Trading in cryptocurrency – techniques for successful trading
Trading in cryptocurrency is child’s play. After Bitcoin emerged in 2009 as the first such currency, cryptocurrency truly came into its own in 2017.
As more people become aware of cryptographic currency, much discussion is being had about whether or not the boom times of Bitcoin and its rivals will continue.
Make no mistake, there’s still plenty to look forward to in the world of cryptocurrency, with significant price increases expected in 2018 and beyond. If you’re one of the many looking to make their first venture into the marker, this is good news indeed.
There are many reasons to trade in cryptocurrencies. Some people use them every day to pay for goods and services, while others are keen to explore more enticing profit-making opportunities.
Our in-depth guide to cryptocurrency trading has all the info you need to get started. We explain how to set up a digital wallet, how to buy your first crypto coins, and how crypto trading platforms work.
Trading in cryptocurrency – What are cryptocurrencies?
If you want to trade with cryptocurrency, it first makes sense to get a good handle on what it is. A cryptographic currency is superficially similar to conventional fiat currencies like the dollar or euro.
Unlike these currencies however, there are no physical notes or coins to represent cryptocurrencies. Digital currencies are also not managed from a central institution, with transactions carried out over decentralized networks, being stored and verified by cryptography.
Therefore, the available amount of cryptocurrency does not depend on the decision of a central bank. It is regulated by the computer network itself or it is determined when the currency is established. In 2009, Bitcoin was the first cryptocurrency to be launched on the market.
Since then, many more digital currencies have been created. The most prominent are the likes of Bitcoin, Ethereum, Dash, IOTA and Litecoin. If you want to start trading in them, you’ll need to make a decision on which cryptocurrency to choose from.
Trading in cryptocurrency – Which cryptocurrencies are trading?
If you’re looking to trade cryptocurrencies, you’ve more than a thousand options to choose from. It’s not just the names of these currencies that are different, but their mode of operation is too.
The best known cryptocurrency on the market is certainly the Bitcoin. For beginners, it’s a recommended first step into the world of crypto trading due to its wider access to trading platforms.
Bitcoin is established on the market, which is why there is plenty of information and general instructions on trading. But this prominent currency also has its drawbacks. For example, it usually takes a long time before transactions are fully executed.
Cryptographic currencies such as Dash or Ethereum offer significantly swifter transactions. No matter which cryptographic currency you opt for, it’s important you’re fully versed in the essential details.
Trading in cryptocurrency – How can I buy cryptocurrencies?
Trading with cryptocurrency is not as daunting as it seems. Numerous trading platforms have now been established at which Bitcoin and other currencies can be purchased with ease.
If you’re a beginner and want to delve into trading, you need to use conventional currency like the euro or dollar first. One of your first concerns is whether to buy cryptocurrency from a trading exchange or a broker.
Trading in cryptocurrency – What is a crypto exchange?
You can trade a cryptocurrency on a crypto exchange buy buying it directly from a trading partner. You can then choose to sell the cryptocurrency directly to another trading partner.
In Germany, the best-known and currently, the only legal platform, is Bitcoin. As an associated company of Fodor Bank, Bitcoin is subject to the same financial market regulations as conventional banks.
However, only Bitcoin and Ethereum can be traded against the euro in this territory. Other platforms offer a wider range of cryptographic currencies. It is also possible to trade in other fiat currencies.
Which platform you use is ultimately up to you and needs to take into account the currencies you wish to trade in
. The main concern you’ll need to be aware of at many exchanges however, is that transactions may take a considerably long time. This is because you have to find a buyer who wants to buy exactly the same amount of currency you are offering for sale.
Trading in cryptocurrency – What is a crypto broker?
If you want to trade a cryptocurrency, you can opt for a broker instead. A broker is a middleman who buys large quantities of currencies, then sells them on to various customers in smaller portions.
The advantage here is that any amount of cryptocurrency can be traded immediately. You don’t need to wait around to find a suitable buyer matching your requirement. One of the best known brokers on the market is eToro.
A significant drawback of brokers is that high fees are commonplace. This makes a good case for instead focusing on direct trading on a stock exchange.
Trading in cryptocurrency – Where are cryptocurrencies stored?
If you want to trade a cryptocurrency, you need to first create a wallet. A wallet is a kind of electronic purse where traded cryptocurrency is stored.
Units of currency can be sent to your wallet, while units can also be sent from one wallet to another. There are several ways to set up a wallet.
Trading exchanges such as brokers usually offer the setup of a wallet as a service. Alternatively, you can choose to configure one yourself on an independent platform.
If you trade several cryptocurrencies, you’ll usually have to create a wallet for each currency. However, there are alternatives out there where multiple currencies can be stored alongside each other.