If you’re looking to get into cryptocurrency but aren’t sure where to start, you’re in luck.
Today we’ve got a quick-fire guide that’ll give you all the info you need to know to get started, plus tips on making the best possible start as a crypto trader.
By the time you’ve finished this cryptocurrency trading course for beginners, you’ll know how to:
- Identify a good cryptocurrency
- Find a reliable cryptocurrency broker
- Choose your cryptocurrencies
- Analyse crypto prices
- Define your trading strategy
- Know your exit plan
- Know what affects crypto prices
First, let’s quickly run through a few key things you need to know about the crypto market before you start trading.
5 Things To Know About Cryptocurrency
Before we delve into trading specifics, here are fives things you need to know about the cryptocurrencies before you get started:
- The cryptocurrency market is 24/7: Unlike regular exchanges (including fiat currencies), the cryptocurrency market is open 24/7.
- Cryptocurrencies are highly volatile: Prices can skyrocket or plummet in minutes or hours.
- Cryptocurrencies are technologies: You’re not simply investing in digital coins/currencies but also the technology they encompass – and this varies a lot between different cryptocurrencies.
- The market is unregulated: Which means there are a lot of scams you need to spot and avoid.
- If it sounds too good to be true, it almost certainly is: It might be a cliché, but it’s never been more appropriate than right now.
Above all, you need to understand that the crypto market is a rapidly-changing environment with high risk and reward that you need to keep an eye on 24/7.
Before you get started, do your research (a lot of it), and you can find plenty of help in our multiple guides.
How To Get Started With Cryptocurrency Trading?
Now that we’ve given you a flavour of what to expect from the market, let’s look at how you can start trading cryptocurrencies.
Step #1: Find yourself a reliable broker
This is simply a platform that allows you to buy and trade cryptocurrencies quickly in return for small fees on transactions, withdrawals or other actions, depending on their payment model.
Choosing a broker can be tricky, especially when you’re just starting out – so take a look at our guide on The Best Cryptocurrency Trading Platforms.
When you’re choosing your first cryptocurrency broker, try to find a platform that provides the following essentials:
- Easy trading
- Support for major cryptocurrencies
- Good reputation
- Quality support
- Low minimum deposit (for beginners)
With all of this considered, we recommend eToro as the place to start trading cryptocurrencies.
Aside from having a long history (for this industry) of providing a secure and robust platform, eToro makes trading easy for beginners and only ask for a $50 minimum deposit.
One of the platform’s best features is the documentation and online support system provided which helps you get to grips with the platform and crypto trading in general.
eToro’s support team has an excellent reputation for helping users who experience any problems while trading with it.
For more information on eToro. You can read our review of the platform.
Step #2: Choose your cryptocurrency
Once you have a broker, you need to decide which cryptocurrencies you’re going to trade.
This is something you’ll want to consider when you’re choosing your broker because support can vary across different platforms.
If you don’t know which cryptocurrencies you want to trade when you’re choosing a broker, go for one that offers broad support for the top currencies and is quick to add support when new coins make an impact on the industry.
For example, eToro supports all the following cryptocurrencies:
- Bitcoin (BTC)
- Ethereum (ETH)
- Bitcoin Cash (BCH)
- Ripple (XRP)
- Litecoin (LTC)
- Ethereum Classic (ETC)
- Stellar (XLM)
As for choosing your cryptocurrencies, keep in mind what we said at the beginning of this guide: you’re not only investing in currencies here but also the technology behind them.
For example, Bitcoin is by far the most valuable cryptocurrency on the market right now, but its technology has already been surpassed by some altcoins while others take an entirely different approach to using blockchain technology.
For example, Ethereum allows businesses to create smart contracts that are easier to enforce and almost impossible to alter without permission from all parties, reducing the risk of contract fraud.
Another promising technology, Ripple is being trialled by major financial institutions to make transferring fiat currencies almost instant and free.
If you’re looking to buy into cryptocurrencies as a long-term investment, make sure you look beyond the current market value of each currency and think about what the technology will have to offer the world in the next five or ten years. Here are some key things to look out for:
- Infrastructure: app development, funding and security.
- Technology: Fast transactions, blockchain innovations, etc.
- Development team: Number of developers, experience and other ventures.
- Growing popularity: Media coverage, rising demand and increasing number of users.
As new cryptocurrencies enter the market, you’ll need to keep an eye out for these things if you want to spot investment opportunities early and be amongst the biggest winners.
For more in-depth information about cryptocurrency investment, you can download our free eBook – An Ultime Guide To Successful Investing in Altcoins and ICOs.
Step #3: Analyse the prices of your cryptocurrencies
Before you buy into any cryptocurrencies, you need to assess where current prices are at.
Anyone who bought Bitcoin when it was knocking on $20k last year will be kicking themselves now while people who invested while prices were under $1k less than ten months before are still laughing whatever happens to short-term prices.
The lesson is this: you don’t want to buy when prices are inflated, and you should do your research before buying into any cryptocurrency.
Always remember that stocks increase in value more often than they decrease over time but, when they do fall, they tend to fall hard.
So when prices are only heading in one direction, you have to expect some correction, sooner or later – as we saw with Bitcoin earlier this year.
Let’s not forget that Bitcoin prices are still up by more than 800% from this time last year (March 2018 vs 2017) after the supposed “crash”.
Using Bitcoin as an example.
Imagine you were getting into Bitcoin for the first time in early December 2017 when prices were soaring past $15k.
You had a bunch of experts calling saying the Bitcoin “bubble” would burst any minute and others predicting prices would only continue to soar – yet both stances were wrong.
Nothing has burst, and prices corrected themselves after a hefty drop, leaving prices fluctuating at around the $10k region for the past couple of months.
The question is: how would you have responded if you were planning to invest in Bitcoin during that incredible month of December last year.
Would you have bought in, expecting prices to keep rising, or held on to your money?
If you think this sounds a lot like gambling, you’re right – this approach to crypto trading is highly risky.
You’re essentially flipping a coin and hoping for the best.
However, Bitcoin investors with enough market knowledge or experience would hopefully have been looking at last year’s prices and expecting a correction.
There were two tell-tale signs of this happening and these are the kind of things you need to look out for.
First, when prices are soaring in one direction, there has to be a kick-back sooner or later – the only question is when. The other tell-tale sign was the reason why Bitcoin prices were soaring, and this was the factor a lot of investors failed to realise.
Far too much of what happened to Bitcoin prices during the second half of last year was simply due to hype artificially hiking up its market value.
The problem is most of this hype came from regular people who expected to get rich from a guaranteed winner, and these are precisely the kind of people who will jump ship at the first sign of danger.
When they panic sell, prices fall significantly, and this encourages others to sell, which only forces prices down further, and you have a “crash” on your hands.
It was all quite predictable, and this Bitcoin example is something every new cryptocurrency trader should learn from.
Step #4: Define your trading strategy
Before you start trading with cryptocurrencies, it’s a good idea to read up on some common strategies and go in with a game plan.
For example, renowned investor Warren Buffet once said this: “Be fearful when others are greedy and greedy when others are fearful”.
Going back to last year’s Bitcoin example, it was people’s greed that artificially pushing up prices and it was their fear that caused the “crash”.
In other words, if you held off on buying when everyone else was investing in Bitcoin and waited until prices reached their lowest, you would be in a good position now.
Here are some other strategic approaches to consider:
- The long/short strategy: An approach that allows you to make money as prices rise and fall – check out our guide for more details.
- Value trading: Buy cryptocurrencies when their values are low and sell them when they’re high.
- Buy and hold: Buy into cryptocurrencies you believe have long-term value and hold on to them (remember the technology element).
There are also different methods of buying and trading cryptocurrencies that you should be aware of:
- Buying cryptocurrencies: You purchase coins at the going market rate, and they’re yours to keep, sell or trade as you will.
- Trading CFDs: You trade contracts for difference (CDFs) where you essentially bet on the value changes of your cryptocurrencies rather than buying them.
- Margin trading: You borrow from a broker to buy coins for yourself.
- Crypto-crypto trading: You trade cryptocurrencies that you already own directly for others on an open exchange, much like traditional Forex trading.
There are various other strategies and methods for trading cryptocurrencies, but you’ll want to keep things simple as you start out.
Above all, never put more money on the line than you can afford to lose in any investment strategy, whether it be crypto trading or not.
Step #5: Know your exit plan
An essential part of any good investment strategy is the exit plan – usually a target selling price that achieves your desired profit margin.
Let’s say you buy into Ethereum when prices are at $450 with the aim of selling at $600 for a profit of 33.33%.
It’s always tempting to hold on a little longer when your investment reaches its target and the potential for a bigger return becomes apparent.
Be wary of doing this, though.
Prices have to come down at some point, and they’ll come down faster than they went up.
This doesn’t necessarily mean you should always sell once you hit your target price, of course. Generally speaking, it’s a better habit than always holding on, but there are times when your evaluation will fall short of where the market is heading.
Sometimes you have to make that call to hold on to a cryptocurrency beyond your target value.
You’re venturing into higher risk territory here – especially in this volatile market – but the more you understand about how cryptocurrency prices are affected, the better positioned you’ll be to make this call.
Step #6: Know what affects crypto prices
There are no guarantees in trading, but the best weapon you can have is an understanding what affects cryptocurrency prices so you can make informed decisions.
We mentioned about hype earlier when we talked about Bitcoin prices last year, but various factors led to the buzz around cryptocurrencies in 2017.
Here’s what you need to look out for:
- Government regulations: Every time governments make an effort to regulate cryptocurrencies, faith in them is knocked a little and prices drop – for how long and by how much can vary significantly.
- New firms backing up a crypto project: At the other end of the spectrum, every time a major firm backs a cryptocurrency (e.g., Amazon announcing it will accept Ripple), it gains strength, investor confidence and robust value.
- News coverage: The news has a significant impact on how people view cryptocurrencies as an investment opportunity – especially hype buyers who, in large numbers, can influence prices drastically.
- Cryptocurrency acceptance: As things stand, most cryptocurrencies have minimal real-world value because they’re not widely accepted as a form of payment. This is a significant contributor to the volatility of the market, but things will change as they become adopted more extensively.
- Technology innovations: Every time a new blockchain innovation is released or progress is made regarding security, speed or other advances, the value of cryptocurrencies becomes more robust.
- Other markets: As other markets become weaker, more people are going to invest in cryptocurrencies as a place to protect their funds.
Already, you can see some potential opportunities for trading – for example, buying Bitcoin when prices are relatively low, and the dollar is relatively high.
Or buying a bunch of Bitcoin, Ripple and Ethereum as Trump takes on China in a trade war, anticipating that investors are going to look for alternatives and the Dow struggles.
The more you know about the market (and others), the more reliable your trading decisions will be.
That’s it for today’s cryptocurrency trading guide for beginners, but this will get you started off in the right direction.
You can also find more guides and tips on the trading section our website, as well as all the latest news and analysis on the cryptocurrency market.