Cryptocurrency Trading for Beginners [2022] | Complete Guide

Introduction

If you want to learn how to trade cryptocurrency, you’re at the right place. There are mountains of information available on the internet, which could easily overwhelm anyone, including a seasoned trader. To help you out, we have created this detailed guide to cryptocurrency trading for beginners updated for 2021.

What is cryptocurrency?

Simply put, cryptocurrencies (also known as digital currencies, cryptos, virtual assets, or digital assets) are digital forms of currencies. They can be used to pay for goods and services just like conventional currencies. Like how the traditional forms of currencies can be traded against one another on the forex, cryptocurrencies can also be traded against specific pairs on specialized platforms called cryptocurrency exchanges.

The difference is that unlike conventional currencies such as the U.S. dollar, cryptocurrencies are often not controlled by a single entity. They are also secured using complex cryptography coupled with a new form of online public ledger called a blockchain. It is distributed to anyone and everyone interested in having a copy. Watch the short video below to understand how blockchain works before we proceed further.

Watch the video: Simply explained: How does blockchain work?

How does a blockchain work – Simply Explained

How it all started?

Digital currencies have been around for more than a couple of decades in different experimental forms, but the first one to be successfully implemented was Bitcoin.

Bitcoin was created by Satoshi Nakamoto (pseudonym), who released its whitepaper called “Bitcoin: A Peer-to-Peer Electronic Cash System” [PDF] in October 2008 and launched the network in January 2009.

An excerpt from Bitcoin’s whitepaper published back in 2008.

Bitcoin has spurred a whole new digital coin class that can now be bought and traded on cryptocurrency exchanges worldwide.

Other than Bitcoin, there are other well-known and recognized cryptocurrencies like Ethereum – which is currently trailing Bitcoin in terms of network value; and Tether – which is the leading stablecoin also in terms of network value. 

ℹ️ A stablecoin is a digital asset whose value is pegged to the value of a fiat currency (such as the U.S. dollar) in order to avoid the wild price volatility that is common with other virtual currencies. The majority of successful and professional cryptocurrency traders use stablecoins while mitigating their trading plans.

Currently, there are more than 13,000 cryptocurrencies listed on CoinMarketCap, a leading data aggregator for the cryptocurrency market.

Cryptocurrency trading vs. Investing

As you learn how to buy and trade cryptocurrencies, you must differentiate between crypto trading and investing. What is the difference? Which is better? And, how do you take advantage of this distinction to effectively make your trades? The two terms are often used interchangeably, but they are different.

They are only similar to the extent that the end goal is the same – gaining profit from your activities. They are different in that results from trading activities are generally expected within a short to medium-term period. This could be anything from minutes or hours to a few days or weeks. With investing, the trader is in it for the long haul. We’re talking about months all the way to years or even more.

As a beginner, you probably want to choose a trading strategy that involves medium to long-term trading and investing. This will typically require more time to research and analyze your trades before committing.