In this article we are going to teach you in depth what cryptocurrencies are and how you can invest and operate with them to get an economic return.
Currently the cryptocurrency market has a total capital of more than 93 billion dollars with an average of daily transactions of 1,800 millionmarked by exponential growth in recent years.
Their use can be merely economic, as if they were euros or any other fiduciary currency, for example the Bitcoin either Ether.
What are cryptocurrencies?
cryptocurrencies are virtual currencies. They are the money of the future. With them you can make transactions as with any other traditional currency, but they are outside the control of governments and financial institutions. Namely, there is no central body that issues it or controls its circulation. They use a “peer-to-peer” system where thousands of anonymous nodes verify a transaction, thus avoiding 90% of the cost and increasing the speed of operations that can be seconds.
In order to operate with cryptocurrencies, you must take into account that:
- ✅ The value of a cryptocurrency is not exclusively linked to the behavior of a specific economy.
- ✅ Changes in interest rates and the increase in monetary reserves only have an indirect effect on their value.
- ✅ The value depends on the commitment of users to maintain their price by converting them into traditional currency.
How to trade Cryptocurrencies
Trading with cryptocurrencies is one of the ways to invest in these digital currencies without having to have a lot of money. In fact, they have become an interesting option for Traders as they allow them to diversify your investment portfolio.
Advantages of cryptocurrency trading
- Its value is not usually affected by economic and political events as is the case with traditional currencies.
- The price of cryptocurrencies is mainly determined by the market, that is, supply and demand.
- They are transparent. All transactions made through Blockchain are public.
- It is very easy to trade cryptocurrencies. You can do it from any device.
- They are very secure since the cryptographic system of the currency is very secure, much more so than those used by banks.
Disadvantages of cryptocurrency trading
- Absence of regulation. There are several European Union directives pending approval.
- Mistrust in some people despite its growing use in recent years.
- High volatility since its creation. Its value can vary in a matter of hours.
- Limited acceptance as payment currency. Although, in March 2022, the iconic work “love is in the air” by the artist Banksy starred in the first cryptocurrency auction of the Sotheby’s house when it was sold for 12,903,000 million dollars.
How does the Cryptocurrency Market work?
The cryptocurrency market is decentralized, that is, it is not regulated or controlled by any government or central bank. Rather, they operate through a network of computers. They use the blockchain technology that allows users to interact with each other (peer-to-peer). What does this mean?
Every time a transaction is made, it is recorded digitally. in a chain of blocks (blockchain). These chains are made up of different blocks that are connected and record the data of the transactions carried out.
They use cryptography that prevents transfers from being tampered with or currency counterfeiting. This technology guarantees the security of the operations and the impossibility of fraud since to carry out a manipulation it would be necessary to modify the data of several blocks.
The operation is as follows:
- Each member of the network called a node keeps a copy of each financial transaction.
- A node is a computer connected to the bitcoin network, for example, using software that stores and distributes a real-time updated copy of the blockchain.
- Every time a block is confirmed and added to the chain, it is communicated to all the nodes and it is added to the copy that each one stores.
What are the best platforms for trading cryptocurrencies?
The best cryptocurrency trading platforms are the following:
- eToro: best cryptocurrency trading platform.
- skills: cryptocurrency trading without commissions.
- Libertex: popular crypto exchange for expert traders.
- AvaTrade: multi-platform broker specializing in CFDs.
- CoinbasePro: popular crypto exchange among beginners. It is an advanced platform that Coinbase has and in which we can include advanced orders such as stop loss.
- Binance: the largest cryptocurrency exchange.
- kraken: One of the safest crypto exchanges.
- uniswap: the largest decentralized exchange (DEX).
- Gate.io – Crypto exchange with a large BTC and ETH market.
- 1icnhexchange: DEX aggregator to trade at the best price
What types of cryptocurrencies are there?
There are currently around 800 different cryptocurrencies that are distributed in 3 categories:
- Bitcoin: the best known and most popular. It allows transactions to be carried out without the need for financial intermediaries. It is a digital alternative to traditional currencies. Created in 2009 by Satoshi Nakamoto
- Altcoins: Alternative currencies (alternative coins). Own blockchain technology. The main altcoin is Ethereum, which emerged as an improvement over the Bitcoin network where transactions are made faster.
- Tokens: They do not have their own blockchain. The main platform is Theter. Tokens are a step in the evolution of cryptocurrencies.
In which cryptocurrency to invest? Can you make money trading cryptocurrencies?
Currently, operations with Bitcoin on the rest around 40% more.
The cryptocurrency market can become overwhelming especially for traders when they are just starting to trade. We have summarized cryptocurrency trading in 5 simple steps to help you trade this market:
1. Decide how to trade cryptocurrencies.
- Speculate on their prices through CFDs
- Buy virtual currencies in the hope that their value will increase.
2. Find out how the cryptocurrency market works
If you are interested in cryptocurrencies, it is very convenient that you do some cryptocurrency training course. This market operates differently from other financial markets, so it is important to fully understand how it works.
3. Open an account to trade cryptocurrencies
You do not need a virtual wallet or an account with an exchange. In fact, all you need to trade CFDs is a has a provider leveraged trading.
4. Create a Trading Plan
have a trading plan It is essential for any Trader, but it is even more so for those who operate with cryptocurrencies, since the market is very volatile.
Volatility makes a market very attractive but also difficult to trade. Therefore, your trading plan should include risk management tools.
5. Select your cryptocurrency trading platform
There are many and very good platforms to operate. In fact, a little above we have selected some of the ones that offer us the most confidence. Look at them, compare and keep the one you like the most.
Tips to start trading cryptocurrencies
If you have decided to start the Cryptocurrency Trading adventure, you should keep these tips in mind to get the most out of this new activity:
- Invest the necessary time to learn about cryptocurrencies, technology blockchain and financial markets, so you understand what you’re trading.
- Calculate the risk-reward ratio before each trade. Before making any trade, decide whether the associated risk is worth the potential profit, known as the risk-reward ratio.
- you have to be disciplined. Try to maintain discipline when trading cryptocurrencies, only making trades that are in line with your trading plan.
- Practice before trading for real. Traders not experienced in cryptocurrency trading start with a demo account to learn how it works.
The best cryptocurrency trading strategies
Having a trading strategy is essential. It will allow you to identify opportunities and the right times to enter and exit trades. We present you some key strategies for cryptocurrency trading
intraday trading
Intraday trading consists of open and close trades in a single day, with the aim of making quick profits from intraday price movements. Because positions are not held open after the markets close, the costs and risks associated with holding them overnight are avoided.
However, this strategy requires special attention, so it is only suitable if you can dedicate the necessary time to this type of operation.
scalping
Scalping is a form of high frequency day tradingwhere the goal is to make small profits from a large number of trades.
It involves opening positions in line with a trend, often entering and exiting the market multiple times as the market evolves. Individual trades take place over a few seconds, minutes at most, making it one of the more short-term strategies.
Scalping can be an effective way to trade volatile assets like cryptocurrencies as it profit can be made if the market moves favorably and minimize losses by closing positions quickly if the market changes direction.
trading with trends
Like scalping, this form of trading involves opening a position in line with a trend. But the goal for a trend investor is maximize profits by keeping the position open for as much of the price movement as possible, instead of opening and closing multiple positions in quick succession. It can be a short, medium or long term strategy because trends can develop over any time period.
Using this strategy requires an understanding of technical indicators that can be used to identify emerging trends, as well as the likely impact of news and economic events on the markets.
swing trading
Swing trading focuses on price swings within a trend. The objective is take full advantage of market volatility by moving in both directions as a trend evolves. While this opens up more profit opportunities, you are unlikely to trade at the exact highs and lows of the price movement, as a partial trend reversal is often needed to identify that a new reversal or “swing” is underway. .
Like trend trading, this strategy requires an understanding of technical indicators and the factors that move the markets.
automated trading
Automated trading involves the use of a computer program for executing trading orders automatically. These systems can be as simple or complex as the investor uses them. Are fully customizable and can be verified using historical data prior to commissioning.
Automated trading systems come with advantages like they can monitor the markets throughout the day, opening and closing trades at opportune times, even without constant attention to what’s going on. But of course proper monitoring of the system is essential, as any flaws in the design could be costly.
we are one trading school with the aim of training traders and investors to obtain profits in the financial markets with highly profitable trading strategies. If you are starting to be interested in the world of cryptocurrencies, we recommend you attend some of the Free cryptocurrency webinars and take a cryptocurrency course.