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The cryptocurrency market is an exciting investment that can earn you millions of dollars in a few months. But, when you decide to become a crypto trader, you must also understand that this business is risky and requires plenty of patience and caution. While many people have made a lot of money from the market, many other people have also lost a lot of their money.
As a result, people interested in learning about cryptocurrency need to take enough time to research it. This article will discuss some of the basic things you need to know about cryptocurrency, how you can become a crypto trader, and factors to consider before you begin trading.
What do you need to know to become a crypto trader in 2021?
While the concept of generating wealth from this digital asset is a desirable feature, many people fail to understand how it works. Without proper research and knowledge of the market you are investing in, there is a possibility to yield unexpected results. Thus, let us look at an overview of cryptocurrency trading.
In 2009, Bitcoin was the first-ever cryptocurrency established. But, it could not trade with any other cryptocurrency since it was the only coin available. Years later, there were more cryptocurrencies created and released into the market to allow trading. Cryptocurrency trading involves trading one cryptocurrency for another, with the hope that the coin you buy increases in value over time.
When trading, traders need to use a cryptocurrency exchange to match the buyers and sellers. For instance, if you are holding Ethereum and want to sell it for bitcoin, an exchange aids in finding a bitcoin seller to trade with at a fee of about 0.1% for each trade. As a result, traders buy and sell billions of dollars worth of coins every day, making cryptocurrency trading popular.
There are two forms of cryptocurrency trading, short-term and long-term. They both have their benefits and shortcomings, so let us take a look.
Short-term crypto trading
Short-term crypto trading is when a buyer buys a cryptocurrency in the view that its price will rise in the short term. The short term can be anything ranging between minutes, hours, days, weeks, or a few months.
The main advantage of short-term trading is that it can provide significant profits as cryptocurrency prices can rise to almost double overnight. Due to the popularity of crypto and more than 1500 crypto coins to trade, there are large trading volumes every day, meaning you will always find a seller or buyer.
Likewise, owing to the volatility of the crypto market, the prices change quickly. Therefore, short-term traders need to analyze the market adequately and keep their emotions in-check to conduct a successful trade. It is not every time that the prices will move as you hoped and nobody makes profits all the time.Start Trading
Short-term crypto traders must have an excellent analytical ability to find small price movements, which is where they generate their gains. They must read and analyze trading charts and graphs, which can take beginners some time to learn. Short-term trading also requires a large investment to realize good returns.
Long-term crypto trading
Also known as HODL, long-term crypto trading refers to holding on to a cryptocurrency coin for a year or more. Long-term crypto traders believe that the currency’s price will increase to a large amount over the long term because of the market’s volatility.
Long-term trading is not time-consuming. It is effortless to learn since you are only looking to hold your coin for the long term. Once you buy your currency, you do not need to frequently analyze trading graphs or cryptocurrency prices. All you need to do is wait. You also do not need a hefty investment to get started since you can buy small amounts and let them grow over time.
But, long-term traders are likely to miss the opportunity to make a good profit from short-term gains. They might also miss some bad news that may affect their coin’s value in the long term.
How to start crypto trading
To become a crypto trader, you must first get some coins to trade with. Bitcoin is the most popular cryptocurrency to trade with. But you can also use Ethereum, Litecoin, Ripple, and Dash, among many others. You can buy Bitcoin or any other cryptocurrency through your debit or credit card on an exchange platform, like Coinbase, Crypto.com, and Cash App.
Coinbase, a popular exchange platform, is a reputable exchange broker that sells Bitcoin at a reasonable rate. Although there is a 4% charge to use your credit or debit card, it is worth using this exchange as it sends your coins immediately. To do this, open an account at Coinbase, and buy Bitcoin. Next, open an account on Binance, and deposit the bitcoin into your Binance account to begin crypto trading on the platform.
What to be careful of before becoming a crypto trader
Owing to the volatile nature of the cryptocurrency market, it is very easy to earn lots of money as well as lose your investment. As a general rule of thumb, it is best to set limits for yourself and never invest an amount that you cannot afford to lose. By setting limits for yourself, you can stay level-headed in times of pressure during a trade.
As you begin your crypto trading journey, you should always ensure that you stay up-to-date with crypto news. General news affecting the world is likely to affect cryptocurrency prices. Likewise, beware of wrong information that may influence the decisions affecting your trade. Before taking in any crypto news, research and use reliable sources to determine if the information received is valid.
After reading this article, you can now become a crypto trader. You have basic knowledge of what crypto trading is, the types of crypto trading, and the things you should be wary of. But, you still need to conduct your own thorough research before investing your money in cryptocurrency. It is also beneficial to speak to a financial advisor before investing to make sure that you can afford it.