Wednesday, May 18, 2022
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Cryptocurrency Trading – Free Ultimate Guide 2021

Who would want to carry around bills and coins when one can tap a card and get the same adrenaline rush, followed by the same Instant Regret. So maybe it isn’t surprising that completely digitized forms of currency, namely cryptocurrency, are becoming more popular.

 
Cryptocurrency is known as the digital currency or the decentralized form of currency that can be used for either payment or investments, all around the world.

Cryptocurrency trading involves buying and selling cryptocurrencies for profit. If conventional currencies have a foreign exchange (forex), cryptocurrencies have their own digital currency exchange where people can engage in trading coins.

Why do they call it cryptocurrency?

The name cryptocurrency is a combination of cryptography and currency. With cryptography, we use advanced math to secure our funds, ensuring that nobody else can spend them.

Coming to decentralization, what it really means is that cryptocurrency is not controlled or backed up by any authority, banks, or government; there is not a single authority that can control the price hikes and trends for cryptocurrency. So in simple words, the users all around the world themselves set the price and trends for cryptocurrency. 

Kitty Bitcoin | A cryptocurrency is a form of payment that can be exchanged online for goods and services. Cryptocurrency trading involves buying and selling cryptocurrencies for profit. If conventional currencies have a foreign exchange (forex), cryptocurrencies have their own digital currency exchange where people can engage in trading coin. | beginner's guide, Cryptocurrency, Cryptocurrency Trading, money

But why was cryptocurrency created, and who created it. First, let’s talk about the story behind its creation; the first-ever cryptocurrency, Bitcoin, was created and launched in 2009 by a developer named Satoshi Nakamoto, who tried to improvise a way that could allow the user to send and receive transactions in seconds without depending on anyone.

The motive behind the creation was to allow all the users to be independent, to transact money to anyone they want. They need to pick up their phone, select the person’s address and send assets in seconds without relying on any bank or government. Therefore, we can consider cryptocurrency as a special code that is safe in our smartphone or PC, that has some worth, and if we want to pay anyone, we can send it with our smartphone, and it will be easily sent. 

Fiat Currency vs. Cryptocurrency

Difference between Fiat & CryptoCurrency

Any effective form of money must act as a medium of exchange, store of value, and unit of account. Both fiat money and cryptocurrency deliver this utility but are different in several key ways. First, Fiat money is legal tender whose value is tied to a government-issued currency, as the U.S. dollar.

At the same time, cryptocurrency is a digital asset that derives its value from its native blockchain. Second, the issuance and governance of fiat currency are dictated by central banks, while blockchain protocols, codes, and communities govern cryptocurrency. Finally, the distribution of fiat requires intermediaries, while cryptocurrency relies on distributed and decentralized networks to enable “trustless” transactions.

Source: Gemini

Before jumping on how to trade in cryptocurrency, let’s first analyze the types of crypto trading. 

Types of Crypto Trading

Fiat to crypto trading

Fiat (USD, GBP, SGD, INR) is the base currency; The base currency is the currency against which exchange rates are usually quoted in a given country. Then, you trade it against cryptocurrencies like Bitcoin, Ethereum, and others. The aim is to grow the fiat money and keep booking the profit regularly.

Crypto to Crypto trading (Altcoin trading)

Undoubtedly this is the least understood and most profitable form of crypto trading. In this, you use crypto as a base and trade against other cryptocurrencies (altcoins) to produce/grow the base coin. For example, you start with 0.1 BTC (bitcoin price) and trade it against other coins such as ETH, BNB to grow your BTC holding from 0.1.

This is popularly known as altcoin trading. During the bull market period, this is one of the best ways to increase your Bitcoin holding.

A lot of beginners stick with Fiat to crypto trading, as it is easy and familiar. However, who is using crypto to crypto trading, makes a notable profit over time.

What Is an NFT?

An NFT is a digital asset that represents real-world objects like art, music, in-game items, and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.

What is the difference between Trading Vs. Investing?

You need first to decide whether you want to be a crypto day trader or a silent crypto investor, which depends upon a lot of factors such as:

  1. existing profession
  2. risk tacking appetite
  3. trading style
  4. long term emotional state
  5. How long you have been following the crypto market

However, with time and practice, one can learn emotion and behavioral management, which is the key to ace trading cryptocurrencies. 

Many people who got into crypto trading in the early days now enjoy the integration of investing and trading. The reason is the intense fluctuation of crypto prices, which brings a great opportunity for someone to grow their crypto holdings with a strategy.

Short term trading

Short-term trading/Day trading is buying a cryptocurrency for a short period of time, i.e., days, weeks, or months to make a profit. Many people get into day trading, where they buy and sell crypto on the same day or in a couple of days.

Do note, in short-term trading/day trading; you will be winning some days, losing some days. Stop loss will be the best risk management strategy to ensure you don’t lose a huge portion. However, if you come from a stock trading background, the typical stop loss logic will not be appliable to crypto trading due to high arbitrariness.

Long term trading

Long-term trading can also be seen as investing in crypto. A beginner should know about the pop term of crypto called HODL (Hold on to your dear life). After buying crypto like Bitcoin, you hold it for a significant long time (years) and then sell it for ample profit.

This is recommended for those who believe that cryptocurrencies like Bitcoin, Ethereum, and others are going to the moon, and their investment will grow multiple folds.

Long-term trading advantages are that you are immune to short-term arbitrariness, and you don’t need to follow the trading chart regularly. Instead, you can look at the fundamentals to plan your trading strategy. Of course, this is suitable for only blue-chip coins like Bitcoin, Ethereum, etc. 

Now, it’s time to look at the essentials by which one can start trading cryptocurrencies:

Essential to start trading cryptocurrencies

Funds to Invest

You can decide the number of funds you like to put in for crypto trading. However, as many crypto traders prefer, you should put only that money into trading that you are ok to lose.

There are two most popular ways to fund the crypto trading account, which are as follows:

  • Bitcoin
  • Fiat like USD, GBP, AUD, INR

Cryptocurrency Trading Exchange

It would help if you had a crypto exchange that offers high liquidity and advanced tools for trading cryptos. In addition, as you need to buy Bitcoin or other cryptos to get started, it should offer you an option to buy crypto from fiat.

Binance is the no. 1 crypto trading website for trading crypto for the past few years because it offers a wide variety of cryptocurrencies and one of the best trading engines. Tradings that are supported by Binance as are as follows: 

  • Spot trading
  • Margin trading
  • Arbitrage trading
  • Futures trading

Technical & Chart Analysis:

Technical analysis is a skill that you could develop as you move ahead in crypto trading. However, having a basic understanding of how to see charts, technical indicators such as RSI, MACD, Bollinger bands will be very productive and will help you a lot in the days to come.

image | A cryptocurrency is a form of payment that can be exchanged online for goods and services. Cryptocurrency trading involves buying and selling cryptocurrencies for profit. If conventional currencies have a foreign exchange (forex), cryptocurrencies have their own digital currency exchange where people can engage in trading coin. | beginner's guide, Cryptocurrency, Cryptocurrency Trading, money

Learning about charting and technical indicators is not a time-consuming process, and with regular practice, you can sharpen your skills.  Most of the trading websites offer integrated technical analysis charts. You can also use Tradingview for checking the TA chart. 

Risk Management:

This is one thing that you need to learn right away. Many smart traders lose all their money in trading because of their overconfidence by not following the basic risk management principle. Also, you will not win all the trades, but with proper risk management, you can minimize your losses.

Note for the advanced users: If you come from a background of traditional stock trading, you may be surprised by the fierce swing of crypto price movements. Therefore the traditional hourly or daily resistance and support level may not hold here. This is one reason you should try paper trading before you put the real money.

Paper or Dummy Trading:

What Is Paper Trade?

A paper trade is a simulated trade that allows an investor to practice buying and selling without risking real money. The term dates back to when (before the proliferation of online trading platforms) aspiring traders would practice on paper before risking money in live markets.

While learning, a paper trader records all trades by hand to keep track of hypothetical trading positions, portfolios, and profits or losses. Today, most practice trading involves using an electronic stock market simulator, which looks and feels like an actual trading platform.

Source: Investopedia

A fine alternative before you put real money into crypto trading is by making use of Paper trading. In this, you practice crypto trading before putting your real money. Therefore, you can always check your trading skills before you start putting in your hard-earned money. 

 
3Commas is a cryptocurrency trading platform with the goal of helping users build automated trading bots. is one such platform that offers paper-trading for free. 

Now, let’s understand how a person can actually start trading in cryptocurrency.

How to Start trading cryptocurrencies

So if you’ve reached this segment of the article, you are motivated and keen to make a difference in your financial life with crypto trading.

First, we’ll get started with Fiat to crypto trading. Once you understand this, you can apply the same logic/process for crypto to crypto trading.

Here we go:

Go to Binance.com, and create an account using your email address. Binance does not ask for KYC if you are withdrawing funds less than 2 BTC/day.

c5dbeb4a490421f47eda3a023bd003a5 | A cryptocurrency is a form of payment that can be exchanged online for goods and services. Cryptocurrency trading involves buying and selling cryptocurrencies for profit. If conventional currencies have a foreign exchange (forex), cryptocurrencies have their own digital currency exchange where people can engage in trading coin. | beginner's guide, Cryptocurrency, Cryptocurrency Trading, money

Fund your account:

You can directly deposit BTC from any other website/wallet to Binance or buy BTC on Binance to fund the account.

crypto-investing-img1

For funding, click on ‘wallet’ > ‘Spot wallet’ to see the bitcoin wallet address.

Alternatively, you can click on ‘buy cryptos’ at the top left of the Binance website and choose the amount for which you want to buy bitcoin or other altcoins. 

How to trade cryptocurrencies

Click on ‘trade’ > ‘basic’ and select the market on which you want to trade. 

For example, you wish to trade in USDT: BTC pair. Then you have to select the USDT and BTC market (As shown in the screenshot below)

Note: The yellow star next to BTC/USDT pair. You can select any pair, and marking the star to yellow will add to the favorite tab.

Now, you are all set to start crypto trading. On the same trading terminal page, you could buy/sell any pair that you want.

The price by default is the market price, i.e., The current traded price. However, you can change it to any other price of your choice, and once the Bitcoin reaches that price, then your order will be fulfilled.

Crypto Terms Every Trader Should Know

Fear, Uncertainty, and Doubt (FUD): Spreading fear and misinformation to gain an advantage.

Fear Of Missing Out (FOMO): The emotion you feel when you panic buy.

HODL: Buy and hold on to it for a long time!

Return on Investment (ROI): How much money you are making (or losing).

All-Time High (ATH): The highest price ever recorded!

All-Time Low (ATL): The lowest price ever recorded.

Do Your Own Research (DYOR): Don’t trust, verify.

Due Diligence (DD): Smart people make decisions based on facts.

Know Your Customer (KYC): Regulations that make exchanges verify your identity.

Important things about crypto trading:

Trading fees

This is a principal factor in calculating crypto trading profits. Some exchanges are notoriously high when it comes to fees, and the big profit becomes small after deducting the fees. Many platforms offer platform-specific coins, which gives a rebate for paying the trading fees in the platform coin. For example, Binance has a platform coin called BNB and offers a 50% discount on trading fees when one pays using a BNB coin.

Stable coins

Another cool thing about crypto trading is that you can use stable coins like USDT and USDC to hold your funds in USD. These stable coins are attached with USD, and they are the best way to trade virtually. 

Dollar-cost averaging 

Dollar-cost averaging is an investment strategy that aims to reduce the impact of volatility on the purchase of assets. It involves buying equal amounts of the asset at regular intervals.

The premise is that by entering the market like this, the investment may not be as subject to volatility as a lump sum (i.e., a single payment). How so? Well, buying at regular intervals can smooth out the average price. Such a strategy reduces the negative impact that a bad entry may have on your investment in the long term. Let’s see how DCA works and why you might want to consider using it.

The main benefit of dollar-cost averaging is that it reduces the risk of making a bet at the wrong time. Market timing is among the hardest things to do when it comes to trading or investing. 

Profit calculation

 Another better way about the crypto profit calculation from trading:

Let’s assume you’re investing $10000, and this meant with current market value, you should be able to buy 1.1 BTC

here, there are two ways to think forward:

The total value of your asset should be more than $10000 after trading for months or any time period that you’ve set.

The total value of your asset should be more than $10000 and should enable you to buy more than 1.1 BTC after trading for months or any time period that you’ve set…. If not, then buying and holding BTC is a better option/alternative.

What are the Risks of crypto trading?

So, to become a pro in crypto trading, here are some well-known risks of crypto trading that you should be aware of:

  1. Extinction of technologies: many of the cryptocurrencies (Altcoins) will be gone in no-time. It has happened various times, therefore you should be cautious about the same. At times, some coin would create a rosy picture and look too promising, but under the hood, it is a bitcoin – A popular crypto term.
  1. Lack of Fundamental analysis: If you want to do day-trade as a profession, it would be a good idea to also learn about fundamental analysis of a coin. Even for the day trade, It is good to bet on a coin, that has a strong/better foundation. Or else it is not rare to see a coin losing more than 70% of its value in a matter of time.
  1. Technology savvy: If you are tech-savvy, it will help you grow/expand. However, if you are not, learning about security best practices, hardware wallets, and 2FA would help you create a career in the cryptocurrency market.
  1. Prevent yourself from a scam: Like it or not, like any other financial market, the cryptocurrency market is full of scammers. The worse here is, cryptocurrency is not much regulated, and an unconscious trader might fall for some well-known crypto scams. You should prevent or put extra caution to groups that provide crypto buy/sell signals. Many amongst them are nothing but a dump mechanism, and you put yourself into great risk with such scam groups. A lot of them would also ask for an entry fee to join the group (offering great promises), and you should refrain from such groups.

Bitcoin and Blockchain

Bitcoin is the most recognized cryptocurrency at the moment. So what is it that makes Bitcoin transactions different from shopping on Amazon, with a credit card/debit card, digitally?

Well, you might already know that while normal electronic transactions still involve conventional money, Bitcoin is decentralized, meaning that its distribution and exchange aren’t controlled or regulated by a government or other authority. The technical side of things is also very contrasting.

Traditional currency goes through a central payment processor like your credit card company. Still, all Bitcoin transactions, whether you’re purchasing goods or just sending bitcoins to a friend, are processed by a vast distributed network of computers running special software.

The mining software that runs works by grouping recent transactions into blocks that are only accepted by the rest of the network if the block is hashed correctly, which requires the computer to find correct numerical values, a time-consuming and computationally rigorous process.

https://youtu.be/SSo_EIwHSd4

But what’s in it then for the members of the processing network? Once a computer successfully processes a block, it’s added to the blockchain, and the system produces a new Bitcoin as a reward that goes into the miners’ digital wallet.

So the computer ends up literally creating money for you, out of nothing. Wow, you can mine Bitcoin never to work again. Well, it’s a bit more complicated than that. It takes a lot of processing power to generate a significant amount of bitcoin. And since the system is designed for it to take about 10 minutes to process a block successfully, the difficulty of mining generally increases as more transactions/nodes join the network, not to mention that entry costs are fairly high.

In the early days, mining could be done on a spare laptop. Then, for a while, high-end graphics cards were popular choices thanks to their highly parallelized number-crunching optimized architectures. But these days (this doesn’t necessarily apply to other cryptocurrencies),

Bitcoin can only be profitably mined using specialized mining appliances called ASIC miners. Unlike graphics cards, these can only be used for Bitcoin mining in most cases, and they can cost 1000s of dollars each. So it’s obvious why people are mining Bitcoin; there’s profit to be made.

But why do other people want it? Some people are mistrustful of banks and governments to keep their money secure and have a lot more faith in bitcoins redundant blockchain system, especially as more and more retailers begin to accept cryptocurrency. Like the partial anonymity of Bitcoin offers, the only thing that necessarily links you to a particular bitcoin address is an encryption key.

Plus, you could take a new address for each transaction you make; in fact, many paid VPN services accept Bitcoin payment for people who are anxious about staying incognito online. However, others still look at Bitcoin as an investment. Though you should tread carefully because Bitcoin is completely unregulated, there is no guarantee of its value, not even a flimsy one, so investing lots of money in Bitcoin is considered a speculative level risk for now.

However, the system is designed so that by the year 2140, No new Bitcoin will be produced/generated, leading some to believe that down the line; it’ll be a more secure virtual commodity of sorts that will provide a barrier against inflation of traditional currencies, kind of like how some people invest in gold bars for the same reason. 

As we have learned what actually is bitcoin, let’s see where are bitcoin payments are accepted. 

Companies that accept Bitcoin as payment 

  1. MICROSOFT  Multinational technology giant Microsoft accept bitcoin for its online Xbox store, well as for topping up your online account  
  2. BURGER KING: Burger King has experimented with accepting bitcoin in Germany for payments on its mobile app. 
  3. KFC: Like burger king, KFC Canada has decided to accept bitcoin for a limited time via Bitpay.
  4. WIKIPEDIA: The world’s largest open-source encyclopedia accepts donations in the form of bitcoin, via Bitpay.  
  5. TWITCH: Game streaming platform twitch accepts both bitcoin and bitcoin cash as payment for its services. 
  6. GYFT: A website for buying gift cards for major retailers, gyft accepts bitcoin as payment without any additional fees. 
  7. AMAZON: While not directly allowing bitcoin payments, amazon facilitates bitcoin payment via purse.io.
  8. BMW : A large number of UK and US BMW dealerships accept bitcoin payments for their vehicles. 
  9. AT&T: AT&T is the first major mobile carrier to provide a bitcoin payment option via bitpay. 
  10. EXPRESSVPN: ExpressVPN, one of the largest private network providers, has been accepting bitcoin payments since 2014.

Best Crypto Exchanges 2021

BINANCE

Bitcoin Exchange | Cryptocurrency Exchange | Binance

Binance is the world’s largest crypto exchange and is the top choice for buying and selling altcoins. Binance, as a whopping 1,400,000 transactions per second in over 2 billion in average daily volume. CHIANG PINZAO and YIHI launched the Binance as a cryptocurrency exchange, one of the best exchanges today, in China, in 2017, it only charges clients 0.1% on each trade, and deposits are free withdrawals cost money.

However, if you use Binance own digital currency BNB, you get a 50% discount. One of the primary reasons for Binance’s popularity is the wide range of cryptocurrencies it has to offer, which stands at more than 100. These include notable coins, such as Etherium, bitcoin, and the lesser-known Zee coin. Therefore, the Binance crypto exchange is the most appropriate for individuals who want to trade or invest in the best crypto altcoins since it has the highest altcoin trading volume. 

HUOBI GLOBAL 

What is Huobi Token? Crypto Price Prediction 2021

Huobi is a Seychelles-based crypto exchange founded in Chine; the company has offices in Hong Kong, South Korea, Japan, and the United States. It became a publicly listed company, In August 2018. 

COINBASE

Coinbase Acquires Crypto Prime Brokerage Tagomi - The Industry Spread

Coinbase is the most well-known as well as well-utilized digital currency exchange in the United States. Coin base has been straightforward to use, which has helped him become one of the world’s biggest crypto broker exchanges, especially for Bitcoin. Coinbase is a wholly authorized crypto exchange with licenses to work in more than 40 US states. People have traded more than 50 billion in crypto on the Coinbase exchange since it’s established.

Coinbase offers a simple interface, reducing any obstacles that may get in the way of digital money ventures already complicated enough. Through Coinbase exchange, you can purchase crypto using traditional currency. It also offers the option of insured custodial wallets for investors to ensure security. Coinbase is free Coinbase pro version has an alternate and less expensive trading fee structure and more choices for trading graphs and indicators Coinbase Pro is ideal for individuals who have achieved their veteran status while trading with Coinbase, as it provides advanced features to the investor.

KRAKEN 

Crypto exchange Kraken gets into forex trading business

Kraken is a United States-based crypto exchange and bank founded in 2011. It provides cryptocurrency to fiat trading and provides price information to Bloomberg terminal. As of 2020, Kraken is available to 48 US states and 176 countries and lists 70 cryptocurrencies available for trade. Kraken played a role in attempting to recover funds lost by investors during the  Mt.Gox bankruptcy in 2014-15.  

KUCOIN 

Bitcoin Exchange | Cryptocurrency Exchange | Bitcoin Trading | KuCoin

KuCoin Exchange, aka “The People’s Exchange,” is a cryptocurrency exchange with its headquarter in Singapore. The cryptocurrency exchange was launched on September 15, 2017, and was founded in 2013. The exchange platform offers a KuCoin wallet protected by multilayer encryption and offline storage through bank safe or funds escrow. In addition, KuCoin comes with profit-sharing among token holders.

I guess now you guys have a better idea about crypto trading. I hope this article might help you understand the pros and cons and essential risks of crypto trading. 

saloni | A cryptocurrency is a form of payment that can be exchanged online for goods and services. Cryptocurrency trading involves buying and selling cryptocurrencies for profit. If conventional currencies have a foreign exchange (forex), cryptocurrencies have their own digital currency exchange where people can engage in trading coin. | beginner's guide, Cryptocurrency, Cryptocurrency Trading, money

SALONI AGGARWAL

Author

I am a motorhead, fashionista, and in the progress to become an advocate, Who has a positive attitude towards each and everything.

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