The term crypto trading refers to buying and selling cryptocurrencies on different exchanges. It also means having a sound strategy on when to buy or sell a specific coin from one exchange to another to avoid huge losses if the value drops significantly after the sale takes place.
Trading crypto can be profitable if done correctly, but many people lose their money because they don’t understand how it works.
This guide is meant to help you understand how crypto trading markets work to not fall into the category of those who lose money. It will also highlight key things that traders should know about before getting started with real money investments in the field.
How does crypto trading work?
To understand crypto trading, you need to know how it works. It is not like the forex market, where the process is well-known and understood by many people in all corners of the world.
When it comes to buying or selling any cryptocurrency on a specific exchange, Bitcoin (BTC), there are only two options: buy low and sell high or vice versa. It may appear to be easy enough, but things can get complicated in practice because no one knows what will happen next in the market.
If traders feel that a coin’s value might go up soon because they are not willing to disclose several reasons, they will buy the coin first and sell it back later at a higher price.
Conversely, if traders believe that a specific coin’s value might go down soon for not disclosed reasons, they will short-sell the coin by selling it first and repurchasing it later when its value has dropped.
We have mentioned before that trading crypto can be profitable if done correctly. Still, it would be best to remember that there are no fixed rules for making or losing money in this field because things keep evolving every second, according to new information coming from various sources.
What do you need to know?
Choose the right platform
Trading crypto is not something like forex, where you can start with any broker or exchange out there. It’s essential to choose an exchange with a good reputation in the field because they are better placed to execute your orders at the best price without problems.
Though some exchanges offer support for multiple coins, making it easier for people who wish to diversify their assets, most of them only deal with little coins that suit specific regions better than others. Ensure you check this before opening an account with any platform online.
Understand how each transaction works
Each time someone buys or sells a coin on an exchange, they place an order separate from other orders (bids and asks) that other users have placed.
For each type of order, a specific condition should be met before the trade takes place. Understanding how orders work will help you predict what might happen next in the market and plan your moves accordingly.
Most exchanges have their own trading rules, which traders need to understand if they want to get started with any coin on the platform. It’s essential to read these rules before signing up for an account to avoid losing a lot of money when trading.
Understand investments
Understanding investments is crucial that people new to crypto trading need to know because it works like any other investment field (like forex). Crypto trading, however, is a bit more complicated than most other fields because prices can change in a matter of seconds – a minute for some coins.
To make money in the field, you need to know how markets work and what specific reasons affect their values in the short term. With this comprehension, you can decide when to buy or sell your coins based on credible information from reliable sources with accurate predictions.
Transparency rules everything
As we mentioned earlier, the crypto market works differently from any other investment field out there right now. Traders must have access to all information they need before taking any major step in the field.
Traders need to know when new coins are added to exchanges, when significant bugs in the system are fixed, and when new features are introduced in an exchange.
By having access to this information, traders can make better decisions on buying or selling their holdings.
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