Crypto Consultants

How to start trading Cryptocurrency

Understand how to start trading, and things to be aware of when joining the world of cryptocurrency.

Brandon Bartlett - Crypto consultant and OBR founder

Brandon Bartlett

OBR | CEO

If you are taking an interest in learning how to trade cryptocurrencies, you have come to the right place for a beginner’s low-down. There is so much information out there, which can feel very overwhelming. To help you out, we have created an outline of things to consider when taking your first steps in learning to trade.

What Is Cryptocurrency?

Cryptocurrencies are simply digital forms of currencies. They are also known as digital currencies, cryptos, or digital assets. They can be used to pay for goods and services or traded just like our fiat Australian dollar. 

Cryptocurrency Trading VS Cryptocurrency Investing

Cryptocurrencies can be used to make profit by trading them with fiat or other cryptocurrencies, very similar to trading forex – trading pairs of fiat dollars, like AUD for USD.

The major difference between cryptocurrency and forex trading, is that, unlike central-bank-controlled dollars, such as the US dollar, cryptocurrencies are not controlled by any government or single entity. Cryptocurrencies are secured by complex cryptography coupled with a form of distributed ledger technology, called a blockchain. Cryptocurrency can be distributed to anyone in the world who is interested in owning some.

As you learn for yourself how to buy and sell cryptocurrencies, it is important to distinguish between trading and investing. Is one better than the other? The two terms are often used interchangeably but they are certainly different. The only similarity is the goal to make profit when they are sold out for dollars. Trading is focussing on creating profitable results in the short to medium term. If you are just investing, then you hold on to your cryptocurrencies for much longer, at least a few months or even years.

As a beginner, we recommend that you start slowly. Look at trading with a medium to long-term strategy until you build your trading muscles and analysing skills.

Crypto Market VS Stock Market

There are a lot of people who have compared the crypto market to the stock market. However, even though they are different commodities, the markets are very similar when it comes to trading. When many people have applied stock market trading techniques to the crypto market, they have been able to do very well. However, there are differences too.

Similarities

  • Both involve the buying and selling of an underlying asset. It can be either the trading of the actual asset itself or a derivative.
  • Stock & crypto trading and investing tools are more or less the same, especially for technical traders using tools such as charts to analyse the market.
  • Both assets are denominated, valued, and compared using fiat currencies.
  • Trading and investing strategies are similar. In both markets, traders can choose to day trade, swing, or position trade or they can choose to hold their assets for the long term.
  • Common factors that affect digital coins include security flaws resulting from hackers’ attacks, countries barring the use of these coins, and internal quarrels regarding upgrades and technology changes.

 

Differences

  • The key difference between the two is that when trading stocks, one has to do it through a regulated broker. With crypto trading, it is possible to buy and sell cryptocurrencies without having to go through an intermediary. That’s not to say that intermediaries don’t have a role in crypto, as centralised exchanges have made it super easy for people to get on board and trade.
  • Market liquidity is a major area where stock and crypto trading differ. Most stocks are highly liquid, as opposed to most cryptos, outside of the large-capped ones, which have very little liquidity.
  • The two markets also differ in terms of security due to the stock market being highly regulated. You can always be sure that the stocks you are buying are legit. On the other hand, due to the unregulated nature of the cryptocurrency market, it is very easy for one to buy into scam projects.

So, Why Would You Want to Trade Cryptocurrencies?

Seeing that cryptocurrencies seem to have more negatives than positives against the stock market, why on earth would you want to trade them?  There are many benefits, including a lot of profits to be made from trading in the crypto market.

Benefits Of Trading Cryptocurrencies

  • 24-Hr Trading – The cryptocurrency market is usually available to trade 24 hours a day, seven days a week because there is no centralised governance of the market. Cryptocurrency transactions take place directly between individuals, on cryptocurrency exchanges all over the world. However, there may be periods of downtime when the market is adjusting to infrastructural updates, or ‘forks.
 
  • Fast account opening – When you buy cryptocurrencies, you’ll need to buy and sell via an exchange, which requires you to create an exchange account and then store the cryptocurrency in your own digital wallet. However, with most centralised exchanges, you can be set up and ready to trade within minutes.
 
  • Market volatility – Although the history of cryptocurrencies is relatively short, it has experienced significant volatility due to huge amounts of short-term speculative interest and other various factors. For example, between December 2017 and December 2018, the price of Bitcoin rose as high as AUD$26,822 and fell to lows of AUD$4499. Other cryptocurrencies have been comparatively more stable, but new technologies are often likely to attract speculative interest.
 
  • Privacy – If the right to privacy is important to you, then cryptocurrency trading will be right up your alley. By using decentralised exchanges, you can be trading anonymously when you have self-custody of your assets – when you have complete possession of your digital assets in a private wallet. Please note, that if you choose to use a centralised wallet then they are all KYC (Know Your Customer) and your details are handed over to the tax department.
 
  • Transparency – When it comes to transferring money, transparency is key. With blockchain technology, all transactions can be seen, but if you so choose, your personal information remains hidden. Therefore, your wallet is visible, but your details are not. Furthermore, this increases the security of using cryptocurrency, since the protocol cannot be manipulated by anyone, whether it is an individual, organization, or government. 
 
  • Trading bots – Volatility is also what makes the cryptocurrency market very exciting. As a result, trading bots have become more popular amongst traders since they can control their trading at all times. With the Bitcoin Trading System, you can trade faster and more efficiently than you would be able to do manually.
 
  • Multitude of assets – Despite its short history, the cryptocurrency market has advanced so quickly that traders now have access to similar products as the stock market, including futures, options, leveraged tokens, and derivatives. The crypto market is also advancing into some unique products and platforms, which include NFTs and DeFi loans, giving more opportunities for profits.

Learning How To Trade The Cryptocurrency Market

If you have experience analysing charts to trade the stock or Forex market, then you may get started in trading the cryptocurrency market a little easier than the total novice. But be under no illusion. The cryptocurrency market is a whole different ball game. You do not want to assume that your previous skills in trading other markets areare sufficient. New or old to trading, when entering the crypto market, it is important to research this new arena. It is highly advisable to start with a demo trading account for at least a few weeks, if not longer, to help prepare you for success.

What Affects The Price Of Cryptocurrency?

Cryptocurrencies are extremely difficult to value because most cryptocurrencies do not have any intrinsic value. Cryptocurrencies are not a product; they do not earn revenue or employ many people. On the whole, they do not return dividends as stocks do, and just a very small amount of the total value of the cryptocurrency goes into evolving it. Without any fundamentals to decipher if a cryptocurrency has been overbought or oversold, or when it is a good value or overpriced, we have to rely on the following information:

  • Supply and demand – This is one of the main factors that affect the price of cryptocurrencies. The higher the demand and the lower the supply, then the higher the price. However, if the demand is low and the supply is high, the value will decrease.
 
  • Rules and regulations – the lack of regulations in the crypto space is a key factor in the volatility of the price. This low level of regulation allows for market manipulations. Often orders that can be made with the intent to cancel, can create these manipulations. Whereas, in the stock or Forex market, these types of orders are illegal. On the other hand, different countries, with different regulations, also cause issues.
 
  • Power of the media – The media is hugely to blame for whether the crypto market gets harmed or helped. The way media writes about cryptocurrencies largely affects the demand. Good news can certainly increase it, while bad news can cause panic, which leads to a quick escape of investors from the market and rapid falls in prices.
 
  • Production cost – The direct costs and opportunity costs of producing a digital asset are also factors that determine the value of a cryptocurrency. Bitcoin, for example, has a high cost of production. The resources and energy that have been put into the mining of bitcoin can be seen as a reason why the bitcoin has value. This includes the cost of manufacturing specialized hardware like CPU’s/GPU’s or servers as well as the cooling systems for such hardware. However, newer altcoins use much less energy.
 
  • Changes to technology – when a crypto’s core technology is affected, either via an update or the finding of a flaw, the prices are is also affected.

Subscribe to Get the Latest Crypto News In Your Inbox

Learn More | Crypto Better

Choose A Cryptocurrency Exchange

If you are a beginner in cryptocurrency trading, take the time to consider the right trading exchange that will work for you. Here are some things to consider when choosing a trading exchange:

  • Geographical location and constraints
  • Fees
  • Volume and liquidity
  • Payment options
  • Security, anonymity & customer support
  • User interface and ease of use
  • Does it offer a demo account?

Recommended Trading Platforms

Check out our blog discussing cryptocurrency exchanges and finer details about what to look for in a platform that would suit you.

  • Swyftx – Best cryptocurrency exchange in Australia
  • Digital Surge – An easy-to-use cryptocurrency exchange that anyone from a
  • eToro  – Best for CFD cryptocurrency trading
  • Independent Reserve– Great Australian exchange for OTC purchases
  • Binance  – Best cryptocurrency exchange in Australia for low fees and day traders
  • Coinjar – Oldest Australian cryptocurrency exchange
  • Coinmama – One of the best Bitcoin trading platforms with a debit/credit card
  • Kraken – Best cryptocurrency broker for leverage and derivatives
  • crypto.com – One of the best cryptocurrency exchanges Australia for altcoins

Choose A Cryptocurrency Wallet

After choosing your trading platform, you need to choose a crypto wallet to store and control your funds. There are several different types of wallets to choose from bud for beginners, when trading, we would recommend an online wallet for accessibility and ease of use. An online wallet can be set up quickly.

A few online cryptocurrency wallets to choose from are:

Most exchanges have their own wallets built-in but the best practice is to remove your coins off the exchange and place them in a wallet, when you are not trading them, as exchanges have been known to be hacked in the past.

Find A Cryptocurrency To Trade

After finding an exchange, setting up your wallet, and getting familiar with trading the crypto markets via a demo account, it is time to choose a cryptocurrency to trade with and study the asset. As a place to start, look up the digital asset that you are interested to trade with on CoinMarketCap. Here you can find details about every single token available in the world. You also will want to track the daily cryptocurrency news and learn how to “trade the news”.

If you are unsure of which coin/s to start with, start with the 10 tops coins, listed by the highest market cap.

Always be careful about false market hype and phishing scams.

Manage Your Risk

 

  • Only invest what you can lose – Evaluate your financial position and commit to a limit of how much you will invest. Start small, to begin with.
  • Always pay attention to Bitcoin – Most altcoins are pegged closely to Bitcoin. As Bitcoin pumps up, people traditionally tend to exit out of altcoins to invest in Bitcoin. The opposite is true too; Bitcoin drops and an exit into altcoins happens as they pump.
  • Never put all your eggs in one basket – It’s important to diversify and trade across a few coins. When you have the potential to make a profit, you also have the potential to lose.
  • Don’t be greedy – Don’t be afraid to take profit earlier than later. Many people including myself, have lost money because they’ve watched the price of a coin rise, get excited, and think the ride up is going to keep going. By continuing to hold on, they miss the boat and the price comes dumps, sometimes lower than where they started. Take profits and then watch for a nice re-entry point.
  • Always Learn from Your Mistakes – Always evaluate and try to understand when you have lost money. You are building knowledge and skills from your mistakes. We all start as beginners, then become amateurs before we have a lot of experience behind us. We have all lost money from trading. However, each time you learn from your mistakes you gain a learned asset.

Start Trading – Tips!

  • You don’t have to buy a whole coin – Cryptocurrencies allow a trader to buy a fraction of a coin. Not to worry! You don’t have to trade a whole Bitcoin at $60,000 to trade it. You can trade a small fraction of it if you choose.
  • Keep in mind the market is volatile – Always keep in mind the current volatility of the crypto market. This needs to be kept at the forefront of your trading strategy.
  • Don’t trade with money that you cannot afford to lose – This is a common phrase in the crypto market. If the worst-case scenario plays out, and you lose the money that you have allocated for trading, you do not want to feel the impact of your loss. You need to be able to live your life as if you didn’t have that money, to begin with.

Summary

Cryptocurrency trading is still in its early stages, but it has come a long way, with so many more digital assets, exchanges, and wallets to choose from. When trading, always stay calm and do not buy into your emotions. Remember that it’s a steep learning curve. Learn different strategies and then choose “one” and stick with it for a while to see if it suits you.

The hardest part is getting started. At Orange Brick Road, we help make the first step a little easier for you, so you don’t have to get started all on your own. Get in contact with us now and we will set you up with one of our consultants to help onboard you into the crypto space or learn how to trade.