The cryptocurrency market continues to expand globally. Last year, Yahoo Finance reported that there were 2,957 cryptocurrencies traded around the world, and the total value of the cryptocurrency market was $221 billion. Although bitcoin is still the most popular, other coins are growing as the market develops. This may be the perfect time to become a cryptocurrency trader.
What It Takes to Be a Cryptocurrency Trader
On the surface, it may seem like you do not need a lot of experience to become a cryptocurrency trader. However, having a background in finance and understanding how markets work will benefit you. Knowing more about financial strategies will make it easier to get started.
If you have the time and ability, consider taking some courses in finance or economics to boost your knowledge base. According to Maryville University, even a bachelor’s degree in finance will give you a solid business foundation and teach you about investment strategy, money, banking and wealth management.
The basic plan to start cryptocurrency trading is easy to follow. First, you need to open a cryptocurrency wallet online, such as Coinbase. It will allow you to buy and sell cryptocurrency while building your portfolio. Then, you need to join a cryptocurrency exchange and start trading. Although the technology is easy to figure out, it takes more steps to find success as a cryptocurrency trader.
Choosing the Right Cryptocurrency
Today, there are more than 2,900 cryptocurrencies you can choose from, so the selection process is not easy. Although Coinbase is generally safe and popular, you will not be able to invest in some of the smaller players with it, so you must explore other exchanges.
One of the things that separates successful traders from those who fail is the type of cryptocurrency they invest in from the beginning. You have to do your research and only invest in legitimate coins that are genuine. This means looking at reviews and gathering other information before making a decision.
Consider signing up on a website like CoinGecko to use coin ticker widgets and other tools, so it is easier to compare cryptocurrencies. You can track the top 100 coins by market capitalization and see how they perform. Also, pay attention to the news about different companies because the market is always volatile.
Some successful traders recommend investing in coins that have a real-world use or ties to actual projects. However, there are no set rules for finding your own victories on these platforms. Unfortunately, cryptocurrency is inherently unstable, so there is no guarantee that the coins you choose will make you rich.
Understanding the Risks
If you are trading without thinking about the risks, then you should not get into cryptocurrency. Unlike traditional investments such as the stock market, cryptocurrencies do not come with the potential promise of more money in the future. In the stock market, investors who follow good strategies usually see a positive return in the long-term, but this does not work the same way in cryptocurrencies.
The HODL (hold on for dear life) idea in the cryptocurrency market means that you hold on to your coins indefinitely while hoping for things to improve. Many novice traders stick to this approach because they do not understand the markets or are afraid of making mistakes. However, considering the volatility of all crypto coins, there is no guarantee that this strategy will pay off in the future.
Many success stories come from traders who invested in new coins. But this is one of the riskiest ways to make money because some of the initial coin offerings (ICOs) are scams, and a large portion of the new coins are worth less than a penny. These “pump and dump” schemes initially increase the value of the coins to lure investors, but the coins end up worthless.
Only Invest What You Can Lose
In cryptocurrency, as in other types of investments, you should only play with money that you are comfortable losing. This means that your next rent or mortgage payment should never be on the line as you search for the perfect coin.
Some people compare cryptocurrencies to gambling because the chances of you losing money are higher than you making it. You can lose money with bitcoin and other coins since prices fluctuate all the time. It is important to spread your investments out, so you are not stuck with one type of coin. Although this will not guarantee that you will make a fortune, it will at least reduce the risks. In general, you want to have a diversified investment portfolio in cryptocurrency and other markets.
You can become a successful cryptocurrency trader, but it takes work. Pay attention to the markets, do your research and watch out for scams. Moreover, remember that the market is built on volatility.
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