The date is October 31, 2008. A whitepaper titled “Bitcoin: A Peer-To-Peer Electronic Cash System” has just been released by an anonymous entity known only as Satoshi Nakamoto. This form of digital currency built on blockchain technology was fully launched on January 10 2009.

It would go on to become the progenitor of an entirely new and financially disruptive asset class. Fourteen years later, cryptocurrencies have become a mainstay in the global financial ecosystem. As a matter of fact, it has been legalized, adopted, and even developed by several countries. Crypto market dynamics have since been extensively developed and studied, with crypto mining UAE trading slowly moving towards challenging the stock market. If you are looking to make your way into the burgeoning crypto space, this piece is the informative yet concise crypto trading guide you are looking for.

How to Trade Cryptocurrencies

Crypto trading can come across different avenues, the most popular OTC and exchange trading. OTC (Over The Counter) crypto trading is when cryptocurrencies are traded in a closed, private market. Traders with cryptocurrencies for sale are personally contacted by interested buyers in an arrangement that sees them agree on a price for the trade. Monitoring the value of cryptocurrencies like bitcoin AUD is essential for participants in the OTC market to negotiate fair prices.

OTC trading is usually less regulated and may be susceptible to fraud. As such, many OTC trading systems have an escrow service to protect the interests of both parties. Unsupervised OTC trading may not be advisable unless with a level of expertise or a trusted crypto trading guide.

On the other hand, exchange trading involves traders setting the parameters of their orders according to exchange-traded prices. The exchange system develops an order book that automatically matches buy and sell orders according to their compatibility. Apart from pricing, the type of order set also determines the manner in which orders are filled.

There are orders such as limit orders, market orders, and stop orders, with each having a different kind of trade execution it requests from the system. There are two different kinds of exchanges, namely centralized exchanges and decentralized exchanges. Centralized exchanges are controlled by a company that serves to oversee trading activities such as registration, verification, and loan services, all of which a crypto trading guide would teach.

Decentralized exchanges are fully automated and run entirely by blockchain technology rather than a central authority. These exchanges hardly require any registration and are great for trading in anonymity. Exchange trading is a vast venture. There are several trading varieties available on exchanges, such as:

  • Spot Trading: Spot trading is the primary exchange of cryptocurrencies between a buyer and a seller. The order book merges order prices and quantities to exchange cryptocurrencies between traders. For instance, Trader A offers to sell 1 Bitcoin for $30,000, and Trader B places an order to buy 0.5 Bitcoin at the same price. The system sells half of A’s sell order to fill B’s buy order and keeps selling the rest to other buyers willing to match that price until it is exhausted.

 

  • Futures Trading: Futures trading is a derivative form of trading. This means you are not exactly buying cryptocurrency. Instead, you place a wager on contracts that derive their prices from that cryptocurrency on whether the price will rise (long) or fall (short). These contracts are usually time-bound and are automatically determined at their expiration. Futures trading is also leveraged, meaning you can trade with much higher than your lot size. A crypto trading guide would have you know that a liquidation price exists where the exchange closes your trade automatically, and your entire account is emptied to “settle the debts of your trade” in the most basic terms.

 

  • Options Trading: Options trading is almost the same as futures. The critical difference is that the contractor must fulfil the trade agreements in contracts in futures trading. In contrast, the contractor only has an exercisable right of fulfilment in options.

 

  • Arbitrage: Arbitraging is a short-term form of trading. It involves buying crypto at a lower price on an exchange and selling it at a higher price on another exchange. It seeks to exploit the disparity between exchanges’ rates. It is considered by many to be a complete trading form on its own, though it seems to be more of a trading technique like scalping and range trading.

To trade cryptocurrencies on a centralized exchange like Binance, OKX, or Huobi, you must first create an account. Then you fund it by buying or transferring any currency of your choice. From there, you can move the funds to the corresponding trading account of the type of trade you want to carry out. After that, you can place your preferred order with parameters and wait for it to be executed. Decentralized exchanges like Uniswap or Mooniswap usually require a deposit address of the particular crypto from a wallet built on the native blockchain (most popular decentralized exchanges are built on the Ethereum network).

The wallet must be funded with the currency you are swapping from, and you can fill the parameters to execute your trade once your wallet is linked. It is noteworthy that exchanges usually charge fees for all transactions.

Crypto Trading Tips for Beginners

Having given a succinct explanation of how trading works, we want to share some tips as your crypto trading guide.

  • Do your base research. As you are reading this piece already, we might as well say you are on the right track. Learn about fundamental and technical analyses, trading psychology, and trading techniques.

 

  • Take notes of your data, such as how much you are willing to commit to trading. It helps inform your trading approach and decisions.

 

  • Do not delve into the real market immediately. Acquaint yourself with the know-how of trading through demo trading platforms to simulate live trading. Even if you lose money to rookie mistakes, do not do it with your real funds.

 

  • Risk management is perhaps the most important thing to learn in trading. There are possibilities of making huge losses in crypto trading, especially when trading derivatives. Always use relevant risk management techniques such as stop-loss, no matter how sure you are of the trade.

 

  • Do not be too trusting. Believe it or not, many cryptocurrency scams are still out there. Be very careful of the cryptocurrencies you invest in, so you will not be a victim of a rug pull.

Conclusion

Cryptocurrency trading is a relatively young market globally. It still has a long way to go, and there is still considerable scepticism surrounding it from some quarters. However, that means you are still early to the party. Crypto trading has high rewards and, thus, high risks. Always ensure you trade with funds you can literally afford to lose. In all, dive deep but dive safely.

 

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