Unless you are living under a large rock, you will have heard of cryptocurrency. Bitcoin, Dogecoin, Ether are examples of cryptocurrencies or “digital currencies” which operate through peer-to-peer transactions, i.e., without a central bank.
The benefit of using electronic cash like cryptocurrency is that you avoid the fees of a third-party bank. Also, they are highly secure and transparent payment. You can buy, sell and trade digital coins online and speculate on price movements in the markets. Investing in cryptocurrencies like Bitcoin has never been more accessible. Here is your guide to crypto trading for beginners!
What is Cryptocurrency?
Cryptocurrencies are essentially a kind of digital equity that uses “cryptography” and rely on blockchain technology. The decentralized nature of digital coins protects them against hackers, bank policy, and fees related to international transactions.
It all began in 2008 when the mysterious “Satoshi Nakamoto” (is he a man, a myth, a multitude?) appeared in a paper titled: “Bitcoin: A Peer-to-Peer Electronic Cash System.” A year later, the first digital coin was born in 30,000 lines of code: Bitcoin (BTC). All digital coins since Bitcoin are known as “altcoins.” For several years, Bitcoin was a complex concept that was circulated among cryptocurrency mailing lists and circles.
The idea of cryptocurrency as a viable form of electronic cash began to gain traction. In 2012, the Winklevoss twins (the entrepreneurial millionaire brothers who famously fell out with Mark Zuckerberg over Facebook) bought $10 million worth of Bitcoin. The “Bitcoin Bubble” began.
Today, there are an estimated 10,000 digital coins in existence. The original cryptocurrency, Bitcoin, is now valued at around $48,000 (at the time of writing). Many financial investors fear a “crypto crash” if the Bitcoin bubble bursts, but for now, altcoins are surging in popularity, and cryptocurrency trading for beginners is a new avenue into the markets.
How Does Crypto Work?
If you have heard about Bitcoin and cryptocurrency, you may have come across the term “blockchain.” Most cryptocurrencies, including Bitcoin, use blockchain technology. In a nutshell, blockchain is how many digital coins operate, using “blocks” of data information stored along a permanent “chain.” Every time a new block is added (by another user “mining” coins), the overall chain becomes more secure. You store your coins in a “cryptocurrency wallet.”
An important part of cryptocurrency learning is that some coins, Bitcoin included, have a finite supply. The value of the digital currencies will be affected by how many coins are in circulation. In the case of Bitcoin, there are around 18 million coins in existence (the exact number changes every ten minutes). The maximum number of Bitcoins that can be mined is 21 million.
Why Trade Cryptocurrencies?
Why is cryptocurrency so popular? There are many reasons why droves of seasoned investors and beginner traders alike are investing in cryptocurrencies.
The crypto market is highly volatile, and the frequent peaks and spikes make it an exciting and potentially lucrative place to trade. Last February, for example, Bitcoin rocked the markets when it dropped by $10,000 in a single day. Short-term traders like day traders or scalp traders seek to profit from the frequent price movements of the cryptocurrency markets.
When you trade traditional currencies in the forex market, you may incur various transaction or tax-related fees. Crypto trading for beginners is appealing as it comes with low to no payments, and there is no tax involved.
Many traders choose cryptocurrency for less tangible reasons; privacy of information, data security, or wanting to circumvent third-party central banks. There is also the appeal of investing in digital cash. Many people see the concept of cryptocurrency as an alternative financial future.
Strategic Crypto Trading Fore Beginners
Cryptocurrency is a famously volatile market, but that does not mean it is random. There are several tools you can use which can aid in predicting the future price movement of a coin. The most popular way to do this is by using “chart indicators.” Each indicator works slightly differently, but they all essentially make practical price data calculations and display the results with graphics and lines on the charts.
Here are three popular chart indicators which can help elucidate various coin price patterns:
This indicator is an excellent tool for viewing a coin’s volatility. It uses three “bands” (graph lines). The top band makes an upper price estimate, the lower band makes a lower price estimate, and the middle band shows the average price. When the three bands are close together, this is known as a “squeeze,” and it implies volatility in the coin. Bollinger Bands also show you where to buy and sell (buy near the lower band and sell near the upper band).
Moving Average Convergence Divergence (MACD):
Charting the trend of a coin is the big reason to use a MACD. The trend is the direction in which a coin price is moving. Sometimes there is no trend at all, which can also help spot when this is the case. There is no trend when the two MACD lines on a chart are close together (and near 0). When the lines move apart, however, this implies a trend. They are excellent at spotting them early. However, when trends are very strong, they can become less accurate, so they are best used for spotting price breakouts and falls.
Relative Strength Index (RSI):
RSI is a handy indicator for showing the momentum (the trend’s strength) of a price. It is similar to the Stochastic indicator, as they both detect high and low price purchases, resulting in the price going up and how much force (momentum). RSI provides a simple scale from 0 to 100. If the reading is 30 or less, it means the price has strong support, which is likely to increase. However, if the readings are 70 and above, the price has weak support and is expected to decrease. Trends can also be inferred. If the reading is above 50, the price is trending up. If the reading is below 50, the price is trending down.
How do you Buy Cryptocurrency?
There are a number of different online trading platforms to choose from if you are interested in trading cryptocurrency. TradeOr is an excellent option as it is a reputable broker in the industry. Most cryptocurrency trading platforms are precisely that: a place to trade cryptocurrency, but TradeOr goes further than that. You can use one of the many chart indicators built into the platform to help you choose the winning coin.
If you want to progress from crypto trading for beginners to be an expert trader, you will need to familiarize yourself with the main concepts and terminology involved in the crypto market. Next, you will need to create a solid strategy (which should include the use of chart indicators. There is a vast community of crypto traders online, and so you can share your work and take help and advice from others. Be careful not to trust others’ calculations without confirming them yourself, however. Finally, you need to find a trading platform that is as reliable and comprehensive as TradeOr.