Crypto Trading for Beginners: Get Started in 9 Steps

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Embarking on your journey into the world of crypto trading as a beginner might seem a little daunting at first, but if you see it as an opportunity to learn, grow, have fun and potentially thrive, the pressure to “get it all at once” will significantly reduce. In this article, we will walk you through the basics, the two common types of trading, key trading strategies, a step-by-step guide to getting started, as well as how to protect yourself by limiting your risk.

Let’s dive in!

Investing vs. Trading: Which One Is Right for You?

Now, let’s address the elephant in the room: investing versus trading. These terms often get thrown around, but they’re not the same thing.

Investing in Cryptocurrency: If you’re in it for the long term i.e. 3 or 5 years or longer, you’re an investor. You believe in the potential of a specific cryptocurrency or the technology behind it. You buy and hold with the hope that its value will increase over time, without having to engage in chart-reading and active trading. This strategy requires patience and a strong belief in the future of digital assets.

Trading Cryptocurrencies: Trading, on the other hand, is more about short-term gains within days, weeks or at most a few months. It involves buying and selling cryptocurrencies within a shorter timeframe to capitalize on price fluctuations. This is where things get exciting, and this is what we’ll focus on for the rest of this article.

Two Main Types of Crypto Trading

There are two main types of trading–spot and futures trading, with pros and cons for each type of trading.

Spot Trading

Spot trading refers simply to the immediate exchange of financial assets, such as stocks or commodities, for cash or other assets, at the current market price or its price “on the spot” hence the name. It’s straightforward–you buy a cryptocurrency at its current price, and you own it. There’s no expiration date or complex contracts to deal with.

Compared to futures trading, spot trading involves less risk. You’re dealing with the actual asset and its market value, without worrying about leverage or contract terms.

If you’re taking a long-term perspective on your investments, spot trading aligns perfectly. You can buy a cryptocurrency you believe in, hold onto it, and watch its value evolve over time.

Equally as important, the learning curve is less steep. Spot trading allows you to understand the basics of how markets work without the added complexities of futures contracts, which can be a bit overwhelming for newcomers.

Futures Trading

Futures trading involves the buying or selling of contracts that obligate traders to purchase or sell a specific asset at a predetermined price on a future date. The main advantage of futures trading is the potential for profit through price speculation and hedging against future price fluctuations, providing a tool for risk management.

However, it carries the risk of significant losses due to leverage, and accurately predicting market movements within a set timeframe can be challenging. Additionally, the obligation to fulfill the contract regardless of market conditions can lead to unexpected financial liabilities. In short, the rewards are higher, but so are the risks.

Now that we’ve covered the type of trading, let’s move on to the two main strategies in trading.

Basic Strategies for Crypto Trading

Spot traders are usually split into two camps:

• Swing trading: Those who hold onto their crypto for a few days or weeks to take advantage of price movements. Generally, swing traders have a target profit margin of 5 to 10%.
• Day trading: Day trading involves making multiple trades within a single day, hence the name day traders. Yes, these are the type of traders who eat at their desks, take rush toilet breaks and dissect price charts to an obsessive level to predict short-term price movements, in order to profit from tiny changes in price–1.5 to 2% is the usual target margin.

Swing trading is often considered to be the most suitable type of trading for beginner traders, as it is not as fast-paced as day trading. As it involves holding a position for a few days to a few weeks, traders have more time to make decisions. This reduces the pressure of constantly monitoring the markets, making it a good choice for those who are just starting out.

In contrast, day trading involves buying and selling within the same day, which requires a lot of skill, experience, and discipline to be consistently profitable. It also involves higher risk and can be mentally and emotionally demanding.

So how does one begin spot crypto trading?

How to Start Crypto Trading in 9 Steps

1. Find a Reputable Crypto Exchange: Start by researching and selecting a reputable cryptocurrency exchange. Look for exchanges with a user-friendly interface, robust security measures and a wide variety of listed coins, such as CoinW.
2. Register for an Account: Visit the chosen exchange’s website and sign up for an account. Provide the required personal information and complete any verification processes, such as identity verification, to comply with regulatory standards.
3. Fund Your Account: Once your account is verified, fund it with your desired capital. In other words, this is the stage where you inject trading capital. Most exchanges offer multiple funding options, including bank transfers, credit/debit cards, and even other cryptocurrencies. Choose a method that suits your preferences and geographical location.
4. Transfer Capital to Trading Account: After funding your exchange account, transfer the desired capital to your trading account within the exchange. This separation of funds ensures that only the amount you intend to trade is at risk, while the rest remains secure.
5. Identify an Entry Point: Use resources like price charts, news, and analysis to identify potential entry points. Look for coins with strong fundamentals and positive trends, but always be prepared for market volatility.
6. Place a Buy Order: Once you’ve identified a promising entry point, place a buy order on the exchange. There are different types of orders, including market orders (buy at current market price) and limit orders (buy at a specific price or better). Choose: The amount of the cryptocurrency you want to purchase; The price at which you’re willing to buy
7. Identify an Exit Point: Determine your profit-taking strategy by setting an exit point. This could be a specific price target, a percentage gain, or a combination of technical indicators. Properly defining your exit strategy helps prevent emotional decision-making during times of market turbulence.
8. Place a Sell Order: When the market reaches your predefined exit point, place a sell order on the exchange. Similar to the buy order, you can choose between market and limit orders for selling. Always ensure your sell order aligns with your profit goals.
9. Pocket the Profit: Once your sell order is executed, the profit will be credited to your trading account on the exchange. From there, you can either withdraw the profit to your linked bank account or reinvest it into other trading opportunities.

Technical Analysis: Getting to Know the Basics

Technical analysis is a method used by traders to analyze and predict price movements in financial markets, such as stocks, currencies, or commodities, by studying historical price and volume data. It’s based on the idea that past price patterns tend to repeat themselves and can provide insights into future price movements.

The reality is there are countless chart shapes and candlestick patterns traders use to time their entries and exits, but trying to learn about all of them at once will likely overwhelm you.

For starters, here are three types of technical indicators you can familiarize yourself with:

• Support and Resistance Levels: Support and resistance levels are fundamental concepts in technical analysis. They represent specific price levels where a financial instrument’s price has historically had difficulty moving beyond (resistance) or falling below (support). These levels are not fixed, but rather dynamic zones that can shift over time. Support levels act as a “floor” where the price tends to bounce back up, while resistance levels act as a “ceiling” where the price often reverses downward. Traders use these levels to make decisions about buying, selling, or setting stop-loss orders.
• Moving Averages: Moving averages are indicators that smooth out price data to identify trends over a certain period of time. The most common type is the simple moving average (SMA), which calculates the average price over a specified number of time periods (like days or hours). Exponential moving averages (EMA) give more weight to recent prices, making them more responsive to current market conditions. Moving averages can help traders identify the direction of a trend (upward, downward, or sideways) and potential support or resistance levels. Crossovers between different moving averages can also indicate potential changes in trend direction.
• Relative Strength Index (RSI): The Relative Strength Index is a momentum oscillator that measures the speed and change of price movements. It’s often used to identify overbought or oversold conditions in a market. The RSI ranges from 0 to 100 and is typically displayed as a line graph beneath the price chart. When the RSI moves above 70, it suggests that the market might be overbought and a price reversal could be imminent. Conversely, when the RSI drops below 30, it indicates an oversold condition and a potential price bounce.

Remember that while these indicators can be helpful, no indicator is foolproof. They provide insights into potential market movements, but they should be used in conjunction with other forms of analysis and risk management strategies.

Navigating the High-Risk Nature of Crypto Trading

Before you dive headfirst into trading cryptocurrencies, it’s essential to acknowledge the high risk involved. The crypto markets are known for their volatility, and prices can change dramatically in a short time. While risk is inevitable when it comes to trading and investing, there are steps you can take to limit your exposure to risk:

1. Start small: Especially if you’re new to trading, start with a small investment that you can afford to lose. This way, you’re not putting all your eggs in one basket and can learn from your experiences.
2. Manage your risk: Set stop-loss orders to limit potential losses. A stop-loss order automatically sells a cryptocurrency when its price reaches a certain point, helping you avoid significant losses if the market turns against you.Also, take note of the 1% rule: Never risk more than 1% of your capital on a single trade.
3. Don’t succumb to FOMO: “FOMO” stands for “Fear of Missing Out,” and it’s a common feeling in the crypto space. When prices skyrocket, you might feel pressured to jump on the bandwagon–this will cause you to buy high and sell low instead. But remember, making decisions out of FOMO can lead to regrettable outcomes.

Sure, there are advanced trading or hedging strategies to help you manage risks, but the above are some good foundational concepts to help you avoid losing the shirt off your back!

In Conclusion

Congratulations! You’re now equipped with the basics to start your crypto trading adventure. Remember that while trading cryptocurrencies can be incredibly exciting and potentially profitable, it’s not without its risks.

Stay informed, be patient, and never invest more than you can afford to lose.

As you embark on your crypto trading journey, remember that success doesn’t happen overnight. Experienced traders often emphasize the importance of learning, adapting, and staying patient.

Cryptocurrency markets are still relatively young and can be influenced by various factors, including regulatory changes, technological advancements, and market sentiment. Keeping a long-term perspective can help you weather the storms and celebrate the successes.