What is cryptocurrency trading, and how does it work?

How to get started with cryptocurrency trading

 

So you’ve heard about this cryptocurrency thing, and you’re wondering what it means to invest in it and how to do it? If so, read on! In this guide, we’ll explain the basics of cryptocurrency trading, including where to buy cryptocurrencies and how to trade them effectively. We’ll also provide tips on protecting your money and trading safely.

 

Setting up your account

After deciding which exchange you’d like to use, you’ll need to link your bank account or credit card in order to deposit funds. Some exchanges allow users to deposit fiat currency directly into their accounts and have it ready for trading right away. 

If that’s what you’re after, look for a platform that will let you do so – Interac in Canada and The Bancorp Bank in the United States are two examples of exchanges that offer no-fee direct deposits as long as you verify your identity by providing some basic information about yourself (such as your Social Insurance Number). 

The bottom line: Cryptocurrency exchanges don't want lengthy registration processes if they can avoid them because they're all competing for traders' business.

 

Buying Bitcoin

For U.S. buyers, Coinbase offers Bitcoin via ACH bank transfer in a variety of digital currencies for those who want to buy and trade via a traditional stockbroker. It is important to keep in mind that these accounts are still subject to FDIC regulations, which means you’ll be required to fund your account with $10,000 or more. 

You can also buy Bitcoin on exchanges like ShapeShift, Changelly, and Cryptonator. As an example of how volatile cryptocurrency investing can be, after starting last year at about $900 per Bitcoin, prices recently soared past $3,000 before dropping back down below $2,000 within days as geopolitical uncertainties swirled over its growth trajectory.

 

The buying process

To buy, you'll have to find a Bitcoin exchange (also called a wallet) that supports your desired currency. You can then transfer money from your bank account or PayPal (or even credit card, if supported) into your new Bitcoin wallet. 

Some exchanges allow you to make a bank transfer in person or another way, but most exchanges require your ID for transactions greater than $100. Exchanges offer various methods of funding your account and buying/selling coins. For example, Coinbase offers an instant sell feature (ACH or SEPA), which allows you to instantly sell any amount of bitcoin and have it deposited directly into your PayPal account. 

The best exchanges will also support multiple payment options and currencies. If you're looking to buy larger amounts of bitcoins, LocalBitcoins is a good option—it's an escrow service that helps match buyers and sellers online. The company only facilitates trades between individuals; there are no fees involved whatsoever.

 

Start trading

If you want to invest in cryptocurrency, first educate yourself on what it is and how it works. One way is by taking a course on investing in cryptos offered by sites like Udemy or Coursera. This can give you an idea of whether you'd be interested in putting money into cryptocurrencies—and if so, help guide your approach. 

Once that's done, read up on strategies for trading blockchain assets using popular exchanges like Coinbase, Kraken, Bittrex, and Poloniex. These kinds of exchanges accept most fiat currencies (like USD and EUR) as well as popular cryptocurrencies (like bitcoin). 

You'll also need to set up an account with one of these services, which requires providing some personal information. After that, you're ready to start buying and selling cryptocurrencies!

 

Tips for successful buying/selling

First of all, take a breath and ask yourself what you want to achieve. This is not a decision that you should rush into; instead, it should be one that comes from understanding your personal situation and deciding how crypto fits into your life now. 

Having said that, there are three common reasons why people enter into crypto investment: Passive income, profit-taking, or investing for future use (disposable income). Each requires different levels of commitment. 

And remember that passive doesn’t mean without work—it just means a much lower level of effort than actively managing a traditional investment portfolio. Before you dive in headfirst, it’s important to know what you want so that you can understand whether buying or selling is right for you now.

 

Trading platforms

There are three main types of platforms that you can use to trade cryptocurrencies: a cryptocurrency exchange, a broker, and a peer-to-peer platform. Exchanges and brokers typically let you buy currencies via fiat or credit card. They’re straightforward to use but usually not anonymous. Peer-to-peer exchanges don’t allow direct purchases; instead, you can only swap one currency for another. 

These platforms tend to be more complex than exchanges and brokers because they require more work on your part—and in some cases, offer less security as well. However, they do give you more control over your funds and allow for anonymity if desired. 

For example, LocalBitcoins lets users post advertisements where they state how much currency they want to sell or buy for a certain price—and whether it's an online transaction or in person. The site also offers escrow services so that neither party has to worry about fraud during transactions.

Conclusion

Cryptocurrency, and digital currency in general, is highly speculative and volatile. That’s exciting for many people: If you like high investments that can pay off big time, cryptocurrencies might be for you.

 But before you invest any cash in Bitcoin or other cryptocurrencies, it’s critical that you read up on them first so you know exactly what you are getting into. I highly recommend starting by reading through our beginner's guide to Bitcoin. 

And once you feel confident enough in your knowledge of Bitcoin and its ecosystem to start looking into investing go ahead and check out some of these resources Bitcoin Charts - A good place to track prices across different exchanges. 

You'll notice how wildly different prices can be depending on where you look. This is because a lot of times exchanges will price their coins at whatever they think they'll be able to sell them at later (this means higher prices). So if you're trying to buy low and sell high, keep an eye out for those discrepancies!