Basic steps in crypto trading
Step 1: Signing up for a crypto exchange account
It is essential to choose a crypto trading platform carefully. The most popular type of trading platform is a cryptocurrency exchange. Traders usually check reputation, compliance, security, features and listed cryptocurrencies on these exchanges.
Opening a crypto exchange account will require personal information and passing Know Your Customer (KYC) verification. KYC in crypto means verifying your identity by providing personal information to comply with regulations. Accounts should be set up with strong passwords, two-factor authentication (2FA) and other available measures.
Step 2: Adding funds to an account
Funds can usually be added to a crypto exchange account via wire transfer, debit or credit card, or by transferring a cryptocurrency balance from an existing cryptocurrency wallet. Once you have funds, it is as easy as buying certain cryptocurrencies and holding them on the exchange until their price changes enough to sell them — hopefully for a profit.
Step 3: Selecting a crypto to trade
Many experienced crypto traders carefully choose a cryptocurrency based on technical and fundamental analysis. Think of crypto trading as buying a car. Technical analysis is like checking the car’s speed, engine performance and mileage to predict how it will run in the future, whereas fundamental analysis is like looking at the car’s brand, reviews and safety features to determine its overall reliability and value.
While both approaches help you determine if the purchase is worthwhile, they focus on different factors: performance data and the car’s intrinsic worth. Now, let’s understand these differences in the cryptocurrency context:
Technical analysis: With technical analysis for cryptocurrencies, traders look at past price movements, trading volumes and other market data to identify patterns and trends. They use charts and technical indicators, such as moving averages and candlestick charts, to predict future price movements. They aim to make short-term trading decisions based on trends identified using charts and market sentiment.
Fundamental analysis: When traders conduct fundamental analysis for cryptocurrencies, they evaluate the asset’s intrinsic value — i.e., the true worth of an asset based on its fundamentals — by looking at factors like the development team, practical uses, the technology behind it, market adoption, partnerships, compliance with regulations and the overall health of the blockchain. Their goal is to determine the cryptocurrency’s long-term potential and strength as an investment.
While many traders choose to speculate on Bitcoin $BTC $71,761 or Ether $ETH $2,677.74, others prefer altcoins or newer tokens. These coins with smaller market capitalization can be even riskier and more volatile, making technical analysis less reliable, but they can also offer bigger returns.
Step 4: Making a trade
Making a first trade or purchase involves selecting a trading pair — e.g., USD/BTC — which means you’re trading fiat United States dollars for Bitcoin. Traders must also choose their order type — either a market order or limit order — and the amount before confirming the order.
Step 5: Storing cryptocurrency
Traders keep their cryptocurrency funds intended for immediate trades on the exchange. Crypto balances held for longer are more safely stored in a cryptocurrency wallet, with a hardware device being the safest option.
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