What is cryptocurrency trading, how to begin trade?

Cryptocurrency is a type of digital currency, the accounting of internal accounting units of which is provided by a decentralized payment system that operates in a fully automatic mode.

By itself, the cryptocurrency does not have any special material or electronic form - it is just a number that denotes the amount of data of payment units, which is recorded in the corresponding position of the information packet of the data transfer protocol and is often not even encrypted, like all other information about operation between system addresses.

The term Cryptocurrency took hold after the publication of an article about the Bitcoin system “Crypto currency” published in 2011 in Forbes magazine. At the same time, the creator of bitcoin, and many other authors, used the term "electronic cash".

Later forks appeared: Namecoin (decentralized DNS for registration within the .bit domain zone), Litecoin (uses scrypt hashing), PPCoin (uses a hybrid proof-of-work / proof-of-stake mechanism, does not have an upper limit on the issue volume), Novacoin (similar to PPCoin, but uses scrypt) and many others.

A fork is a fork from another cryptocurrency by changing parameters that make the data of the old and new systems incompatible. This usually happens when some of the participants switch to the new protocol, and some adhere to the old one. At the same time, both cryptocurrencies can have a common transaction history - which accumulated until the moment of their separation.

Until July 2013, the software of all cryptocurrencies, except for Ripple, was based on the open source code of the Bitcoin system. Since July 2013, other platforms began to appear that, in addition to cryptocurrencies, support various infrastructure - exchange trading, shops, instant messengers, etc.

Many altcoins are inherently very similar to Bitcoin, have similar characteristics and can be used with the same equipment as for Bitcoin, but some cryptocurrencies have significant differences. Ethereum has become a crypto platform through the use of smart contracts.

The independence from Bitcoin is even stronger in Ripple, which is effectively a centralized system. A number of cryptocurrencies, such as Dash, have focused on enhancing anonymity.

The most popular coins
The most popular coins

As the popularity of digital money grew, an infrastructure began to emerge that allowed users to invest and trade cryptocurrency. The high volatility of cryptocurrencies has attracted the interest of many investors and traders. When used correctly, high volatility provided good earning opportunities.

In a matter of minutes, some tokens could rise in price by hundreds, and sometimes thousands of percent.

Against the background of the fame of cryptocurrencies among traders and investors, traditional exchanges have also begun to show interest in these assets. They could not provide an opportunity for spot trading of cryptoassets, so they began to introduce derivative financial tools based on cryptocurrencies.

This contributed to the further popularization of cryptocurrencies. Many traders who were not familiar with the blockchain and did not know how to start trading cryptocurrency gained access to cryptocurrency derivatives on traditional exchanges.

Litecoin Moving Average Deviation
Litecoin Moving Average Deviation

What do you need for cryptocurrency trading?

Cryptocurrency is becoming an increasingly popular investment vehicle, but novice traders and investors are often put off by the first difficulties. Many do not want to delve into the specifics of the functioning of the digital money market, blockchain and study other terminology.

In addition, the functionality of many online platforms is not suitable for professional traders and investors. This is quite understandable. Initially, all of these platforms were designed for a simple exchange of digital assets, spot trading.

For normal trading, more professional trading platforms are needed, with wide functionality for market analysis and trading.

Therefore, the correct start trading cryptocurrency is trading cryptocurrencies on traditional exchanges, brokerage companies. This is where you get a whole host of advantages over online cryptocurrency exchanges.

Crypto exchanges can hardly provide traders with a comfortable environment for full-fledged trading, suitable conditions and a user interface that experienced market players are used to.

In short, unlike crypto exchanges, brokers have more than 20 years of experience in online trading, their trading products are more developed, and their customer service is more refined.

Advanced user interfaces, round-the-clock and timely support, a high level of security, the ability to trade from charts or through mobile applications - only a broker can fully offer all this. Obviously, an experienced trader does not even have the question of how to start trading cryptocurrency? For him, the choice is obvious.

It is the brokerage company that properly start trading cryptocurrency. Moreover, all brokerage companies provide an opportunity for demo trading. You can start trading cryptocurrency without investing your own funds and without risk.

Bitcoin Cash Stochastic Oscillator
Bitcoin Cash Stochastic Oscillator

Main tradable cryptocurrency

Obviously, Bitcoin remains the most traded cryptocurrency. This is the first cryptocurrency and it remains highly invested and in demand, despite the huge number of altcoins.

Bitcoin remains the main benchmark and yardstick for other cryptocurrencies.

How to analyze cryptocurrencies?

The cryptocurrency market certainly has certain differences from traditional instruments for trading and investing, but the same analysis methods are applied to it.

The most popular methods are:

  • technical analysis.
  • fundamental analysis.

Fundamental analysis is price forecasting based on an analysis of economic indicators in general, the state of the industry and the company's market indicators.

This method works better in the long term - weeks, months and years, as opposed to the technical one, which can be applied even at intervals of several minutes. Therefore, an investor should resort to fundamental analysis when planning a portfolio for a long period of time - months and years.

Also, the news background is of great importance for the analysis. Almost every headline in the media can influence the value of a cryptocurrency. The analyst needs to consider news and economic forecasts.

The technique of technical analysis is based on price change charts. Most often, they are formed from Japanese candlesticks.

The chart is drawn up as follows: the "body" of the candlestick lies between the opening and closing prices of the period. "Tails" means the high and low prices during the period. Green color shows a rising price, red - a falling price. On black and white charts, filled and white candles are used.

The schedule is discrete, that is, the candlestick reflects the period selected by the user, be it a minute, hour, day or month.

There are a huge number of approaches and varieties of technical analysis. A huge number of technical analysis figures. A detailed examination of all this material will take too long.

Bitcoin MACD indicator
Bitcoin MACD indicator

Trade planning

A trading plan is a comprehensive decision-making tool in trading activities. It regulates what, when and how much to trade.

This is a personalized guide that is tailored to the temperament and trading style of the individual trader. A trading plan can include whatever you find useful, but its backbone always consists of such components as:

  • motivation for trading;
  • trading goals;
  • capital management;
  • attitude to personal risks;
  • instruments and markets;
  • trading strategies;
  • accounting.

A trading plan differs from a trading strategy, which only defines the rules for entering and exiting trades.

Simply put, a trading plan is a roadmap, a ready-made technical guide, a scenario for our behavior in the market. It exists so that we have a clear idea of ​​what we are doing, for what and how exactly.

It is an essential element of a successful and properly start cryptocurrency trading.

But in any case, it is worthwhile to understand that all these figures and patterns show only the highest probability of the direction of price movement.

If you do not know how to start trading cryptocurrency, then we advise that you start by learning the basics of technical and fundamental analysis. This knowledge will be useful for you when working in any market. This is properly start trading cryptocurrency.

Ethereum Bollinger Bands
Ethereum Bollinger Bands

General trading strategies.

There are many trading strategies in the market. They all have different features and application nuances. It will take a lot of time to analyze in detail each of these strategies.

It is also worth understanding that all traders have different requirements for a trading strategy. Each trader has his own requirements, characteristics, opportunities, capital, free time, etc. There is no universally suitable strategy.

Plus, even the best strategy cannot guarantee you a profit. Because this is only one element of successful trading. Much depends on other factors, including yourself.

However, how to start trading cryptocurrency? Which strategy should you select? Many cryptocurrency traders argue that the easiest strategy for newbies is HODL, which means holding assets for a long period of time in the hope of future price increases.

This strategy is very simple as a trader doesn't need to know a lot in order to make a profit. How can this be? The thing is that all cryptocurrencies become incredibly expensive over time. Moreover, you can invest in the most popular coins or tokens to minimize risks.

So what should you do? How to start cryptocurrency trading on this strategy? You need to purchase a promising cryptocurrency and keep it for a certain number of months, and maybe years.

Bitcoin Relative Strength Index (RSI)
Bitcoin Relative Strength Index (RSI)

Many traders say that this strategy is one of the least effective, but there are some doubts about this. Especially when the market is in a bearish phase. At the same time, there are no guarantees that every single cryptocurrency will rise in price over the years. There is an opinion that the entire cryptocurrency market is a big bubble that will burst sooner or later. In this situation, day trading looks much more attractive and safe.

Nevertheless, trade is inextricably linked with statistics. And the statistics is that people who bought cryptocurrency at the beginning of 2018, when the market was in a bearish trend, today have a profit of hundreds, or even thousands of percent.

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