How to become a crypto trader?

by Dec 8, 2022Blockchain Technology0 comments

Because of the large quantity of terminology and processes involved, the crypto market may be unnerving for both new and professional traders. To help you better understand the crypto market and how to become a crypto trader, we’ve broken it down into six easy steps:

Choose how you want to exchange cryptocurrencies.

There are two ways to trade crypto: speculating on their values using CFDs or purchasing digital currencies in the hope that their value rises.

CFD trading in cryptocurrency

Contract For Difference (CFD) is a contract that you agree to trade the difference in the value of a crypto from when you start your position to when you close it. You are speculating on the market price rather than purchasing the coin. If you create a long position and the cryptocurrency’s value rises, you will win; if the price falls, you will lose; the converse is valid for a short position.

Purchasing cryptocurrency using an exchange

Alternatively, you may elect to buy a cryptocurrency, which means you gain outright possession of a chunk of the digital currency to store it in a digital wallet and earn if its value goes up.

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First, you must create a cryptocurrency wallet and an account in a cryptocurrency exchange before you begin. There may be several steps to this procedure, and you are required to join a waiting list for the account.

Discover how cryptocurrency markets work.

The cryptocurrency market functions differently than normal financial markets, so it is critical to understand how it works and the terminology used to describe it before you begin trading.

The market is a decentralized digital currency network that functions on a peer-to-peer transaction check mechanism rather than a central server. When cryptocurrencies are purchased and traded, the transactions are added to the blockchain, a shared digital ledger that stores data, through a process known as mining.’

Cryptocurrencies are also notoriously volatile, so it’s critical to understand what’s likely to influence the market, ranging from ICOs and blockchain forks to news and government rules and regulation.

Create an account

Trading cryptocurrencies rather than purchasing them allows you to be ready to initiate a position much faster. You do not require a digital wallet or an exchange account. You only need an account with a leveraged trading provider to trade CFDs.

You can open an account with IG fast, and there is no commitment to add funds until you want to trade.

Design a trading strategy.

A trading plan is essential for any trader, but it is especially important for cryptocurrency traders due to the market’s extreme volatility. Volatility makes the market incredibly appealing, but it also makes trading tough. This is why your trading strategy should contain risk management tools, a description of your goals, which cryptocurrencies you wish to become a crypto trader, and a process for initiating and exiting deals.

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Your strategy should also mention how you intend to analyze the crypto market: technical or fundamental analysis. Technical analysis focuses on a cryptocurrency’s price movement and historical patterns, whereas basic research examines the external variables and macroeconomic data that influence the digital asset. Whatever strategy you choose, it is critical to stay current on any news that may affect the market since cryptocurrencies are susceptible to market mood.

Select a cryptocurrency trading platform

Our trading platforms may help you trade crypto CFDs in a more innovative and faster way, with personalized alerts, interactive charts, and risk management features integrated. You can use the IG trading platform to trade using:

  • Your internet browser
  • One of the mobile applications
  • Advanced third-party platforms, such as MT4, are available.

Start by opening, monitoring, and closing your first position.

Because no digital wallet is required, you may begin trading cryptocurrencies immediately and become a crypto trader after opening your account with IG and selecting your platform.

To trade crypto, ether, Litecoin, or another cryptocurrency, open the deal ticket for your selected market, and then you will see both a buy and a selling price stated. You will be able to choose the amount of your position and then either purchase or sell to open a long or short position. Remember that you can add stops or limits to your trade to close it once it reaches a certain level and protects it from unnecessary risks.

The profit/loss of your position may be tracked in the ‘open positions’ area of the trading interface. When you’ve determined it’s time to close your position, place an identical transaction in the opposite direction.

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Examples of cryptocurrency trading

We’ve included two examples of how to become a crypto trader and their probable results to help you learn how to trade cryptocurrencies.

Selling ether as an example of CFD trading.

You feel the price of ether, the Ethereum network’s token, will decline and decide to go short by selling ether against the US dollar (ether/USD).

The current market price is 200, and you plan to sell five contracts (1 ETH each) to initiate a position at this price.

If your Prediction is right

Your trade would benefit if you were correct and the value of ether declined against the US dollar. If the new market price is 150, you can finish your position and profit by purchasing five contacts at the purchase price of 155, which is higher than the market price because of the spread.

Because the market has shifted 45 points in your favor, your profit would be computed as follows: 5 x 45 = $225.

If your prediction is wrong

If the value of ether increased in relation to the US dollar, your position would be terminated at a loss. Assume you decide to quit the trade when the market rises 15 points to 215; thus, you purchase back five futures at the buy price of 217. This would imply that your position suffered a loss of $5 x 17 = $85.

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We do not endorse or promote any specific cryptocurrencies, projects, exchanges, or investments mentioned on this website. The inclusion of any external links does not imply endorsement or recommendation.
Please note that the cryptocurrency market is highly volatile and involves substantial risks. You should carefully consider your own financial situation and risk tolerance before engaging in any cryptocurrency-related activities.

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