in cryptocurrency markets since several crypto indexes exist. Purchasing a crypto index allows a beginner trader to buy a basket of assets that will likely offset one another in terms of performance. As a result, there is less risk and activity involved. More recent strategies offer tokenized indexes that focus on a critical industry or operational capacity.

Start Trading Cryptocurrencies Today

Of course, before you start implementing any of the steps or strategies mentioned, you should be ready to conduct your own research. Any opinions and advice in this article should act only as the starting point as to which you start learning about the cryptocurrency market and your role. After doing so, a platform like Bitbuy can be an excellent place for beginner traders to start.

This is where I started my trading journey and have found it easy to use for beginners (like myself). You can start an account in just a couple of minutes using their website.