With crypto-mania all around, newbie investors and traders often look to the legends for inspiration. After all, don’t you want to be filthy rich and be the next hot-shot crypto millionaire?
Investors like Warren Buffet and Ray Dalio are well-regarded for consistently pulling in profits from their judicious long-term investments. On the other hand, trading maestros like George Soros and Paul Tudor Jones employ more frequent buying and selling tactics that have defined the world of trading.
These experts have made a career off traditional stock markets. They have established sky-high standards that investors and traders in other markets, such as cryptocurrency seek to emulate or surpass. And if you’re one of them, a first-timer looking to be the big bull in the world of crypto trading, this one is for you!
So, if you are looking to ride high on the crypto wave, fasten your seatbelts and sit tight because we’ll discuss all about how cryptocurrency trading works, day trading crypto, and much more. Let’s get started!
- People can begin crypto trading without becoming miners
- People can begin trading in this digital currency by simply making an investment and purchasing any of the existing crypto coins through an exchange, such as Bitcoin, Dogecoin, Ether, and others.
- There are a number of exchanges in India that provide this service for a little transaction charge or commission.
- The crypto exchanges are open 24×7, unlike the stock markets in India which operate from 9 AM to 3.30 PM and remain closed on weekends, prescribed holidays.
What is Cryptocurrency Trading?
From 2021 through 2030, the global cryptocurrency industry is expected to increase at a CAGR of 12.8 per cent, from $1.49 billion in 2020 to $4.94 billion in 2030.
With such a bright future in crypto trading, it is obvious that people all across the globe want to hop on the crypto bandwagon, and we’re here for exactly that purpose.
The cryptocurrency market has surged in popularity in recent years, opening up a slew of chances for traders to bet on market values. However, it would be best if you first learned how cryptocurrency trading works before you take a position.
To help you get started, we’ve put up a list of everything you need to know.
The act of speculating on cryptocurrency price fluctuations using a CFD trading account or purchasing and selling the underlying coins via an exchange is known as crypto trading.
The crypto jargon we’ve used above might have given you a rough idea of what is crypto trading, but how do you start? As the above definition of crypto trading says, there are two ways to trade cryptocurrencies!
- Using CFDs to speculate on their pricing.
- Purchasing the digital currencies via an exchange in the hope of seeing their value rise.
So, without further ado, let’s dive into what exactly these buzzwords mean.
Utilising CFDs to Trade cryptocurrencies
A contract for difference (CFD) is a method wherein you agree to swap the difference in the price of a cryptocurrency between the time you open and close your position. In this case, rather than taking ownership of the cryptocurrency, you speculate on its price. If you open a long position and the cryptocurrency grows in value, you will profit; however, if the cryptocurrency falls in value, you will lose money, and vice versa.
Purchasing cryptocurrencies through a cryptocurrency exchange
Alternatively, you might buy a cryptocurrency, which means purchasing a portion of the digital currency and holding it in a digital wallet with the intention of profiting if its value grows. For this, you’ll need to open a cryptocurrency wallet and a cryptocurrency exchange account before getting started.
Crypto trading offers you both long and short-term benefits. No matter what kind of trader you are, if you are someone who focuses on the big picture, you may place positions those last months or even years.
Also, you can open deals that will last hours, minutes, or even seconds if you’re a short-term or even day trader. Whether you’re a long-term or short-term trader, you need to understand the intricacies of the crypto market because we don’t want you to get burned by the crypto market volatility.
How Do Cryptocurrency Markets Work?
Warren Buffett, the legendary investor, once stated his two basic investing rules: The first rule is never to lose money. And rule number two is to remember rule number one at all times. Sounds easy, right? Well, it isn’t!
Though we all can’t be Warren Buffet, what we can do is get an in-depth understanding of crypto trading meaning & how cryptocurrency trading works. This way, you can make most of your crypto trading journey and have a positive win/lose ratio where your wins are more prominent than your losses.
The cryptocurrency market operates differently from other financial markets, making it vital to learn how it works and understand the jargon used to describe it. Also, before you move ahead, trying to be a crypto trading expert, there’s something you should know about the crypto market in India.
Industry estimates put the number of cryptocurrency investors in India at 15 million to 20 million, with total crypto assets worth around 400 billion rupees ($5.37 billion). But how does the crypto trading market function at its core?
The cryptocurrency market is a decentralised digital currency network, which means it functions without using a central server and instead relies on peer-to-peer transaction verification. When cryptocurrencies are bought and sold, the transactions are added to the blockchain – a shared digital ledger that records data – through ‘mining’.
Steps to Trade Cryptocurrency
Cryptocurrencies have risen to prominence as an asset class where you can invest and profit handsomely. Despite its lack of government support, this asset class has become extremely popular in recent years. The prospect of high returns in a short period has enticed investors to join the crypto bandwagon because everyone’s expecting crypto to shoot to the moon, and being a millionaire isn’t bad!
So, to help you kickstart your dream journey of being a crypto millionaire, here we are with a list of steps you’ll need to take to start trading in digital currency.
- Pick a Cryptocurrency Trading Exchange of Your Choice
As you may be aware, stock exchanges like NSE and BSE help you trade in shares, and when it comes to crypto trading, you’ve got crypto exchanges. In the case of cryptocurrency, there are online trading platforms like ZebPay, CoinDCX, WazirX, UnoCoin, CoinSwitch Kuber, etc. These cryptocurrency exchanges have shown tremendous growth and are gaining a strong foothold in India’s nascent crypto market.
- Start a Trading Account
After picking a crypto trading exchange of your choice, you must first create an account. This account will function similarly to a bank account. This account will work in the same way as a bank account. During the registration procedure, the exchange will verify your credentials based on the services you select, the amount you desire to invest, and the coins trading options available. It will necessitate the sharing of KYC (Know Your Customer) information and the establishment of payment options. For KYC, you may be asked to produce copies of your PAN card, photo ID, and proof of address. Crypto exchanges, unlike traditional stock exchanges, operate 24 hours a day.
- Fund your account and start Investing and Trading in Cryptocurrency
After you start your crypto trading account with your preferred exchange, you’ll have to transfer some money into the cryptocurrency trading account to invest and trade in crypto. You’d need to decide the coins you intend to invest in after the money transfer. By far the most popular cryptocurrency is Bitcoin, which is followed by altcoins such as Ethereum, Cardano, Binance Coin, Tether, XRP, and Dogecoin, to mention a few.
Store Your Cryptocurrency and Choose a Crypto Trading Strategy
After making your purchases, storing your crypto is the most important part. Standard insurance policies do not cover cryptocurrency exchanges since they are not backed by any official governmental institution. Also, they are vulnerable to getting hacked. Therefore, you must keep your account and asset codes in a secure location. Saving your newly acquired cryptocurrency in a crypto wallet is typically a good idea. Furthermore, you can acquire some professional crypto advice that can be useful before increasing your crypto investment. Instead of mindlessly following anyone’s advice, you should always start with tiny investments and carefully research the market.
Did You Know?
The estimated market capitalisation of Bitcoin alone is more than Rs 50 lakh crores, making it bigger than the combined market cap of the six largest stocks in India, namely Reliance Industries, TCS, HDFC Bank, Infosys Technologies, Hindustan Unilever and HDFC.
Pros of Crypto Trading
The technology underpinning cryptocurrencies is sophisticated and frequently a bit of a black box for those who aren’t specialists. Each coin has its blockchain, regulations, and any other technologies or innovations associated with it. It isn’t easy to keep up. But that’s why we’re here. Though it’s all about personal preference – your risk appetite, plus your objectives with crypto trading, here are some advantages that you should be aware of.
|Cryptocurrency market hours|
|Ability to go long or short|
|Faster account opening|
Crypto Trading Strategies
- Day Trading
Day trading crypto strategy is based on taking and exiting positions on the same day. While opting for day trading crypto, the trader aims to book profits amid the volatility of intraday price movements in a cryptocurrency. Traders often rely on technical indicators to figure out entry and exit points for a successful trade.
Scalping involves using increased trading volumes to book profits. Though the risk in such situations is high, a trader can avoid bad trading experiences if he takes care of the margin requirements and other important rules. Scalpers generally analyse the past trends, volumes, etc. and judiciously choose an entry and exit point within a day.
- Range Trading
Some traders rely on expert analysts who give out support and resistance levels every day. Resistance is the point up to which the price of particular crypto may rise, and therefore it is above the current price. On the other hand, support refers to a level below which a crypto price is not supposed to fall; hence it is always below the current price.
Apart from these strategies, there are plenty of other strategies that you can rely on, such as dollar-cost averaging, high-frequency trading, arbitrage, etc., that can help you get a piece of the cake in this lucrative crypto world.
Word to Remember
The use of debt to gain extra exposure to investment is known as leveraged trading. Leveraged cryptocurrency trading allows investors to increase their gains or losses. If a margin call occurs, leveraged investments can become worthless. Because of leveraged positions, crypto markets are more volatile.
Learning to trade crypto has become popular with traders looking to gain big in either volatile bullish or bearish markets. But, there is no holy grail to always winning a ton of money in the market, or we’d all be rich by now. Remember that knowledge is power, especially in crypto trading. Train your understanding of cryptocurrencies and their behaviour. Identify market players, positive and negative news, corrections, massive liquidity levels, and the tokens market’s particularities and impact. You’ll be on your path to becoming a successful crypto trader.
Unlike the stock markets, the crypto market operates 24*7, 365 days a year. There is no specific best time to trade as price changes happen around the clock. Also, as crypto is traded globally in varying time zones, the market will be active somewhere.
The crypto market is primarily driven by the economic forces of demand and supply. Some factors that impact this are:
Political and governmental regulations
The health of fiat currencies
Market sentiment refers to the collective attitude of traders and investors towards a financial market or a particular asset. It has the power to influence market cycles.
You can begin your crypto trading & investment journey from a bare minimum amount. For example – you can trade in Bitcoin for as low as INR 100. Bitcoins can be split up to their 8th decimal place. The smallest unit of measurement for bitcoin is called a Satoshi, and it’s 1/100 million of 1 bitcoin.
There is no one-size-fits-all cryptocurrency for beginners to trade because each one is unique, offering a unique set of benefits and hazards to the trader. Your trading objectives, risk tolerance, and general interests will also determine the best cryptocurrency for you.
Also Read: What is cryptocurrency mining