Cryptocurrency trading for dummies — all details explained

Cryptocurrencies have made a big fuss after Bitcoin reached its highest price. The blockchain technology development has had a significant boost thanks to this as a lot of people got interested in the way it all works. But the topic that has reached the highest interest of users worldwide is the way of earning money on cryptocurrencies. We have prepared a short guide about cryptocurrency trading for dummies.

Common terms in short

At first, it is essential to understand the terms that are used in this field. These are:

  • Cryptocurrency — the name for all crypto coins, including Bitcoin, Litecoin, Doge and others;
  • Altcoins — any cryptocurrency that is not BTC, meaning alternative coins;
  • Fiat — paper money;
  • Exchanges — services that allow users to buy or sell cryptocurrencies;
  • Brokerage accounts — accounts on brokerage services, such as Dowmarkets, where you can trade cryptocurrencies, commodities, stocks, bonds;
  • Stable coin — currencies that have the purpose of having a stable price at all times;
  • Volatility — the size of changes in the value of a coin on the market over time, if the value of something often changes to a high degree, then investing in it is considered to be risky.

These are the basic terms that are often met when working with the crypto industry. There are many others, but there will be explanations for them.

How much money should you put in cryptocurrencies?

It is hard to answer such an abstract question. A lot depends on your financial status, current portfolio, and strategy. You can copy professional traders’ portfolios just with lower sums or work with a business analyst.

Make sure you invest a sum that you can afford to lose. Bitcoin and other currencies have high volatility, and it is better to be careful.

Where do you buy or sell cryptocurrencies?

Cryptocurrency exchanges are used for trading coins. Dowmarkets offers such services and allows buying or selling fiat, cryptocurrencies, stocks, bonds. You can trade crypto here by investing fiat or crypto.

A lot of trading tools are offered to help the user get the best trading experience. These include signals, graphics, indicators, stop-loss (it sells the coin when the price drops too low), take-profit (it sells the coin when the price reaches a specific value), limit orders, etc.

How do you use a crypto exchange?

All you need to do is create an account, confirm your identity, and make a deposit. After that, you have to get tp the trading panel and choose whatever you want to trade. For example, on Dowmarkets, you can select any cryptocurrency you wish to and see recommendations for what to do with it. This way, you do not need to do any researches of your own, although we suggest you try doing that from the very beginning.

If you have minimal experience in the topic, you should work with smaller sums at first. Select a couple of currencies which you would like to trade and buy them when the price is at its lowest position. Then wait for it to grow and sell it as only you see that the price is at a profitable place.

Why use Day Trading?

Not a bad idea is working with day trading from the very beginning. The purpose of this strategy is quite simple:

  1. You buy a coin for the lowest price.
  2. You sell it as only the price grows a little bit.
  3. You repeat the actions.

As you can see, the profit is gained by the minimum price changes. Trades here should not last longer than one day. It is often used with volatile currencies, such as Bitcoin. It often happens that people buy Bitcoin at one price, and in a few minutes, it changes for a dozen dollars in both ways. This strategy requires you to trade cryptocurrency quickly by catching every possible profit, even if it is only a few cents.

How to prevent significant losses when trading?

A lot of exchanges have a unique tool called “stop-loss.” When you set it, you can be sure your investment won’t be lost entirely. For example, the current price is $1000, and you buy the coin. You set the stop-loss at $950. If, in some time, the price falls till this position and your trade is still active, the system will automatically sell your coin, thus making you lose only $50.

How to guarantee profits without paying much attention?

Not everyone can look after the market all the time. That is why a feature called “take-profit” was created. It is simple — you set a specific price, and if it is reached, then the coin is sold automatically.

For example, the price is $1000, and you set a take-profit at $1010. As only the price reaches $1010, you earn a profit of $10 immediately. The only problem is that if the price grows even higher, you lose potential benefits as the system will not make any auto-trades. You set a value, and that is it.

Conclusion

We have had a look at the basic moments in cryptocurrency trading. This guide should assist newcomers in their new careers. This is what we have discussed:

  • Some basic terms;
  • How much should you invest;
  • Where to buy or sell crypto;
  • How to use an exchange;
  • Why is it better to use day trading;
  • High loss prevention;
  • Profit guarantee.

We hope this article was useful to you. If you have any other questions, please contact your analyst for further details or have a look at the other free educational materials at Dowmarkets.

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