With the ongoing craze in cryptocurrency trading, you might have been thinking about investing in it. However, the lack of knowledge about how this type of trade works and all the unfamiliar jargon just makes it a daunting industry to risk your money. Don’t worry; you are not alone. Everyone goes through that newbie phase and has to give themselves time to advance in the learning curve.
We’ll demystify cryptocurrency trading to give you a better picture of what you will be dealing with once you’re in the playing field.
What is Cryptocurrency?
First, let’s define the subject at hand to be on the same page. Cryptocurrency is a digital asset that’s being safeguarded from unscrupulous individuals through cryptography – an encryption technique used to hide and protect valuable data. This digital money is used to buy and sell goods and services but cannot be utilized for purchasing any commodity, like gold.
How do you buy and sell cryptocurrencies?
Buying and selling of cryptocurrencies are done online and does not require any identity disclosures. They are sold and being bought in virtual marketplaces called cryptocurrency exchanges. These entities act as the middlemen for crypto traders who want to buy or sell cryptocurrencies. There are many crypto exchanges out there. Some of them include Coinbase, CashApp, Binance, among many others.
Getting started in cryptocurrency needs you to sign up to your preferred exchange, go through the two-way verification process and select your payment method. However, be careful in choosing your crypto exchange since there are bad apples among them. After signing up, you can now trade cryptocurrencies to your heart’s content.
How do you trade cryptocurrencies?
Before we dig into trading cryptocurrencies, you must first need to have a wallet to protect your cryptos. The wallet is kind of safe that stores your data, including your private key and public address to sell, buy, and hold cryptocurrencies.
- Private key – is your access to use and send your cryptocurrencies.
- Public address – the address where others can send you cryptos
Now, let’s get to business. Trading cryptocurrencies is not an exact science, and it needs patience and willingness to learn.
You can start trading through the Atomic swap by which you trade your cryptos directly to another trader, also called peer to peer. When using the Atomic swap, you will have to decide together with the other trader a shared secret which will be validated upon an attempt to swap cryptos. If the secret matches, then you’re good to go. This is also to ensure that even if a third party wants to intervene, they will not get any of the coins because they are not in on the secret.
You can also trade cryptocurrencies via day trading. This is where people sell and buy cryptos several times in a day. Day trading takes skill but it’ll be worth it once you get the hang of it. Although you have to remember that cryptocurrencies are a highly volatile investment and it will take you down on a roller coaster ride once you start playing on it.
Understanding the World of Digital Cryptocurrency
Now that cryptocurrencies have been demystified and you understand a little bit about how it works, you can start the hard work. Research more on how to play the game. If you can, use demo accounts to dig deeper on how it really works.