How to Start Trading Crypto: Beginners’ Guide
How to start trading crypto? There’s so much information out there, and it can feel overwhelming, especially for beginners. That’s why this guide has clear, easy-to-follow steps that will help you start immediately.
When starting with crypto trading, you need to have a well-thought-out plan. As a beginner, you’re naturally more vulnerable to common mistakes. These can include choosing unreliable platforms, not understanding market trends, or risking more than you can afford to lose. A strong foundation can save you from costly errors and make you more successful.
Understand the risks, learn the basics, and take deliberate steps to start the right way. Let’s explore these steps one by one.
Key takeaways
- Start by researching and understanding cryptocurrencies, blockchain technology, and trading terms.
- Choose a reputable and user-friendly crypto exchange with strong security protocols, reasonable fees, and a diverse range of cryptocurrencies.
- Create a secure crypto wallet, either hot or cold, to store and manage your cryptocurrencies, and back up your recovery phrase regularly.
- Begin with cryptocurrencies that have high liquidity and market stability, such as Bitcoin, Ethereum, and Cardano, for safer trading experiences.
- Practice with a trading simulator using a demo account. This will make you more familiar with trading interfaces and functionalities without the risk of losing your assets.
- Develop a clear trading plan, research market trends, and set risk management parameters to avoid significant losses and maximize gains.
How to choose a crypto exchange
Choosing the right crypto exchange can feel like rocket science, especially for newcomers.
Here are the key factors to look for in a crypto exchange:
- User-friendly interface
- Strong security protocols
- Reasonable fee structure
- A wide range of cryptocurrencies
With numerous options available, try to prioritize platforms with user-friendly interfaces, such as Coinbase and Kraken. These exchanges are designed specifically for beginners and offer step-by-step guides for trading. It will make it easier for you to find your way in the crypto world.
When selecting a crypto exchange, you should also focus on security measures. Make sure that the exchange you choose has strong security protocols, such as two-factor authentication (2FA). This will safeguard your assets from potential hacking incidents and ensure peace of mind.
Another aspect to take into account is the fee structure. If you’re a total beginner, this isn’t as important as a clear and polished user interface, but it’s still a factor.
Compare fees across different crypto exchanges, as lower fees can greatly influence your trading profits. Some platforms offer no trading fees or reduced fees for high-volume traders, which can be beneficial for you.
Also, verify that the exchange provides access to a diverse range of cryptocurrencies, including major coins like Bitcoin and Ethereum, as well as lesser-known altcoins. This may not be hugely important now, but over time, it will allow you to diversify your investment options.
How to create a crypto wallet
Typically, setting up a crypto wallet is a simple process that requires some basic technical knowledge.
Hot wallet or cold wallet?
First, you’ll need to decide between a hot wallet (online) and a cold wallet (offline, physical device). Each type offers distinct advantages. Check out this detailed guide on crypto wallets for a profound understanding.
Hot wallets, such as Exodus, provide convenience, while cold wallets, like Ledger Nano S, offer improved security.
Our recommendation is to go with the hot wallet if you’re not using a lot of capital and to choose a cold wallet if you will be trading a lot of funds.
Once you’ve chosen your wallet type, download the application or purchase the hardware wallet and follow the set-up instructions.
Password and recovery phrase
When setting up your crypto wallet, you’ll create a secure password and generate a recovery phrase.
Recovery phrase (also called seed phrase) is vital, as it allows you to restore access to your wallet if you forget your password or lose access. Write it down on a piece of paper (yes, using actual physical pen and paper) and keep it safe and protected.
Also, verify the authenticity of the wallet source, especially when downloading software wallets, to prevent phishing scams or malware attacks.
After setting up your wallet, you’ll need to fund it by transferring cryptocurrencies from an exchange. Most exchanges provide a straightforward withdrawal option, which lets you link your bank account or use debit/credit cards for purchases.
To safeguard your assets, regularly back up your wallet’s recovery phrase in a secure location. Losing access to this phrase may mean you permanently lose all your assets.
Best crypto to trade for beginners
When it comes to selecting the best cryptocurrency to trade for beginners, you’ll want to choose options with:
- high liquidity
- market stability
- strong development roadmap
As a beginner, you’ll benefit from trading cryptocurrencies with a large market capitalization, which often translates to higher liquidity and (usually) less volatility.
Let’s break down what these terms mean and why they matter.
High liquidity
Liquidity means how easy it is to buy or sell a cryptocurrency without significantly affecting its price. Cryptocurrencies with high liquidity, like Bitcoin (BTC) and Ethereum (ETH), are traded a lot and have a large number of buyers and sellers. This reduces the risk of price manipulation and makes transactions smoother. This makes them a safer choice for beginners.
Market stability
Market stability is about how much a cryptocurrency’s price fluctuates over time. Beginners benefit from trading coins that exhibit low (or lower) volatility, as this reduces the chance of sudden and big losses. Cryptocurrencies like Bitcoin and Ethereum have established themselves as more stable compared to smaller, newer coins.
Strong development roadmap
A strong development roadmap indicates that a cryptocurrency has a team that is actively working to improve its technology and make it more useful. For example, Ethereum (ETH) has a strong developer community that focuses on innovations like decentralized applications (dApps) and smart contracts. This increases the long-term value and reliability of Ethereum.
Top recommendations for beginners
Based on the criteria we just mentioned, here are the best cryptocurrencies to start with:
- Bitcoin (BTC)
- Ethereum (ETH)
- Ripple (XRP)
- Cardano (ADA)
Bitcoin ($BTC) stands out as a suitable entry point, accounting for approximately 60% of the total crypto market capitalization as of November 2024. Its market dominance and high liquidity make it an attractive option if you’re new to trading crypto.
Other cryptocurrencies deserving consideration include Ethereum ($ETH), which boasts a strong developer community and smart contract capabilities. It’s the second biggest crypto by market cap.
Other popular options include Solana, Doge, Ripple, and Cardano. Out of all of these, as alternatives to BTC and ETH, we’d go with Ripple and Cardano, since the other two tend to have higher volatility, generally speaking.
Ripple ($XRP) is a payment protocol that has established partnerships with numerous banks, providing real-world utility and value. Cardano ($ADA) is also a good option, distinguished by its focus on sustainability and scalability.
These cryptocurrencies offer a solid foundation for beginners due to their relatively stable markets and strong development roadmaps.
Long or short? What’s the difference and which way to choose?
Perhaps you’ve heard the terms long and short in trading, but aren’t sure what they mean. Let us explain.
- Long position: you’re buying a cryptocurrency with the expectation that its price will rise, allowing you to sell at a higher price for profit. Essentially, you profit from the price going up.
- Short position involves selling a cryptocurrency you don’t own, expecting its price to fall so you can buy it back at a lower price for profit. In this case, you profit when the price goes down.
In traditional markets, taking a long position is typically associated with bull markets, while taking a short position is associated with bear markets. However, this is crypto, where volatility is higher than in traditional markets, so it’s not strange to short in a bull market, and vice versa.
Going long tends to suit risk-averse investors seeking potential gains over time, while shorting carries higher risk due to the potential for harder losses if prices rise. This is because using leverage often comes into play with short selling, which can amplify profits but also increase financial risk.
We won’t go into great detail about how exactly leverage works, but for now, just know that leverage amplifies both profits and losses, so both your wins and losses are bigger. This is obviously a more risky option than not using leverage. If you want to learn more, you can read my guide on Spot, Leverage, and Futures Trading in Crypto.
Evaluate these factors and make the right choice for you about whether to go long or short, or both.
What is demo trading and why should you use it?
As a beginner in crypto trading, we already mentioned that you’re likely to feel overwhelmed by the sheer amount of information and the risks involved.
This is where demo trading and trading simulators come in. It’s a risk-free way to practice trading strategies and gain hands-on experience without risking real money.
Demo trading allows you to create a virtual trading account, funded with simulated currency, and simulate real-time market conditions. This enables you to test your strategies, adjust them accordingly, and refine your trading plan.
Think of it as trading with Monopoly money. Everything is exactly like real-world trading, except the money and the stakes are not real. This gives you the practice you need, without the risk.
Cryptomania is a trading simulator that works just like that. It’s a beginner-friendly app that can help you familiarize yourself with the trading interface and features, without the fear of losing your money.
How to learn crypto trading for free
Okay, so by now, you know you should gain valuable experience from demo trading, which is great, but this won’t make you any money, right? Well, becoming a skilled and profitable crypto trader requires continuous learning and education.
Do you have to pay for this? You could, and you could pay for expensive courses that may or may not have valuable information. However, there are also free options that are great.
To learn crypto trading for free, you can use numerous online resources. Websites like Coinbase Learn, Binance Academy, and Cryptomania offer educational content that covers the fundamentals of crypto trading and investing strategies.
You can also participate in community forums and social media groups on platforms like Reddit and Telegram. Here, you can engage with experienced traders, ask questions, and gain insights on trading practices without cost.
You can also access free webinars and online courses through platforms like Coursera and Udemy, where you can learn about technical analysis, trading strategies, and market trends specific to cryptocurrency trading.
Bottom line
You’ve taken the first steps in trading cryptocurrency, now it’s time to put your knowledge to the test. Pick the right exchange and wallet for you, choose which crypto you want to trade, and remember to stay up-to-date with market trends and continuously learn new strategies.
Use demo accounts to improve your skills without financial risk. As you gain more experience, you’ll become more confident in your trading decisions. Stay informed, adapt to changes in the market, and you’ll be well on your way to becoming a successful crypto trader.
