In the last few years cryptocurrencies have gained a lot of popularity, as has the market for trading them. However, as popular as it is, there are still many people who do not know these concepts and how to start trading. If you are thinking of starting trading, here below you will find the basic information you need to know to do so.
What Is Trading?
Trading is purchasing and selling assets in the digital finance market, using short-term speculation to obtain a profit. No matter how simple this concept may sound, trading involves much more than just a simple transaction.
Is Trading a Type of Investment?
Although both trading cryptocurrency and traditional investment involve purchasing assets and hoping to sell them when the market is favorable, there are some differences between the two. Traditional investment refers to long-term investments, usually when you buy an asset and hold onto it long-term while you wait for its value to rise. You obtain profits from annual yields, dividends, or from the difference between the original purchase price and the final sale price. Despite cryptocurrency trading being a little more speculative, you can invest both short and long term with it. It involves obtaining small profits by buying, selling, and trading many times. Trading cryptocurrency requires more attention and time to get the best opportunities, as the market and values of digital coins are constantly changing.
How Can You Start Trading?
Once you know what trading is and how it is different from traditional investment, it’s essential to assess the amount of risk it involves. Especially if you are a beginner with trading, you should research a variety of topics such as types of trading, market analysis, and risk management.
Are There Risks With Trading?
Like traditional investments, trading involves risks. Trading digital assets has both external and internal risks.
The external ones refer to the market and market volatility. You should know all about volatility. Because cryptocurrencies’ price is based on supply and demand, it is constantly changing and can be highly volatile.
The internal risks refer to the broker or platform used in the operations. Today with the popularity of cryptocurrency, there are many legit platforms, such as the OKX trading platform, but also many unsafe platforms and hackers looking to steal their share. It is important to find a safe platform before trading.
What Types of Trading Are There?
There is not only one way to trade. Here are three popular ways:
- Scalping. This means completing many small transactions in a very short amount of time to make a profit.
- Intraday trading is when the operation opens and closes on the same day.
- Swing trading. This is long-term trading compared with both mentioned before. Operations are open for about ten days before closing.
What Is Risk Management?
Before trading, you should know how to manage the risk of each trade you make. You should never invest or risk more money than you can afford to lose if the trade does not go as expected.