Before learning how to day trade crypto, you have to know what cryptocurrency is.
- Get a Reliable Crypto Wallet
- Buy and Sell Cryptocurrency
- Open an Account in an Exchange
- Decide What's Your Crypto Trading Plan
- Formulate Your Crypto Trading Strategy
- Final Words of Wisdom
What is Cryptocurrency and How to Get Into Crypto Trading?
A cryptocurrency is a virtual currency based on a secured, public, decentralized ledger. It doesn't rely on banks, government, or private institutions to verify each transaction. Everything happens inside a peer-to-peer system, which allows crypto holders to buy and sell without the need for a middleman like banks or financial institutions.
Wanna learn the top crypto to buy now? Have you recently Googled "how to start crypto trading"?
Buying coins and trading them usually involves few steps:
There's a popular saying in crypto trading: DYOR or Do Your Own Research. Whether you're eyeing a particular cryptocurrency to buy or still skeptical about your choice, it's still recommended to do extensive research before investing your money.
Easier said than done, right?
If you're reading the news or active on social media, many coins get a lot of hype. Beginners often fall victim to FOMO (Fear Of Missing Out). So, always remember to keep your emotions in check if you're still starting out.
Aside from searching for information on Google, there are a few authority websites you may want to start checking first. CoinMarketCap.com lists all available cryptocurrencies and provides detailed information about each one of them.
So, there are a few questions you can ask when researching certain cryptocurrencies:
1. Is it economically active?
When you discover a promising crypto project, the first thing you can check is if it's still active in the market. So, next time someone is hyping some cryptocurrency stocks to buy, you can check their status on websites like CoinGecko.com to see if the coin is still alive.
The crypto should be listed on at least one reputable exchange, such as Coinbase, Binance, and Crypto.com. You should check the trading volume and price action of the cryptocurrency. If the hype is indeed true, it should exhibit a significant trading volume.
Once you've established that the crypto you're interested in is economically active, it's time to dig deeper.
2. What exactly is it?
Analyzing specific coins is certainly a headache-inducing task. You'll have to deal with lots of technical terms and winding processes.
This is why watching videos about cryptocurrency analysis is recommended for beginners. For this, you can pay a visit to reputable websites and their YouTube channels, such as Messari, Binance Research, and ICO Drops. Because these companies are big players in the crypto space, there's a degree of professionalism that's expected of them. Meaning, they are as reliable as they can get.
When analyzing a cryptocurrency, the first thing you can look at is its profile. Messari is one of many websites that provides a comprehensive profile for each cryptocurrency.
Within the profile, you should find a thorough breakdown of the coin's history, detailed coin economics, where was the money raised or allocated, and a timeline of its development or funding milestones.
Another thing you should carefully research is the comprehensive breakdown of how the capital was raised and where the coins are allocated. When most of the coins are issued to the people who founded the project, it's easy for them to manipulate the supply and price of that cryptocurrency. Therefore, the top crypto to invest in are those that issue the majority of their coins to the community.
Be on the lookout for wallets that hold a substantial amount of the coin. You can use a coin tracker or blockchain explorer to check who the largest coin holders are and the total coin distribution. However, you may also spot large wallets, which could just be smart contracts used for staking.
3. How does it work?
Once you familiarize yourself with technical terms about the token, you have to understand how it really works before you can fully learn how to get started day trading. Your goal here is to wrap your head around how the coin is or will be used in the real world, which involves its consensus mechanism, algorithm, integrations, and mining.
You can search for interviews of the key members involved in developing the cryptocurrency. Make a list of these interviews according to date so that you can arrange them in chronological order before watching them.
These interviews offer a treasure trove of information that you won't find anywhere else. Furthermore, watching these interviews often goes a long way in understanding any technical elements that you might have struggled to understand by just reading blogs or documentation.
Watching the brains behind the project can answer the questions you might have had when you were just reading about it. Also, you'll be able to see if you're dealing with experts or not.
PRO TIP: You can research the credentials of these key members on Linkedin to see if they have any merit. What you want to see is an extensive experience in Information Technology, Programming, or Computer Science. On the other hand, a background in sales or marketing is not exactly a convincing credential for a founder of a cryptocurrency.
More established cryptocurrencies have various channels to inform the public about how the coin really works. You can check the YouTube channel of the cryptocurrency you're researching. If you're lucky, you'll be able to find videos explaining the core components of the project.
4. Is it making any progress?
Skimming through the headlines of the crypto's website blog page is usually enough to get a sense of whether it's been true to its word and where it is headed.
You can follow and read any significant update you see, such as those related to tokenomics or any big partnership announcements.
Subscribe or visit cryptocurrency news websites like CoinDesk, Cointelegraph, and Decrypt. Here, you can search for the cryptocurrency you're interested in to see what it's up to or if it has made the headlines. If you don't find anything, don't take that as a bad sign because you can't expect these websites to cover all crypto projects available in the market.
By this point, you'll get a good idea if the cryptocurrency you're researching is worth your time or not.
II. Get a Reliable Crypto Wallet
Choosing a secure, easy-to-use wallet is the first crucial step after deciding what specific crypto to buy now.
After buying coins, beginners tend to keep their coins in the exchange they bought them from, practically trusting the exchange to keep the coins safe, giving up control over their holdings.
A wallet that doesn't allow you to have complete control over your crypto is known as a Custodial Wallet. It doesn't require private key access, and you don't have full control over your coins. Therefore, the recommended way to store cryptocurrencies is to move them off the exchange into a non-custodial wallet.
Wallets can be installed on your mobile phone or computer. Sometimes, each cryptocurrency needs a different type of wallet, most wallets can support multiple coin types.
PRO TIP: With this in mind, when someone buys coins, the wallet should support the coins that were purchased.
For those who want a more secure wallet, using a hardware wallet is the best option. This is a physical device that connects to your computer – and keeps your coins offline, away from the reach of hackers.
After acquiring a wallet, you'll need to find your cryptocurrency address, which you'll need for receiving payments or deposits. Different coins have different address formats, but they're usually arranged like a jumble of numbers and letters.
Currently, there are three leading beginner-friendly, non-custodial wallets in the market:
1. Exodus Wallet
It's a free non-custodial software wallet that can be installed on your computer and mobile phone. The interface is intuitive and beautifully designed for beginners. It supports over a hundred cryptocurrencies. Inside the wallet, you're able to trade coins while also earning interest when you hold or stake a minimum amount of cryptocurrency.
2. Ledger Nano X
It's an easy-to-use hardware wallet that supports over a thousand coins and tokens. Ledger Nano X can be controlled from your mobile phone and computer. The only disadvantage is that the hardware wallet is a bit expensive.
Looking for a convenient way to store and trade cryptocurrency within a safe non-custodial wallet, ZenGo is highly recommended for you. It's a mobile wallet that allows crypto holders to earn interest with no lockup. It has a smooth user interface and is very easy to set up.
III. How to Get Into Crypto Trading: Buy and Sell Cryptocurrency
So, you're done with your research. You already have a wallet. It's time to get rich by buying and selling cryptocurrencies. There are usually three steps before you can make profits in crypto:
1. Open an Account in an Exchange
Choosing an exchange is not easy. You should consider a lot of factors, such as
- Accepted countries
- Payment methods
- Verification requirements
Not all exchanges sell all cryptocurrencies. If you're looking to buy several cryptocurrencies, choosing an exchange that supports all your desired coins is recommended. The signup process at an exchange usually takes a while, and creating several accounts is a terrible idea.
As a newbie, these are the most recommended crypto exchanges for beginners:
This crypto exchange is perfect for those not living in the United States. Binance is a global exchange founded in 2017. Currently, it's considered one of the leading exchanges around the world. The platform supports over 200+ coins. For intermediate and advanced traders, Binance also offers a number of different financial services, where you’re able to learn how to margin trade crypto, leverage trade coins, or stake your crypto holdings.
Coinbase is probably the best possible choice if you are a US resident. It provides a simple process for buying cryptocurrencies, which is very convenient for first-time traders. Like Binance, it also lists all major cryptocurrencies in the market.
One of the fastest options to buy and sell cryptocurrency is doing it in Cryptomama. The platform doesn't require long and tedious verification processes. It would take only 30 minutes to open an account. With over 2 million customers in over 188 countries, it is considered one of the veterans in the crypto space. It provides a simple brokerage service that lists a number of leading coins through a credit card.
2. Decide What's Your Crypto Trading Plan
The key to success in cryptocurrency is having a robust strategy, which an average crypto holder doesn't usually have. Without a plan, many people end up getting wrecked because of buying too much and having no idea when to sell.
So, before you gamble your money on crypto, you have to think about a few things. There are two major ways to start earning money from crypto:
Cryptocurrency investors tend to "HODL" the coin for a very long time. When you search for and buy the top crypto to invest in, you are buying crypto for the long term. Meaning: You believe that the price of the crypto you bought will ultimately rise, regardless of the fluctuations that occur along the way.
People invest in a certain cryptocurrency because they believe in its technology. Investing doesn't require that much research, especially if you bet your money on only a few cryptocurrencies.
Cryptocurrency traders buy and sell crypto in the short term whenever they think a profit could be made. They view cryptocurrency as an instrument for making profits. When you trade cryptocurrency, the underlying technology or the team behind it won't really matter that much.
Basically, crypto traders are taking advantage of the volatility of cryptocurrency. They buy a coin while its price is low and sell it once the price rises. Therefore, trading requires a lot of research, which involves reading charts and following the latest news.
3. Formulate Your Crypto Trading Strategy
The next thing you have to do is formulate a strategy by knowing how the crypto market works. There are a few proven methods to create a successful investing or trading strategy. Here are some of them:
1. Keep an Eye on Bitcoin
Bitcoin (BTC) has a huge influence over the price of other cryptocurrencies.
At any point in time, BTC could either be going up, going down or staying relatively stable. When the price of BTC goes up, it typically carries altcoins along with it, especially larger cryptocurrencies like Ethereum and Cardano.
However, if BTC's price is pumping hard or "going to the moon", it tends to leave altcoins behind. The reason: BTC is viewed as a safe investment, which means people tend to take profits from other altcoins and buy Bitcoin instead for a safer trip to the moon.
When Bitcoin price is going down gradually, it tends to pull large altcoin prices along with it; though some smaller ones can continue to perform well. If BTC's price is crashing hard, everything else will definitely go down with it.
2. Learn What Causes a Bullish and Bearish Market
How do cryptocurrencies gain value? How can you predict when their prices will go up or down? The crypto market is experiencing a sustained long-term uptrend (bear market) or downtrend (bear market) because of various reasons.
- Human Psychology
The fundamental reason why prices of assets fluctuate in the short term has to do with human psychology. It is anchored on human emotions like fear and greed.
Cryptocurrencies can change in value by hundreds – sometimes thousands – of percentage points per day. Until now, there's still a lot of debate about how much a given cryptocurrency is really worth. Speculations and the amount of "trust" people give to a certain cryptocurrency can greatly affect its market volatility.
- Macro Economics
Learning what specific cryptocurrency stocks to buy involves studying the macro factors that affect the economy as a whole, which can directly translate into a bullish or bearish market.
A good example of a macro factor is the debt cycle. In the short term, borrowing money creates economic growth. Typically, people borrow money to buy stuff, allowing corporations to create more products. The government can then collect more money from corporations and the people, allowing them to fund more programs. When this cycle happens, it creates a bull market, where the price of assets tends to experience a sustained long-term uptrend in price.
Unfortunately, a time comes when eventually, the debt that funds all those spending will pile up. Individuals, corporations, and the government need to start paying off some of that debt, which requires a reduction in spending. This creates a bear market - a sustained long-term downtrend in price.
- Adoption and Significant Events
Compared to technical analysis, fundamental analysis looks at the big picture to predict the price movement of a particular coin.
It evaluates a given cryptocurrency's industry, significant news about it, technical developments, regulations around the world, or any other issues that can affect the success of the cryptocurrency. Regardless of the short-term price, fundamental analysis looks at the technology behind specific crypto to evaluate its value.
For example, if Russia suddenly decides to ban Bitcoin, the market will most likely experience a bear market because the perceived value of crypto will be diminished.
How to Get Into Crypto Trading: Final Words of Wisdom
- Invest Wisely
A rule of thumb: if you can't afford to lose it, then don't invest it in cryto. Cryptocurrencies are highly volatile and extremely risky - even for more established ones. If you're a beginner, you can allocate a certain amount of money you can practice with as you're doing your research.
- Beware of Scams
Don't just focus on learning how to day trade crypto. Spend some time learning about how you can protect yourself from scams. Cryptocurrencies are relatively new and widely unregulated. Since governments or financial institutions are not involved, you're on your own. There are little to no laws that protect individuals against scammers or hackers.
- Invest in Non-Custodial Wallets
When someone buys coins, it's highly recommended to store them in a non-custodial wallet. With cryptocurrencies, transactions are irreversible and pseudo-anonymous. So, there's potentially no recourse when a large exchange gets hacked. Therefore, storing your crypto on exchanges like Coinbase is like storing your money in a bank. If their system gets hacked, it's likely that you won't be able to recover your crypto holdings - ever.