From there it is as simple as getting verified with the exchange and funding your account (a process that can take a few days).
When you are checked and have your account funded, the main thing left to do is to purchase or sell crypto utilizing limit, stop, and/or market orders.
If you need to exchange digital money you need:
- A digital money wallet (or two).
- A cryptocurrency (or two) exchange.
The following stage is trading. When exchanging, you can:
- Exchange dollars to crypto (for instance US dollars to Bitcoin or Ripple to US dollars).
- Exchange crypto to crypto (for instance Bitcoin to Ethereum or Ethereum to Litecoin).
What You Should Know Before You Start Trading Cryptocurrency
If everything you know about crypto-trading is the above, you know enough to start cryptocurrency trading.
There are however a few things to know about cryptocurrency trading beyond what has been mentioned above that will help you plan for crypto trading:
Trading on an exchange means you have to recognise the forms of the order. You’ll need to understand the difference between a limit order and a market order. And, you’ll also need to understand how stops function at certain exchanges. If you are trading on an exchange, also make sure you brush up on the concept of slippage. Crypto markets can lack “liquidity,” so please place large-market orders very carefully!
That’s critical to protect your accounts. In crypto if someone hack your account (NOTE: BitRoyal Exchange Uses 7 layer Security to protect your account from hacking.), or lose access to your wallet, you lose everything. In many cases, there’s no way to recover, so security is super important. A strong password, 2FA, and other best practises are a must. For wallet security, you MUST write a copy of your seed / pin / etc onto an offline file, the best way to have a backup and have both of them encrypted (but make sure you don’t lose the password either). Eventually, safe password programmes such as Last Pass support.
The demand for crypto-currency is incredibly unpredictable. If you trade Bitcoin, another coin, or even a stock like the GBTC Bitcoin Trust(The Grayscale Bitcoin Trust is a digital currency investment product that individual investors can buy and sell in their own brokerage accounts.), you can make a fortune in a moment, and lose it in the next. Try minimising risks, hedging, knowing some TA with all your investment funds, and not “going long.” TIP: When you trade only the top coins by market cap (that’s coins like Bitcoin and Ethereum), or GBTC, then it’s slim (not impossible, but slim) to lose all overnight. Many cryptocurrencies are more volatile (but on a good day, they may make quick gains). Coins with lower market caps and amounts usually tend to offer higher risk / reward.
To beginners, selling on the margins does not make sense. Newcomers are likely to want to stick with strong liquidity to big coins and stop the exchange in margins. No better way to blow up your account than to exploit altcoins, but some who delve deep into the culture of cryptography will quickly come along in the temptation. Common sense says you don’t do it from the doorway, so here’s your warning!
Derivatives do have their own set of rules. You can’t just HODL (A slang in the cryptocurrency community for holding the cryptocurrency rather than selling it.) an options contract because you’ve mistimed the market, and it can cost money in fees to keep a long or short contract for ever. The ability to optimise profits can be enticing, but the risk you take and the expertise you need makes derivatives unfit for beginners.
Trading with the Cryptocurrency is a taxable event. If you don’t grasp very well the tax implications of cryptocurrency trading walk. There are some nasty traps that you might fall into when you trade coins. For one, they aren’t necessarily considered “like-kind money.” If that’s confusing, then consider sticking with Coinbase trading USD as coins before you grasp the concept.
In other words, if you understand order types, security, and what you are trading, you are ready to start trading.