Allright, You Want to Start Cryptocurrency Trading?

Well, you’ve come to the right place. Getting started with cryptocurrency trading can be a daunting task. You may be wondering, “What wallet should I use? Where do I buy Bitcoin? What even is a Bitcoin?”

Worry no more. We’re here to provide you with all the information you need to learn how to begin your cryptocurrency trading adventure.

What’s Your Strategy?

Before even looking at potential cryptocurrencies, you should figure out which strategy you want to pursue. Everyone has their own tactics, but they generally fall into one of the following categories:

  • Long-term hodler – You just want to buy a few different coins and keep them as a long-term (>1 year) investment. This is the simplest trading strategy and usually involves the least amount of risk. You’ll most likely stick to cryptocurrencies with a larger market cap.
  • Mid-range investor – You have a slightly higher risk tolerance than the long-term hodler. There may be coins you hold for awhile, but you also rebalance your portfolio every month or so. Your holdings probably include a mixture of large and medium market cap coins.
  • Daytrader – The most advanced and riskiest cryptocurrency trading strategy. You focus mainly on technical analysis to trade volatile swings in the market. This can be lucrative if you do it properly, but it’s difficult to execute well. All coins are fair game with this strategy.

Your strategy can be some mixture of these three tactics as well. If you’re just starting with cryptocurrency trading, we recommend you stick with the first two.

Choose a Cryptocurrency

It may seem obvious, but you need to put some effort into choosing the cryptocurrencies you invest in. Take your time with this. There will always be new opportunities, so don’t just jump into a trade in an attempt to catch a pump.

Research, Research, Research

Did we mention research? The most important step of every investment opportunity is to research the coin you want to buy. Doing this one step will set you notably ahead of many other investors out there.

At the very least, you should figure out what problem the coin is solving, why the team is qualified to create it, and what purpose the coin has in the overall ecosystem.

Reading the coin’s white paper is a great way to gather all of this information. These documents may seem intimidating, but after reading the first couple, you’ll find that they aren’t so bad. The Bitcoin white paper is the perfect starting point for any cryptocurrency novice. Check it out and learn what started the whole blockchain revolution.

After proper due diligence on your coin (or ten coins), it’s time for you to make the investment.

Find an Exchange

There are a seemingly endless amount of exchange options. Each one consists of pros and cons for different traders as well as different lists of available coins.

When finding an exchange, it’s important that you first see if it supports the coins you want to trade. Most exchanges have an easy-to-find page that lists all of the available coins. We’ve also compiled a list of tradeable cryptocurrencies on the most popular exchanges here.

Beginner Exchanges

If you’re a beginner interested in sticking to the most well-known cryptocurrencies, Coinbase is your best bet. Ever so slightly more advanced, GDAX and Gemini offer similar coin selections with lower trading fees.

Kraken has similar ease-of-use as the previously mentioned exchanges but consists of a larger list of coins.

You can purchase cryptocurrency with fiat (i.e. USD) on all of these platforms.

cryptocurrency

Moderate Exchanges

These platforms support a wider array of coins than the beginner exchanges and usually have lower fees as well. However, this comes at the expense of user experience.

None of these exchanges allow you to use fiat to purchase crypto. You need to have already owned or first purchased Bitcoin or Ethereum on one of the beginner exchanges.

Reputable exchanges in this list include Binance, Bittrex, and KuCoin.

Decentralized Exchanges (Advanced)

As you become a seasoned cryptocurrency trader, you may find yourself trading small market cap coins. Most of these coins aren’t available on centralized exchanges. Instead, you have to use an Ethereum-powered decentralized exchange (DEX).

On these exchanges, you trade directly on the blockchain. There’s no intermediary to match orders. You use a tool like MetaMask to execute your trades. Once again, decentralized exchanges are only recommended for experienced traders.

If this is something that interests you, Ether Delta and IDEX are two solid DEXs to check out.

Select a Wallet

Finally, and most importantly, you should have a secure wallet if you plan on holding your coins for an extended period of time. Once again, you have plenty of options for storage.

Exchanges

Exchanges are by far the least secure place to store your funds. They’re common targets of hackers and are susceptible to phishing attacks. If you do plan on leaving your money on an exchange in order to have some trading liquidity, make it the least amount possible.

Online Wallets

Online wallets are your next best option. These are slightly better than exchanges, but since they’re still online, they have many of the same vulnerabilities. Even a reputable wallet like MyEtherWallet has recently proven that malicious players will always find a way to circumvent the system.

Software Wallets

Even better than online wallets are software wallets. Many of these wallets store your information locally on the device you download it to. However, if your computer or phone catches malware, it could compromise your security. Exodus and Edge are two popular software options.

Hardware/Paper Wallets

Ideally, you should use a hardware or paper wallet for storage. Both methods keep your coins offline and provide the highest level of security. Paper wallets are free, but hardware wallets typically cost around $100. The price tag brings enough security to make them worth it, though. The Ledger Nano S and Trezor are the top hardware wallet picks.

Ledger Nano S

Get Out There and Start Trading

Those are the basic steps you need to follow in order to begin cryptocurrency trading. From there, it’s a lot of trial and error and learning as you go. If you’re itching for more information, check out the guides on the common mistakes to avoid when trading as well as how to evaluate a coin.

This article by Steven Buchko was previously published on Coincentral.com

 

About the Author:

Steven Buchko is a managing editor at Coin Central and a blockchain investor. He’s also the co-founder of Coin Clear, a mobile app that automatically turns your daily spending habits into cryptocurrency investments.

 

Coins, Coins Everywhere

When starting cryptocurrency trading, the vast number of coins to choose from can be overwhelming. From the thousands out there, how can you possibly decide which few to keep in your portfolio?

Although there are an endless amount of strategies when choosing coins, there are a few different tactics you should follow to minimize your risk. In this guide, we’ll teach you the tips and tricks on building your portfolio, so you have a more successful cryptocurrency trading experience.

Diversify Across Market Caps

A great way to minimize your downside risk when cryptocurrency trading is to diversify your holdings across different market caps.

In case you don’t know, the market cap of a cryptocurrency is its price multiplied by its circulating supply. Usually, the higher the market cap of a coin, the less volatile it is. A properly diversified portfolio contains a mix of large (>$5 billion), medium ($250 million to $5 billion), and low (<$250 million) market cap coins.

Large market cap coins like Bitcoin and Ethereum may not experience the same 40-50% runs that smaller altcoins do, but their price typically holds better in bear markets.

How you diversify among these classes depends on your risk tolerance. If you think that investing in cryptocurrency is already a gamble, a portfolio that consists 95% of large-cap coins may be appropriate for you.

Maybe you have disposable income, though, that you wouldn’t be too upset losing. In that case, it may be worth putting over half of your portfolio in small-cap cryptocurrencies. Coins in this class have a high probability of being worth nothing down the road, but the ones that end up growing 100-200x could make the risk worth it.

In the end, you should do a serious evaluation of your risk tolerance as well as the amount of money you’re willing to lose and choose your market cap split based on that.

Consider the Industry

Another thing to consider when building your cryptocurrency portfolio is the industry that each coin is targeting. There are a couple of different ways you can approach this.

Diversify Across Industries

Once again, diversity is key. Because blockchain is still young, it’s difficult to predict which sectors will be most accepting of the new technology. To hedge against this risk, it’s recommended that you invest in coins across different industries.

You can group the most popular cryptocurrencies into a few different categories:

These are just a few of the categories in which you can place coins, and you’ll quickly find that there’s plenty of overlap for some of them. The idea of this strategy is to avoid investing too heavily in any one category. If for some reason that category ends up bombing, you don’t want to be left holding the bags.

Bitcoin TradingDouble-down on Your Favorite Industries

Even when holding coins across a diverse set of industries, you should consider putting additional capital in the industries that you’re most confident in.

There’s a popular notion in the cryptocurrency industry that only one coin per category will win out. But, that just isn’t the case. Take a look at any other business sector. Delta, American, Southwest (airlines), AT&T, Verizon, T-mobile (cell carriers), Chase, Wells Fargo, Bank of America (financial institutions) – and the list goes on and on. People have their preferences and categories are large enough for multiple cryptocurrencies to survive.

For example, if you think blockchain and file storage is inevitable, you may invest in Sia, Filecoin, and Storj. Or, if you’re a big believer in supply chain projects, VeChain and Waltonchain could take up a considerable amount of your portfolio.

Look for Hidden Gems (if you have the time)

The best coins to have in your portfolio are oftentimes the ones that not many other people have. There’s wisdom in going against the crowd.

Finding coins that haven’t haven’t become popular yet is a time-consuming process, though. It usually involves days (or even weeks) of research and slogging through a bunch of white papers. Even reviewing fifty projects may only lead to one or two that you deem worthy to invest in.

However, these one or two coins could be the key to an uber-successful portfolio. Let’s look at some examples:

  • Early investors in AntShares (now NEO), have seen ~160,000% return on their investment.
  • An investment in Bitquence (now Ethos) would have brought you a 4,300% return.
  • And, your portfolio would’ve grown by almost 4,000% by finding OmiseGO early.

As you can see, there’s immense value in finding coins early. If you have the time to research and enough money to take the risk, it could really pay off.

Cryptocurrency Trading is All Trial and Error

As you build out your cryptocurrency trading portfolio, you’ll probably find other tactics that also fit in well with your trading strategy. Additionally, you’ll most likely try out advice that sucks. You may even find that you don’t agree with the tips listed here.

And, that’s okay. Becoming a cryptocurrency trader is a learning process, and each investor inevitably molds their own unique style as they become more experienced. The important thing to remember is to keep an open, yet skeptical, mind and enjoy the ride.

This article by Steven Buchko was previously published on Coincentral.com

About the Author:

Steven Buchko is a managing editor at Coin Central and a blockchain investor. He’s also the co-founder of Coin Clear, a mobile app that automatically turns your daily spending habits into cryptocurrency investments.