Trading has been around for millennia. From essential commodities like meat and textiles, various civilizations paved the way for a global economy that revolves around the exchange of goods. It may not be obvious, but our society revolves around trading.
Now that the times have changed and things have gone digital, there’s a new form of trading that has popped up, crypto trading.
What is It?
Cryptocurrency trading works the same way as, for example, foreign exchange trading. Instead of buying and selling national denominations like U.S. dollars, British pounds, or Euros, you’ll be dealing with virtual currencies like Bitcoin, Ethereum, and Litecoin.
Crypto trading is the act of doing one of the following:
- Exchanging a regular fiat currency with a cryptocurrency, and vice versa.
- Exchanging a cryptocurrency for another cryptocurrency.
The same trading principles apply, though there are minor changes as to how the exchange works because of the volatility.
Types of Traders
Long-term traders look at how the crypto market goes in the long run. It’s all about investment for these guys. These traders can hold cryptocurrencies for weeks and months, some even years. Take for example the Winklevoss twins who bought Bitcoins before the crypto had any real value. They went through all the crypto’s tribulations and held on to it when its price dropped drastically.
But look at them now; they’re two of the top crypto millionaires. Being a long-term trader needs diligence, patience, and monitoring. You need to study price trends over long periods and know what to do when things go pear-shaped.
Short-term traders dwell on the idea of right timing, knowing that prices can go extremely high and low in a matter of hours. It’s all about taking advantage of the daily or even hourly price fluctuations. Your typical short-term trader will be savvy with technical analysis.
Advantages of Crypto Trading
One of the reasons why cryptocurrencies are regarded as innovative is their affordability. Never before has trading been so cheap, where a single transaction can be just a few cents. Paying fees is inevitable because exchange platforms are needed to facilitate the transactions. But they’re still far cheaper if you were to compare them to overseas bank and credit card transfer fees.
Crypto trading is all about right timing. A cryptocurrency can exponentially increase in value in just a few months, just like what happened to Bitcoin last year where it peaked at $20,000-a-piece. Traders can take full advantage of these price hikes by carefully studying the latest trend and updates in the community.
Regular monetary transactions are mostly only done during regular business hours, but not with cryptos. Cryptocurrencies can be transacted anytime and anywhere, as long as you have a device that’s connected to the internet.
Risks of Crypto Trading
Crypto volatility is a double-sided coin. It can make you money quickly. and it can also take everything from you in a single swipe. Take for example Litecoin that lost 50% of its value in just two weeks. It took two months for the cryptocurrency to recover. There was also the dramatic price decrease of Bitcoin when it plunged to $7,000 this year from its $20,000 price in late 2017.
Crypto transactions are irreversible. If you make a mistake sending your cryptocurrency to an exchange, there’s a good chance that it is gone for good. Criminals know this as well, that’s why the rate of scams and exchange fraud are on the rise. See to it that you’re trading with a reputable person or exchange platform.
The key to being a successful crypto trader is knowledge. It’s through this that you know how things work in this tricky, but a highly lucrative game called crypto trading. Hopefully, you’ve learned enough to keep you chasing your dreams of becoming a self-made crypto millionaire.