A Guide On Trading Digital Tokens

Whether you’re new to crypto and looking for a guide on Bitcoin trading, or you’re familiar with cryptocurrency but need a refresher course on trading, we’ve compiled a comprehensive guide to help you trade safely and successfully. This article explains digital tokens, various crypto tokens, and how to trade cryptocurrencies.

What is Cryptocurrency?

Cryptocurrency is a digital token that uses cryptography to encrypt and secure transactions. Crypto coins are built and hosted on a blockchain and come in different forms. A blockchain is an infrastructure that powers all forms of crypto activities, from buying and selling to storing cryptocurrencies. 

There are different blockchains, and some crypto coins have their blockchains. For example, Bitcoin works on the Bitcoin blockchain; Ether works on the Ethereum blockchain. Some other coins operate on existing blockchains. For instance, Uniswap (UNI) and Yearn.finance (YFI) run on the Ethereum blockchain. 

Types of Cryptocurrencies 

Most crypto analysts classify crypto coins into two major groups; Bitcoin and altcoins. An altcoin is any other coin aside from Bitcoin. Another class of crypto tokens is stablecoins. 

Stablecoins are crypto coins pegged to the value of fiat currencies. For example, Tether (USDT) is a stablecoin pegged to the value of one dollar. Stablecoins are a haven for investors who want more control over their money but are not ready to be open to the volatility inherent in regular crypto coins.

The crypto market has grown exponentially since it first launched in 2009, and there’s massive economic and profit potential in the crypto industry today. One of the core ways to earn from crypto is by trading digital tokens. 

What is Crypto Trading?

Crypto trading involves buying or selling crypto assets to make a profit. One of the most common pieces of advice pro traders share with newbies is to buy crypto coins when the price falls and sell when the price rises. You profit from the price change when you buy low and sell high, but knowing when to buy or sell is not as simple as ABC. 

For one, you could buy a coin when you think it’s at its low, and its price falls lower than expected. Or you could sell when you think it’s gotten to a good price, and then right after you sell, the coin keeps increasing in price, and you miss out on making more profits. All these scenarios play out a lot for new traders. However, you can master crypto trading, become a pro trader and make massive gains in the crypto market. 

Types of Crypto Trading 

There are different types of crypto trading, but spot, margin, and futures trading are the most popular. If you’re a beginner, it’s advisable to start with spot trading before proceeding to the more advanced ones like margin and futures trading. 

In spot trading, you trade the spot market. The basic principle for spot trading is to find crypto coins with good utility, buy when the price falls and sell when the price rises to earn a profit. Margin trading is more advanced and requires you to leverage a small amount to get bigger money to trade the market. This way, your leverage allows you to make more significant profits. 

Futures trading involves speculating on the price direction of a crypto asset. If you buy a coin in the futures market, you’re opening a long position, meaning you anticipate an increase in the price of that asset. If the price of the coin increases, your reward increases based on the leverage you’re using. But if the price of the coin decreases instead, meaning it’s gone against your prediction, your capital will decrease correspondingly, and you may lose all your funds if you get liquidated. 

Margin and futures are riskier than spot trading, and you should only venture into them once you’ve grasped spot trading. Once you start trading the spot market, you need to master some crypto trading skills before you can start making consistent profits.

How to Trade Digital Tokens

Open A Crypto Account

First, you need a crypto account. You can open an account with a crypto exchange with good user reviews.

Deposit Some Money

After completing your registration, you can fund your account using your credit or debit card, via bank transfer, or through the peer-to-peer (P2P) marketplace.

Buy Some Crypto Coins

Once you’ve deposited money into your crypto account, you can choose the coin you want to trade. You can buy Bitcoin, or Ethereum, the biggest and most popularly traded crypto coins. If you want to take more risk and trade low-market cap coins, you can opt for altcoins with good profit potential.

Practice Technical Analysis  

When you view a crypto chart, you’ll see different icons, for example, the lines or candles indicating price movement and the time frames. Technical analysis gives you insight into what technical indicators mean and how you can use them to interpret a chart and predict the price direction of a crypto coin.

Store Your Crypto Safely 

Most crypto exchanges maintain a good level of security to ensure that your assets are safe. But if you want to take your crypto security to a higher level, consider transferring your coins into a hardware wallet, especially if you won’t be trading with it for a long while.

The Bottom Line 

Cryptocurrencies are the next big thing for the financial sector. While the government can leverage crypto for many economic pursuits, you can trade cryptocurrencies to make money as an individual.  

The most important skill you need to trade profitably is technical analysis, which requires patience and commitment to master. Remember not to begin your crypto trading with large sums; start with a small amount and gradually increase it as you gain mastery.

Disclaimer: Information written in this article does not constitute investment advice. Readers should do their own research before investing or taking any actions related to the company. Crypto Academy is not responsible for any damage or loss caused or claimed to be caused by or in connection with the use of or reliance on any content, or services mentioned in the article.