Cryptocurrency is a type of digital currency designed to work as a medium of exchange using Blockchain technology. Without going into too much detail, what separates a cryptocurrency from traditional money is that cryptocurrencies use decentralized control whereas traditional money is controlled in a central bank. The most important and first of these cryptocurrencies is Bitcoin, however, since its release in 2009, over 4000 other cryptocurrencies have entered the market.
Nowadays, being able to trade cryptocurrencies has become very easy, with the emergence of online brokers and other companies trying to make the financial world more accessible to the general public. As a result, brokers such as City Index who are renowned for spread betting, share, and forex trading, already offer a comprehensive service when it comes to cryptocurrencies. However, as a new technology and currency, there are some things to keep in mind when starting to trade. It is important to remember that there is massive opportunity to earn profits but going in without doing the proper research will more than likely result in you making a loss.
The first and most essential tip of trading crypto is to learn as much as possible before starting to trade. It’s way too tempting to just jump in straight away because a friend told you how he tripled his investment in just a month. Educate yourself about the jargon that crypto traders use. “Pump and dump” and “HODL” are words often used in the crypto community and not understanding these will be to your detriment. A great way to keep yourself up to date with the latest crypto market news and insights is to follow a reputable site. Also understanding the impact that positive and negative news has on the demand for cryptocurrencies will allow you to make better market predictions.
Analysing a coin before you purchase is extremely important. Analysis should be done by asking yourself what market the coin is disrupting? What is the technology and the mind behind the development of the coin? What is the market potential of the coin and what separates the coin from other similar coins? These are just some examples of questions, but you should never stop analysing whatever coin you invest in, since the market is ever changing and volatile.
New traders all make the same mistakes. For seasoned traders, these mistakes are where they make their money. Therefore, you must avoid these if you want to ensure a long and prosperous crypto trading career. You should avoid chasing pump and dump schemes where recommendations are advertised based on false, misleading and exaggerated market information. Not diversifying your portfolio is another rookie error. As Warren Buffet says “You should not test the depth of a river with both feet”. Falling for FOMO, or the fear of missing out, is no way to conduct trading. Entering into an investment blindly simply because everyone is doing it is irresponsible and a quick way to exhaust your trade account.
As cryptocurrencies grow and investor confidence improves we will see more books, courses and classes on how to trade. In the future crypto may even be taught in universities. But until such a time we should be grateful for being alive during the early stages of what promises to be the future of currency and the way we do business.