A Beginners Guide to Trading Cryptocurrency
In this piece, we will discuss how to trade cryptocurrency for beginners. Before you can trade cryptocurrency, you need to an exchange to trade on and a wallet to keep your funds. Once you sign up on an exchange, the rest is as simple as filling out a form and waiting for the confirmation of your transaction.
Simply put, in order to trade cryptocurrency, you need:
It’s that simple. The rest of this guide will explain the details and other essential things to know.
How to invest in cryptocurrency: You have a few options if you want to invest in cryptocurrency and not just buy or sell or trade. You can choose between
- The GBTC trust like it is sold on the stock market.
- An exchange to purchase coins on and a wallet to store them.
- An exchange-broker-wallet hybrid like Coinbase or GDAX.
This page will focus on the last option due to its ease of use for new entrants.
Essential Things to Know Before You Start Trading Cryptocurrency
There are not much to know about trading cryptocurrency beyond the points noted above. Here are some of the most critical things to know before starting:
- A crypto exchange is not part of the typical stock exchange.
- A new investor might prefer to trade on the stock market via cryptocurrency stocks. GBTC is the main Bitcoin stock available on the stock market.
- The most straightforward place to buy, sell, and store digital assets is Coinbase, but you can only buy, sell, and store these currencies on Coinbase. If you are keen on really trading cryptocurrency, you’ll need another exchange like Bittrex, Binance, Kraken, or Coinbase’s GDAX.
- The cryptocurrency market is wildly volatile. You can make an enormous profit in a moment and lose it all in the next whether you trade Ethereum, Bitcoin, or the GBTC Bitcoin trust. Consider moderating risks, hedging, and not “going long” with all your capitals.
On cryptocurrency mining: Mining cryptocurrency is one of the ways to invest in the crypto market. That is a genuine way to start investing in the market if you are a computer geek and you have a good rig with a great graphics card. The average investor, however, will want to trade USD for bitcoin on an exchange platform and avoid the investments and complexities of mining.
What You Need to Know to Begin Trading Cryptocurrency
- As a new investor, you should start by choosing a reputable and secure exchange that offers a crypto trading platform and a wallet (to help simplify the process).
- A new investor should also start by trading leading cryptocurrencies. Presently, in 2018, the prominent coins are Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP).
It is worth noting that a good start for any person wanting to trade cryptocurrency is starting with is stating with a prominent cryptocurrency exchange like Coinbase. (one of the biggest crytpocurrency exchanges in the world, and a service that provides a single platform for a Bitcoin wallet, Litecoin wallet, Bitcoin Cash wallet, Ethereum wallet, and currency exchange).
After you’ve obtained your preferred digital asset on Coinbase, then you’re ready for say GDAX and other exchanges that offer a trading platform such as Binance, Bittrex, Kraken, Bitfinex, Gemini or Coinhouse.
How to Begin Trading Cryptocurrency with Coinbase ?
The process of starting to trade digital currencies is simple, but some notes are indispensable to your understanding. These are like the ones stated above, but they are applied to using Coinbase this time around.
First, to create an account on Coinbase.com.
- Sign up for an account on Coinbase.com to create a cryptocurrency wallet where you can securely keep your digital assets.
- Connect your local bank account, debit/credit card to your Coinbase account so that you can exchange digital currency into and out of fiat currencies.
- Buy Bitcoin, Litecoin, and Ethereum, (trading USD for cryptocurrency).
- Sell Bitcoin, Litecoin, and Ethereum, (trading your digital currency for Fiat)
- Consider opening an account on another exchange and trading one digital currency for another. You can then convert that back to Bitcoin, Litecoin, and Ethereum, and then back into Coinbase, and then sell it for USD.
Important notes for trading with Coinbase:
– Coinbase or GDAX will demand more personal information than you’ll feel comfortable handing out; you can’t bypass this. The limit and restrictions on your account will depend on how much information (ID, proof of residency, utility bill, etc.) you give them. Don’t let this discourage you from becoming a crypto investor. All other users on this exchange went through this process; you have to as well. Coinbase or GDAX is a good bet since you have to trust someone.
– We suggest you use a bank account, and likewise strongly recommend you don’t use a debit/credit card. The fees for using a bank account are way far lower.
– You’ll need to enter your bank account login when you sign in with your bank account. Again, even though that feels shady, it’s just part of the process.
– If you sign in using your bank account, you have to wait 3-5 working days for your bank to confirm the pairing.
– There are limits to how many coins you can purchase or sell in a week. Verifying your account (adding a government issued ID) and adding other payment methods will increase your limits. Otherwise, your limits increase promptly over time as you use the platform.
– Trading incurs some set amount of trading fees; as trading increases, fees decrease. Other exchanges like GADX, for instance, have better rates. Simply put, you’ll pay a little bit more than regular market price and pay a tiny fee when trading on Coinbase (this is probably the trade-off for the ease of use it offers).
– For an extra layer of security, set up 2-factor authentication on your account. The 2FA helps to secure your trading account by sending a code to your phone anytime you try to log in. * This step is pretty important, take the time to set up the 2-factor authentication on your account.
– To trade cryptocurrency, you need to go into settings and ensure your wallets are set up. You will find Bitcoin (BTC), Litecoin (LTC), Ethereum (ETH), and USD wallets under “accounts.”
– The advantage of a USD wallet on Coinbase is that you can put fiat cash in that and then purchase digital coins directly from the wallet. The transaction can take about a week if you try to buy directly with your bank account. You won’t encounter this problem if you use a credit/debit card, but limits on cards are usually lower.
– It’s not compulsory you buy a full coin. You can purchase fractions of coins. Bitcoins, for instance, are pretty expensive right now in 2018, so consider buying portions of a cryptocurrency to start if you don’t have huge capitals. Historically, it has been a mistake to purchase only LTC and ETH because BTC costs more. You should examine which one is most likely to grow in and hold value. Purchasing all three in equal fiat amounts, and overlooking how many of each coin that can buy, is one way to bypass making the wrong choice based on the price tag on each digital coin.
– When you purchase a cryptocurrency, take a moment and analyze the information. An additional decimal place can indicate huge money given the fact that a single Bitcoin can sell for over $4,000 $10,000 $14,000 – $20,000, $10,000.
– Download the mobile app. This lets you trade digital currencies from your smartphone. Transactions are slow, as the market is volatile. You need to buy or sell ASAP when it’s time.
– Set notification alerts. Alerts can help you determine when to buy or sell.
– There is a functionality that lets you buy increasingly over time. Taking a position on a weekly basis is a time-honored conventional move that Coinbase will automate for you.
– Cryptocurrency is extremely volatile! There is always the possibility that the market will collapse, or that you will encounter some other disaster. Digital currencies are not like centrally regulated controlled fiat currencies. There is nothing you can do if you lose your assets, or your account gets hacked, or someone cheats you (which is one critical reason you should have the have 2-factor authentication set-up).
Overall, trading in the cryptocurrency market is easy to start, but there are some vital aspects to understand before you begin trading with a wallet-exchange such as Coinbase.
NOTE: Once you have mastered Coinbase, try moving onto GDAX. It’s, in straightforward terms, like a better version of Coinbase with relatively lower transaction charges.
Coinbase manages both platforms, and both use the same login credentials. GDAX is the favorite exchange of many Bitcoin traders in the United States. It caters to new and experienced traders. After you understand that, then consider other exchanges like Binance and Bittrex.