Trading cryptocurrency has gained traction in recent years because of its volatile nature. If you can catch the moves right, trading in crypto can provide traders with potentially higher returns compared to trading in the traditional financial markets. But this also comes along with greater potential downside risk. As such, it is not uncommon to hear and read stories of not just individuals but also of institutions losing money from trading crypto.
But there are also many stories of people whose lives were changed because of the returns that they have generated from trading crypto. So if you think that trading in crypto is for you but are unsure of where and how to start, in this article, we have put together 5 simple steps for you to start trading in crypto.
Step 1: Create An Account With A Cryptocurrency Exchange
CoinMarketCap tracks 272 cryptocurrency exchanges that offer spot trading alone. If you are looking for a cryptocurrency exchange to use, you will have no shortage of options. Having options is great, but having too many of them can sometimes be a bad thing. It can cause analysis paralysis whereby one cannot decide because one is bombarded with so much information and options.
The key then is to evaluate the pros and cons of each cryptocurrency exchange and find one whose features best meet your needs.
Step 2: Fund Your Crypto Account
The next step is to fund your crypto account. There are two main ways that you can do this.
- Fund your account with traditional currencies
Most crypto exchanges allow you to connect your bank account and accept funding through debit cards and wire transfers.
- Fund your account with cryptocurrencies
There is an increasing number of cryptocurrency exchanges that allow you to fund your account with cryptocurrencies that you already own in an external wallet. These crypto exchanges will typically give you your deposit address and/or QR code. All you have to do is copy and paste the address to your external crypto wallet (or scan the QR code) and select the amount of crypto that you want to deposit and transfer.
Step 3: Choose A Crypto Trading Strategy That Fits You
Many traders believe that there is a “holy grail” trading strategy out there; a crypto trading strategy that guarantees high returns and low risks. But the truth is that there is no one best trading strategy. Instead, the best trading strategy is one that fits your profile. These are some of the factors that you should consider when selecting a trading strategy:
- Trading Goals
One of the first things that you need to consider when choosing a crypto trading strategy is setting realistic profit targets. It is important to set goals that will stretch you out of your comfort zone however these goals need to be achievable. Setting unrealistic trading goals and not achieving them can cause some people to lose motivation and even give up on trading crypto altogether.
Thus, it is important to set realistic goals that are more closely aligned with your experience and expertise in the crypto markets. If you are just starting to trade in crypto, a 10-20% profit target is a realistic trading goal to set. Experienced traders, who have many years of experience under their belts, may set higher profit targets.
- Risk Tolerance
Risk tolerance varies from individual to individual. Individuals with lower risk tolerance might find crypto trading strategies that expose them to lower price fluctuations and volatility more ideal. On the other hand, individuals who are willing to accept moderate to higher levels of risk will find crypto trading strategies that expose traders to greater price fluctuations and volatility and potentially higher returns more suited for them.
Therefore, understanding the amount of risk that you are willing to tolerate can help determine the crypto trading strategy that is the right fit for you.
How much time are you willing to set aside to trade the crypto markets? Are you willing to set aside 2-3 hours every day to research and trade? Or are you more inclined to spend 2-3 hours a week instead? The answer to these questions will help you decide on the crypto trading strategy that is the right fit for you.
If you are willing to set aside more time for trading, crypto day trading strategies can be a good fit. If you are unable or unwilling to set aside time to trade, intermediate to longer-term crypto trading strategies might be more suited for you.
The above are some factors to keep in mind when selecting a crypto trading strategy for your unique profile.
Step 4: Avoid Making These Common Crypto Mistakes
As humans, making mistakes is inevitable. Making mistakes is not something to be frowned upon because it is what allows us to improve. Making mistakes is part and parcel of the learning process. However, if you can learn from the mistakes of others and avoid making them, it can help shorten your learning curve and potentially even save you money.
One of the most common mistakes that beginners make when getting started trading in crypto is trading before doing their due diligence. They tend to make trading decisions based on the advice of friends, family, and financial gurus. This is one of the biggest pitfalls that any crypto trader can make regardless of experience. Even if the advice may be well-meaning, because of the different goals, time frames, and profiles, what works for one individual may not work for another. Thus, doing your own research (DYOR) and understanding how the crypto trade that you are taking fits in with your profile will help you make a more informed decision even during bear markets.
Step 5: Start Trading In Crypto
Now that you have created your account with a crypto exchange, funded it, chosen a crypto trading strategy that fits you, and are aware of the common crypto mistakes to avoid, you are ready to start trading in crypto.
Some people will get stuck in this stage because they feel that they are still “unprepared”. Trading in crypto, like any other worthwhile endeavours, requires time to get good at. Most traders will tell you that they never felt ready to start but they started anyway. Because the fastest way to get good at something is to get your feet dirty and gain experience from actually doing it. Imperfect action trumps perfect inaction.
Disclaimer: This material is for information purposes only and does not constitute financial advice. Flipster makes no recommendations or guarantees in respect of any digital asset, product, or service.
Trading digital assets and digital asset derivatives comes with significant risk of loss due to its high price volatility, and is not suitable for all investors.