Explanation of currency trading for beginners
When people think of digital currency, the word “complex” is probably one of the first ideas that comes to mind. This concept has been around for more than a decade now, but many still don’t fully understand it, but who can blame them?
When Bitcoin first appeared in 2009, it caught the attention of the finance and technology industries a great deal. And for a while, people weren’t interested in it until it started costing $19,783 apiece in 2017. This was probably the height of the hype surrounding cryptocurrencies and suddenly people wanted to be in on the trend. Since the emergence of the first digital currency until now, other currencies have appeared in the digital space to act as competition. The likes of Ethereum, Ripple, Litecoin, and more are also becoming stable and worth investing in as well, as this technology attracts and promises a new era of e-wallets and cashless payments.
In this article, we will present to you our complete guide to explaining digital currency trading for beginners, which will touch on everything related to digital currencies and their trading to help beginners form the understanding and knowledge necessary to start a good and correct trading path.
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What are digital currencies?
Before we go any further, it would be helpful for us to be on the same page so we will start with understanding what cryptocurrencies are. Simply put, cryptocurrencies are a type of money that only exists electronically, i.e. digital money, if you will. The technology behind it aims to solve some of the biggest pain points of traditional banknotes. They eliminate the need for an administrative body, such as a bank, to print and issue them. Transfers also take place from one person to another without the need to go through an intermediary, in addition to instant transactions that are not charged with high fees as in the case of traditional transactions.
Here is a list of the most important advantages of digital currencies:
Faster and Cheaper Transactions: Instead of having to go through all the legal formalities and unnecessary steps when sending money to someone else, transferring digital currency is relatively simple and straightforward. No agents, brokerages, commissions or additional fees are required, making your transactions fast, easy and cheap.
*Secure and confidential transactions: Any transaction made using digital currency is encrypted, secure and essentially anonymous. Nobody can get a chance to spy on your financial activity or get your details from your account history, like banks. Only you have the ability to check your recent transactions.
*Financial Freedom for the Unbanked: Globally, there are about 7 billion adults who are unbanked. This means that they do not have an account with any financial institution or mobile money service provider. This may be a result of these institutions’ strict procedures and requirements that they impose on depositors, which can be a major hindrance to many. Since this is not the case with cryptocurrencies, anyone can quickly create an account and start conducting their financial transactions smoothly, easily and securely.
*Rapid International Trade: With digital currencies now, what used to take days or weeks in a row can be transferred in just seconds. Since these transactions are done online, they do not have to be transferred from one bank to another and this allows for less waiting time for a money transfer no matter where you are in the world.
* A growing investment opportunity: It has been a long time since Bitcoin appeared, and now there are about 5,000 different altcoins in circulation today serving more than 20,000 markets. The growth of this sector in the future depends on the world adapting to it and taking into account the needs of the postmodern population. A number of these currencies are already in use and in circulation today and they constitute a great investment opportunity for those who wish to participate in their trading.
5 tips and tricks you should know before considering cryptocurrency trading:
If you are planning to start trading or investing in digital currencies, it is very important that you are aware of the secrets of the new field that you will enter. Below, we will give you some tips that you should keep in mind in order to be prepared for the new financial adventure:
There will always be a lot of conflicting opinions about cryptocurrencies as many believe that cryptocurrencies are just a passing fad, and those who engage in it will only find disappointment.
If you are already convinced that your investment in it will be a great opportunity for you, then just stick to the sources you can trust and avoid the noise of non-believers. If you want to be a successful investor or cryptocurrency owner, stick to facts and avoid opinions.
*Be prepared for ups and downs:
It is no secret that digital currency is still not as stable as traditional currencies. Consider, for example, the inflation of Bitcoin to nearly $20,000 apiece less than three years ago. You have to be agile in your decisions and consider what is best for the current amount of assets you have.
Even experienced cryptocurrency traders and owners still haven’t had much luck mastering these cryptocurrency trends, so don’t be shocked if you find yourself in the same boat.
* Adventure with other altcoins:
Bitcoin is just one of the various cryptocurrencies currently available. Be careful not to put everything you have into one coin, as you may end up losing and then winning. Do some research and find out which coins know to thrive well with the most use cases that you can take advantage of. You are free to choose what you do with your cryptocurrency, so choose your assets wisely.
*Learn the uses of hot and cold wallets:
While cryptocurrencies exist in digital form, you can still have a way to store them online and offline as well through hot wallets and cold wallets. If you are a beginner, offline hot wallets will be easier for you to access and more useful and versatile. However, cold wallets offer more protection from hackers and other miscreants. As part of your journey to diversifying your assets, you should learn how to use both types of portfolios.
While cryptocurrencies have higher safety scores than traditional currencies, they can still be tricky. If you want to trade or hold large amounts of cryptocurrency in your mobile wallet, you must be prepared to act against the risks and vulnerabilities that you open yourself up to.
Try to study the different ways in which you can handle your
newfound assets and try to find how you can manage your money responsibly and convenient for you.
Mastering trading and investing in cryptocurrencies will take time and a lot of effort and learning, so don’t push yourself to become all-in on the first day. Like any skill, it takes time and continuous learning to learn how you can maximize the potential of your cryptocurrencies whether you want to use them for trading or day to day transactions. Below is a guide to explaining cryptocurrency trading for beginners, we will help you learn all about cryptocurrency trading from the basics:
What is digital currency trading?
Cryptocurrency trading is the process of speculating on the price movements of digital currencies through a CFD trading account or buying and selling underlying currencies via an exchange.
Trading digital currencies via CFDs:
CFD trading is a derivative, which enables you to speculate on the price movements of cryptocurrencies without having to own the underlying currencies. You can go long (buy) if you think the value of the cryptocurrency will go up or short (“sell”) if you think it will go down.
Both options are leveraged, which means you only need to make a small deposit – known as margin – to gain full exposure to the underlying market. Your profit or loss is calculated according to the full size of your position, so leverage will increase both your profit and loss.
Buying and selling cryptocurrencies via the stock exchange:
When you buy cryptocurrencies through an exchange, you are buying the currencies themselves. You will need to create an account on a digital exchange of your choice, then put up the full value of the asset to open the position, and then store the cryptocurrency tokens in your own wallet until you are ready to sell.
Every digital stock market has its own way of displaying data and using technology, so you will need to learn how to deal with this technology and how to read the data correctly. Many digital exchanges also have limits on the amount you can deposit and sometimes it can be very expensive to maintain accounts.
How do cryptocurrency markets work?
Cryptocurrency markets are decentralized, which means that they are not issued or backed by a central authority such as a government. Instead, it is run through a network of computers. However, cryptocurrencies can be bought and sold via exchanges and stored in “wallets”.
Unlike traditional currencies, digital currencies only exist as a shared digital record of ownership stored on the blockchain. When a user wants to send cryptocurrency units to another user, he sends them to that user’s digital wallet. A transaction is not considered final until it has been verified and added to the blockchain through a process called mining. This is also how new cryptocurrency tokens are created.
What contributes to the movement and volatility of the cryptocurrency market?
Cryptocurrency markets move according to supply and demand. Because they are decentralized, they tend to remain free from and removed from all economic or political concerns that would normally affect traditional currencies. While there is still a lot of uncertainty surrounding cryptocurrencies, the following factors can have a significant impact on their prices:
Supply: The total number of coins along with the rate at which they are fired, damaged, or lost.
Market capitalization: the value of all the coins out there and how users perceive the industry to be developing.
Journalism: The way digital currency is portrayed in the media and how much coverage it gets.
Integration: How easily the digital currency can be integrated into existing infrastructure such as e-commerce payment systems.
Major Events: Major events such as regulatory updates, security breaches, and economic setbacks.
How does digital currency trading work?
You can trade cryptocurrencies through a CFD account, which are derivative products that enable you to predict whether your chosen cryptocurrency will rise or fall in value. Prices are set in traditional currencies such as the US dollar, and you can never own the cryptocurrency itself via this method.
CFDs are leveraged products which means you can open a position for a fraction of the full value of the trade. Although leveraged products can magnify your profits, they can also increase your losses if the market moves against you.
What is the spread in cryptocurrency trading?
The spread is the difference between the quoted buying and selling prices of the digital currency. Like many financial markets, when you open a position in the cryptocurrency market, two prices will be offered. If you want to open a long position, you trade at the buy price, which is slightly higher than the market price. If you want to open a short position, you trade at the sell price, which is just below the market price.
What is a lot in cryptocurrency trading?
Cryptocurrencies are often traded in lots which are batches of cryptocurrency tokens used to standardize trade volume. Since cryptocurrencies are highly volatile, lots are so small that most are just 1 unit of the cryptocurrency’s base. However, some digital currencies are traded in larger blocks.
What is leverage in cryptocurrency trading?
Leverage is a way to gain exposure to a large amount of digital currency without having to pay the full value of your trade up front. Instead, you make a small deposit known as margin. When you close a leveraged position, your profit or loss depends on the full size of the trade.
It is true that leverage will amplify and increase your profits, but it may amplify and increase the size of your losses as well, including losses that can exceed your margin in an individual transaction. Thus, leveraged trading makes it important to know and learn how to manage risk before making any decision.
What is margin in cryptocurrency trading?
Margin is an essential part of leveraged trading. It is the term used to describe the initial deposit you place to open and maintain a leveraged position. When you trade cryptocurrencies on margin, remember that your margin requirements will change depending on your broker and your trading volume.
Margin is usually expressed as a percentage of the full position. For example, trading in Bitcoin (BTC) may require a payment of 15% of the total value of the position to be opened. So instead of depositing, say, $5,000, you will have to deposit only $750.
What is a pip in cryptocurrency trading?
A pip is the unit used to measure the movement in the price of a digital currency and refers to a single-digit movement in the price at a certain level. In general, cryptocurrencies with value are traded at the “dollar” level, so a move from the price of $190.00 to 191.00, for example, means that the cryptocurrency has moved by 1 pip. However, some low-value cryptocurrencies are traded in different scales, where a pip can represent one cent or even a fraction of a cent.
It is very important to read the details on your chosen trading platform to make sure you understand the level at which price movements will be measured before you place a trade.
In our comprehensive guide to cryptocurrency trading for beginners, we’ve tried to help you understand everything related to cryptocurrency and trading so that you are fully prepared to start your journey and make sure you are on the right track. Understand the contents of the article carefully and consider them along the way to make sure you make the right decisions.