With the advent of technology, trading and transactions have come a long way. From barter to metals to paper, the evolution has led to a new age of digital or cryptocurrencies. These are virtual currencies secured using cryptography, making it impossible to meddle with or counterfeit them. These are intangible entities, existing only in bits and bytes. No government or central authority regulates cryptocurrency because of being decentralized or exists over the blockchain networks. The next natural question may be, what is crypto trading?
Understanding what is crypto trading
Crypto trading involves two major activities, speculating the price fluctuations or buying and selling through an exchange. The activities take place via a Contract for Difference or CFD account. In simple terms, all one needs to do is create a CFD account on a secure platform and bet on the price movements of Bitcoin or any other cryptocurrency. If this sounds like nothing fancy, traders must be meticulous in understanding the technology and other assets involved in crypto trading.
After the answer to what is crypto trading, the next piece of information to explore is how to actually do it.
An introduction to crypto trading
The entire process of cryptocurrency trading is broken down into the following steps.
- Signing up for a trading platform
- Depositing sufficient funds in the new account
- Deciding on a cryptocurrency to invest in or trade
- Going in with the trading
- Storing the crypto in a digitally secured wallet
However, getting the hang of the market is the real deal. Crypto makes one of the most volatile markets, alongside stock trading. So, one needs to do their due diligence beforehand. Further, starting with a small amount is wise, especially for newbies. No one becomes a millionaire overnight through crypto trading. Even if they do, the wealth is based on much research.
Types of crypto trading
Most traders apply the following 4 types of crypto trading methods.
It is the shortest trading method in the crypto market. Pro traders looking for quick profits often use scalping. People usually hold a particular currency for as fast as a few seconds. Even though the profit is instant, the amount is comparatively lower than the other methods. The small income gets accumulated for a day to make a fair sum. The best time for scalping, according to several experts, is during super busy hours because one can bag a decent sum during that time.
- Day trading
It involves keeping an asset for a little longer, say for a day. Intraday trading is when people exchange cryptos during the same business. This type of trading needs the most technical understanding, identifying the trends and identifying the variables affecting the market. Day trading offers small but secure returns. It protects the traders from the aftermath of market volatility.
- Swing Trading
For swing trading, one would need to hold the asset for a longer duration, several days or even a few weeks. It follows the intermediate-term trends, usually from 1 to 30 days. It is ideal for people who cannot follow the market daily for full-time jobs or other reasons. However, one should try to keep themselves updated because more knowledge of the market helps optimize profits.
- Position trading
It involves the maximum profit and the maximum holding period for any asset. Some people also call this method trend trading as one would own the cryptocurrency for a long time. It is best to analyze the weekly and monthly trends for optimum profits.
So, one can choose the trading method based on the money and time they can afford to invest in the trade. Again, it all boils down to understanding two things, recent market updates and one’s priorities as a trader.