Cryptocurrencies are going mainstream. But not only people are starting to see value in cryptos, market trading is getting popular as well, it might sound like something reserved for the financial elite, but with the proliferation of online currency exchanges and trading platforms, anyone can take part and profit from market speculation and due to the high volatility of this market, it is possible to make interesting profits just buying and selling cryptocurrencies at the right time. You just need to know how it works.
Trading currencies (whether fiat or digital coins) involves exchanging currency that you own into another kind of currency and then exchanging it back when the price changes, hopefully for a profit. In the world of fiat currencies, this is known as forex market. Trading cryptocurrencies works exactly the same, but instead of selling and buying US dollars or Euro, traders buy and sell Bitcoin (BTC), Ethereum (ETH) or others altcoins.
Trading cryptocurrencies comes with its own set of advantages:
1. Cheap fees and fast exchanges. For each trade, the exchange platform you’re using will take a small percentage as commission for the service they’re providing. But trading platforms like Binance only charge 0,10% for each transaction.
2. Extreme volatility. Traders make profits when the price of the currency takes large strides upwards, and cryptocurrencies often experience large price movements. Therefore, the chances to make profit are higher in a shorter period of time.
3. Open all week. You can only trade stocks and commodities during business hours, and you can only trade forex during weekdays. Cryptocurrencies, on the other hand, can be traded 24/7, anytime and anywhere.
Despite all the advantages, the risk is also higher trading cryptos than fiat money.
You have to bear in mind that trading is not a game, and just as there is real money to be made, there is real money to be lost. Becoming a good trader is a full time job, there are many things to consider and in order to beat the market you have to understand fundamentals of economy as well as how to read the patterns and trends from a chart.
Cryptocurrency prices are extremely volatile. Where certain trade techniques used in forex might take months to come to fruition, in cryptocurrency trading, it could only take hours or days. For example, in September 2017, Litecoin’s value fell more than 50% in two weeks. The recovery to its previous value took more than two months. Cryptocurrencies not only take large steps in value both up and down, but they also do so in very short spans of time as you can see in the image below.
There are many market-trading books and guides that cover certain chart-reading techniques and patterns which might help you to predict the market but the reality is that the best way to learn is by practising. If you want to get started we recommend you to send a small amount of cryptos to an exchange like Binance and start trading.
While you can buy your first Bitcoin or Ethereum on Coinbase, we like more Binance for trading because has more cryptocurrencies available, it’s the first exchange in trading volume and has advanced options like stop-limit orders to buy or sell a crypto once the price reaches a specified price.