Are you interested in trading cryptocurrency?
The mechanics of trading is now so simple you can do it from your phone.
But let’s start at the beginning.
What is Crypto Trading?
In the beginning, your only option, if you wanted to trade crypto, was to buy coins. Nowadays, you have multiple options including CFDs (Contracts for Difference) and trading stock of companies that are involved in the cryptocurrency market.
Buying Coins vs Using CFDs
Buying coins is just a gamble. Everything’s fine if the price goes up, but if the value goes down, you lose money. Can you afford to wait until the next upswing? Can you afford to tie up your capital for months with no return while you wait for the price of your coins to increase beyond what you paid?
When you take out a CFD, you predict whether the price of the particular cryptocurrency will increase or decrease. If your prediction is correct, you stand to gain money. If you are wrong, you lose money.
CFDs are a less risky way to trade crypto. Sure, you can still lose money, but you can limit the amount you can lose when you take out the contract. Your credit card will be charged the amount you are willing to lose at the outset. You cannot lose more.
If your prediction is correct, you get your deposit back, plus any profit, less the broker’s charges.
You never own any crypto, but you can still profit by correctly predicting changes in the value of the cryptocurrency CFD you take out.
Trading CFDs has multiple advantages over trading and owning coins:
- Your downside risk is limited
- You can start small without disproportionate charges
- You can profit even if the cryptocurrency value is falling
Trading Bitcoin vs Trading Altcoins
Bitcoin isn’t the only cryptocurrency, but your risk of losing money is higher with many altcoins. This is because there are fewer buyers and sellers, the market is less liquid. Bitcoin is the most trusted cryptocurrency because it was the first one.
New altcoins have sometimes attracted buyers who plan to sell as soon as their target price is met. If you are committed to trading altcoins, then it is better to choose ones that have been around for a few years.
If there is a lack of liquidity in an altcoin market, the price will be more volatile. This is why altcoin prices fluctuate more widely than Bitcoin’s. If you want to trade altcoins, the least risky play is to trade altcoin CFDs because you can cap your potential loss when you enter a contract.
Newer altcoins will be affected by the Squidcoin scam. When released the coin quickly went from 1 cent to $2,836. Now it is worthless. Investors need to be wary of any new initial coin offering (ICO). It is sometimes better to miss out on the initial over-excitement, and buy after a few months once you can see more trading data.
How do You Trade Crypto?
You can still do things the old-fashioned way, trading from your computer.
However, you can now download free apps that let you trade from your phone. The easyMarkets app lets you trade CFDs in Bitcoin, Ether, and a whole range of altcoins including; ADA (Cardano), DOT (Polkadot), ALG (Algorand), LNK (ChainLink), SOL (Solana), and Uni (Uniswap).
Managing Your Risk
Trading sometimes leads to losses. You can never completely remove the risk of losing money. But you can reduce your risk on two fronts: You can reduce the risk of a trade going bad, and you can reduce the amount of money you lose when it does go bad.
- Acknowledge your lack of knowledge. Spend time to understand cryptocurrency before you put your money down. If you have only read about Bitcoin price movements in the press, you need to know more. The better your understanding of crypto trading, the less chance of loss-making trades.
- Start by virtual trading. This way, you learn what you don’t know without losing money. When your virtual trades are consistently coming out positive, THEN is the time to consider switching to real-world trading.
- Sign up for a paid trading advice service. Brokers know more than you do, but you have to pay them for their knowledge; free tip services are only the tip of the iceberg.
- Trade with a reputable broker where you can limit your potential losses. You should be able to do this even on a phone app.
The Short Version
Trading CFDs in Bitcoin, altcoins, forex, and indices can all be handled by a single app.
Trading crypto is now so simple you can download one app that will let you trade crypto CFDs with just a single click.
It is incredibly easy to lose money if you jump in without research, so be sure to educate yourself before you start any real-money trading.
