Understanding and learning crypto trading sounds complicated. But in this article, I will explain what crypto trading is, how it works, why you need to start, the types of trading, and their Pros and cons in a simple way.
What is Crypto Trading?
In simple words, the Meaning of crypto trading is to buy high and sell low, and earn profit from that specific trade. The crypto market is open 24/7, allowing users to trade at any time. Due to high volatility and prices that fluctuate quickly, traders have a chance to make a lot of profits in a short amount of time
How Does Crypto Trading Work?
There are certain steps you need to take before starting crypto trading. And understanding how crypto trading.
1: Select Exchange:
- Centralized Exchange: Acts as a broker. Facilitate trading cryptocurrencies like Binance, Coinbase, and Bybit
- Decentralized Exchange: Working on peer-to-peer transactions. Like Pancakeswap.
2: Open Account:
First, you need to register for an account with Gmail or a phone number, and do your KYC identity verification. So exchange is required. Then you need to connect your wallet with the exchange to access funds for trading different pairs of cryptocurrencies.
3: Deposit funds:
You can deposit fiat currencies and exchange them into cryptocurrencies in a wallet or on an exchange, or you can transfer crypto from another wallet.
4: Place Orders:
There are a few types of order:
- Market Order: By placing this order. You buy cryptocurrencies at the market price. Currently, cryptocurrencies are traded.
- Limit Order: You set a limit and place an order in the market at a specific price you want to buy crypto. When the market price matched the limit price. Order automatically fulfilled.
- Stop Loss order: During placing an order. You set a limit after the order is complete. When the price hit a certain level. The order was automatically placed, and all you positioned closed. Help you manage your losses.
- Take Profit order: During placing an order, you set a limit. When the price reaches a certain level, take profit and close your position.
Trading Strategies:
Different trading strategies traders applied according to their understanding of the market, psychological approach, and circumstances.
- Day Trading: A trader buys and sells on the same day. Due to high volatility and price gives a trader many opportunities to make profits.
- Swing Trading: A traders hold for days and weeks and earns profits from medium-term movement, and sometimes makes a lot of profit on certain trades by positioned before certain events happen or certain project hypes.
- Scalping: A traders enter a market for a short interval of time, like minutes, and makes small profits from price movements and candlestick patterns. Frequent trades and using stop loss smartly help them minimize losses and make profits in a short amount of time.
- Hodling: A traders hold cryptocurrency for a long period, ignoring short-term opportunities and price fluctuations. They believe in the project and long-term gains.
Why Do People Trade Crypto?
Due to high volatility and price fluctuations, it gives a lot of opportunities to traders in a short amount of time with even a small amount of capital. But it’s not guaranteed. 90 percent of traders lose their money. It depends on your understanding, timing, and strategies. Before starting crypto trading. You need to test your strategies on a demo account and journal your trades to help you identify where you lack.
Is crypto trading legal?
Cryptocurrency faces legal challenges almost everywhere. Depends on the country’s interests and laws. In some countries, crypto is fully banned. But in some countries relaxes to some extent. And even in countries. Where crypto is fully legal, certain restrictions are applied. Before diving into crypto. You must be aware of whether crypto is legal in the jurisdiction where you start, and if legal, then to what extent. El Salvador accepts cryptocurrency as legal tender. Now, other countries like Pakistan are starting to legalize cryptocurrencies.
Conclusion:
Starting crypto trading gives you time and place freedom to trade anywhere in the world, anytime. But before investing all your savings. You need to give time and learn about how the crypto world works. As crypto space is very fast. You need to be aware of Events, hype, rug pools, etc. Start small, stay safe. With time, you get experience. Then go all in. Must know about the risks, like Market volatility, Security, laverage & Margin, Fraud and Manipulation, emotional and psychological risk
Are you going to start crypto trading? What motivates you to do so?