If you are new to cryptocurrencies and have little knowledge about digital assets, you should pay attention to the following things: cryptocurrency exchange, trading strategy, and risk management.
Let’s talk about each of these terms in more detail.
1. What Is A Cryptocurrency Exchange?
A cryptocurrency exchange is a platform where you can buy, sell, and trade crypto. It allows you to quickly
exchange one cryptocurrency for another, or fiat money for crypto. In other words, it’s a middleman between the buyer and the seller, ensuring the security of your transactions.
When exchanging cryptocurrency on some platform, pay attention to its offer: the proposed assets, types of trading, various opportunities, and fees. Sometimes the fees noticeably eat into the income from crypto trading, so most traders are looking for the
cheapest cryptocurrency exchange.
2. What Risks Does Cryptocurrency Involve?
Besides the lowest fees cryptocurrency exchange, traders also worry about the possible risks that fall on their shoulders when trading crypto. So, how do you risk?
The main risk of crypto is, of course, market volatility. As with the progenitor of all digital assets, Bitcoin, the price of altcoins (ETH, WBT, ADA, and so on) depends on supply and demand. We can’t accurately predict where crypto will go tomorrow, but we must be as safe as possible. It doesn’t apply to stablecoins such as USDT or USDC as they are tied to the state currency (for example, USD).
In other words, you can both make capital and lose everything. However, you can avoid the worst by controlling the crypto trading risks. So, what do you need?
- Don’t panic and give vent to emotions. Trade with a cool head; don’t use the money you need to live. Beat your FOMO (fear of missing out) and FUD (fear, uncertainty, doubt). It’s the first step to trading that won’t corner you;
- Never rely on someone else’s opinion. Learn to analyze the market yourself. Expand your knowledge about crypto daily. Do Your Own Research (DYOR) means staying critical of information from the Internet. Before trading, study the asset’s White Paper, tokenomics, or the project’s roadmap;
- Diversify and hedge your funds. Diversification is the ownership of various financial assets. Modern portfolio theory states that the variety of assets in a portfolio reduces the risk of losses and systematizes returns. You can divide investments like that: 40% — shares, 30% — bonds, 20% — digital assets, and 10% — cash. For example, invest some part in Bitcoin and others in altcoins. Trade the way you think is best for you (remember DYOR).
3. What Are Cryptocurrency Strategies?
A trading strategy is a set of rules by which a trader acts. Generally, they are based on technical and fundamental analysis of the asset. In technical analysis, we use various tools and market indicators. In fundamental analysis, the investor studies the “intrinsic” value of the asset: the underlying technology, the team behind the project, general market conditions, etc. A standard set of strategies, easy for a beginner:
- Day trading;
- Copy trading;
- Swing trading;
- Crypto range trading;
- Crypto arbitrage.
Remember the features mentioned in the first item when choosing the best cryptocurrency exchange for day
trading, copy trading, and other crypto strategies.