This beginner’s guide to cryptocurrency trading will give you a starting point and walk you through this exciting journey. In doing so, you can feel confident as you begin to trade the right coin, pick the best broker/exchange, place your first trade, and more.
Cryptocurrency markets and related digital assets attract speculative capital like moths to a flame. Millions of novel traders tried their hand over the last few years, but most of them have never reached their full potential. The majority of those have not mastered the basic skills needed to be on the way to increasing odds of their success.
A better approach is to learn how to trade these volatile assets with nuance and discipline.
What is Cryptocurrency Trading?
The cryptocurrency market is set apart from the traditional market in many ways. Bitcoin and other cryptos became an asset class of their own. However, the fundamentals remain the same.
Simply put, cryptocurrencies are digital assets that can be used just like conventional currencies. They can be sent, stored, and exchanged. However, blockchain technology has also opened the doors for more complex systems to be built within them, which adds weight to their intrinsic value.
Most importantly, digital assets are not controlled by any centralized entity and, unlike fiat currencies, crypto relies on blockchain technology in order to keep tabs on all transactions. As so, cryptocurrencies set themselves apart from other assets due to their decentralized and immutable nature.
With this being said, cryptocurrency brings a whole new level of complexity to the table. One must account for the intrinsic value that is provided in the ability to transact freely and with little to no fees or waiting times. Moreover, more complex assets, carry with them the value of industries like DeFi.
Ethereum and other smart-contract platforms allow for financial services to be created and executed on the blockchain automatically. This creates demand for the native network asset which is required to pay transaction fees, similar to Bitcoin and other simple cryptocurrencies.
Learn to Analyze: Technical and fundamental analysis
As a new asset class, cryptocurrencies are highly volatile and are considered a high-risk investment. So trading these digital coins without a plan in mind can often lead to disaster. As so, it’s important to take some notes from the traditional market when it comes to portfolio management, ensuring one’s assets are hedged and not overleveraged.
There are two main techniques to analyze cryptocurrency markets: technical and fundamental analysis. There is nothing new here as both methods exist and are implemented for decades in mainstream asset classes.
Technical analysis uses a host of chart indicators to predict a cryptocurrency’s future price path, given its historical price action. This includes moving average lines, oscillators, volatility indicators, trend lines, candlesticks, chart patterns, and more. At the end of a technical study, you should identify a trading setup and potential entry and exit points.
On the other hand, fundamental analysis involves using economic and financial factors affecting a given cryptocurrency to determine its intrinsic value. You can apply the same valuing techniques to cryptocurrencies to judge whether a particular token is either overvalued or undervalued at the current price.
News sites such as CoinDesk, Cointelegraph, and industry data aggregators such as CoinMarketCap serve as a great resource that you need to look no further than.
You can use both technical analysis and fundamental analysis complementary to each other, though it is common to apply either independently. Which one is better? It entirely depends on your profile as a trader.
Practice With Paper Trading Account
It is now time to get your feet wet, but without risking your real money or giving up your trading stake. In this context, demo trading offers a perfect solution that allows you to develop a strategy, test it out and make lots of theoretical trades.
You should stick to simple trades, and once you master the basic skills, you can add advanced strategies to your toolbelt.
So, when do you flip the switch and start trading with hard-earned capital? There’s no perfect answer because demo trading carries many flaws — at least from a psychological standpoint — even if your paper results look great.
When transitioning from paper to live trading, a recommended approach is to start out risking little money for hands-on testing of your broker’s services. And as you trade, you’re also building self-confidence, even if a good portion of your trades are losers.
How to Choose Your Cryptocurrency Platform
When you’re a beginner investor, the right platform is the one that helps you build a solid trading foundation as your skills and strategy mature — functioning as an instructor, advisor, and market analyst.
Take your time researching trading fees, the platform’s reputation, how easy the app or website is to use, and read reviews about its different functions.
Big exchanges like Coinbase, Binance, and Bithumb have been around for years and are well known. However, other players offer more sophisticated, hybrid trading solutions.
Zenfuse, for example, offers an all-in-one crypto venue that aims to appeal to cryptocurrency traders by bringing built-in connectivity to major exchanges, next-generation tools, analytics, portfolio management, and news aggregation under one roof.
Zenfuse allows you to trade on multiple cryptocurrency exchanges from one account — bringing together services that were only available separately until now.
The service aspires to deliver a centralized and decentralized exchange aggregator with risk-management tools designed to keep your capital safe.
The Bottom Line
For new investors, getting started into the volatile cryptocurrency market can feel overwhelming. That’s where reputable platforms can come in handy to guide you through your early investing days.
Start your investment journey with a deep education on the digital asset markets, then read charts and analyze price actions. Based on your observations, build strategies that fit your trader profile and test them out with demo trading, all the way analyzing trade results and making continuous adjustments accordingly. Then complete the first leg of your investment journey by opening an account with a cryptocurrency trading platform that allows you to address market issues.
It’s essential to understand that trading is a long journey, and your market experience will come in handy repeatedly. If you need a bit more knowledge before making any decisions, follow us to satisfy your curiosity.
About Zenfuse
Zenfuse is a powerful all-in-one platform for cryptocurrency traders and investors.
It aggregates multiple cryptocurrency exchanges, allowing control of funds via API, and powers up the trading process, making trading more profitable, simple, and stress-free.
Our cross-platform app provides rich analytics of both your portfolio and order history, giving you the ability to control your funds on a mobile device.
