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Cryptocurrency trading is one of the best ways to grow your money, but there are very important things you need to learn before you start trading. The basic principles of trading remain the same: you buy an asset and then you sell it when the price is higher than when you bought it. However, cryptocurrency is a bit more complicated than your usual stock trading process.
Below are things newbies need to know before trading cryptocurrency:
What Is Cryptocurrency?
Cryptocurrency is real money on software platforms. It uses blockchain technology and is not regulated by banks or any government. Every time you make a transaction using cryptocurrency, the whole network knows about it immediately. When the transaction is confirmed, it cannot be forged or reversed.
There are tools that can help beginners when trading cryptocurrency. Harry Miller from the news-spy.info has a detailed review of such tools that you may want to check out before purchasing.
Properties of Cryptocurrencies
- Permissionless: When you start using cryptocurrency, you don’t need the permission of anybody. As mentioned, cryptocurrencies are not regulated by any entity like banks or governments. Anybody can download and install the software for free.
- Secure: Because of the blockchain technology, it’s almost impossible to manipulate cryptocurrencies. Blockchains are distributed ledgers that record every single transaction, and this is shared with the public for authentication. So if hackers create a fake cryptocurrency such as a fake Bitcoin, they will need to manipulate the ledgers all over the network. When these hackers make a transaction, the cryptocurrency they used will need to be confirmed. Each coin could be traced and each transaction using that coin will be visible even up to the point when it was mined. If the coin is not valid, it will be rejected.
- Fast and Global Transactions: Most transactions are confirmed only within minutes. Your location does not matter since the network of computers are global. You could send cryptocurrencies to your brother next door or to someone else across the globe and the transaction time will still be the same.
- Irreversible: Once you have completed a transaction, you can no longer reverse it. It doesn’t matter if you sent it to the wrong person or to someone who scammed you. No one will be able to help you reverse the transaction, not even if you were a miner. This is why it’s crucial that you double or triple check before you finalize a transaction.
How Can You Buy Cryptocurrencies?
When you’re ready to trade, you will need to create an account on a cryptocurrency trading platform. There are many companies that offer trading services. When you have created an account with one of these platforms, you will need to link a credit card or a bank account.
However, before you go ahead and choose a platform, you will need to read some reviews about their services. Keep in mind that not all trading platforms are the same. While many have a good reputation, you will need to see which one will work better for you. You should check if they have good customer service and if they are available 24/7. Most of these platforms will let you create a trial account so you will get a feel of the actual trading process. However, some platforms are not user-friendly, which could affect the outcome of your trade.
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Storing Cryptocurrencies
As mentioned, you will need to use a trading platform when you trade, but you don’t have to store your cryptocurrencies there because of the possibility that the platform could be hacked. You will need a safer place to store your coins when you’re not trading.
Flat currencies can be stored in an actual wallet or your bank. This is not possible for cryptocurrencies because these are digital currencies. Instead, you can store your cryptocurrencies in a wallet on the blockchain. Here are the different types of wallets where you can securely store cryptocurrencies:
- Online Wallet: The online wallet is the easiest way for you to store your cryptocurrency. Unfortunately, it is also not the most secure type. You can use this when you are trading short-term, but if you’re planning on holding on to your cryptocurrency for a long time, this may not be the best option for you.
- Mobile Wallet: There are mobile apps that were made especially for storing cryptocurrencies. It’s more secure, but you need to be careful and not lose your phone.
- Paper Wallet: A paper wallet is not as convenient as the other types of storage, but it is the most secure. It will enable you to store your private key on actual paper. You must, however, store it in a secure place such as a safe.
- Desktop Wallet: This works the same way as a mobile wallet, but only on a desktop.
- Hardware Device Wallet: There are hardware devices that have been built specifically to store cryptocurrency keys. You can buy it in any store such as Amazon.
Conclusion
Cryptocurrency trading may be a bit challenging to learn at first, but you should be comforted in the fact that it’s not rocket science either. Anybody can learn how to trade. However, you will need dedication when learning especially if you’re a beginner. Even professional traders have to keep on honing their trading skills because the market can be very volatile. You will need to learn how to read trends if you want to be a successful trader.
Trading cryptocurrency can be very lucrative when you understand the market as well as the risks involved. The most important thing you should probably keep in mind when you’re trading is that you shouldn’t be trading with money that you can’t afford to lose. Undoubtedly, there will always be loses in any type of trading such as trading in stocks. This is all the more true when trading in cryptocurrency because of the volatile market. However, when you’re equipped with the right knowledge, cryptocurrency trading could potentially earn you a lot of money.
Sukriti Leekha ,An Economics major by qualification, and writer by profession, Sukriti Leekha has been an active contributor to the blockchain space. As an economist, she is interested in the financial scope of cryptocurrencies, and as an individual, she is passionate about the latest technologies. When she is not researching, she spends her time travelling, exploring the entrepreneurial space, or losing herself in a book.
