Information of interest to beginners in digital currency trading 2023
Driven by relatively cheap cryptocurrencies such as stable digital currencies such as Bitcoin and Ethereum, the transaction of digital currencies has caused controversy not only at the individual level, but also at the central bank and national level!
Therefore, the reliable AvaTrade platform brings you this article which discusses the most important points you should know about buying and selling cryptocurrencies, types of investors and where the trading process takes place.
In addition to mentioning the most common risks of online trading and important tips for beginners to avoid falling into trading pitfalls and losses.
What is trading cryptocurrencies?
First, let’s briefly define digital currency. Digital currency is a virtual, intangible, decentralized, and tradable currency, that is, it can only be bought, sold or exchanged online but not physically.
It consists of specific encrypted tokens located on a very secure virtual network (i.e. blockchain network). It is known as the modern and contemporary blockchain technology or technology, which has undergone a digital revolution in the last two decades.
Cryptocurrencies are traded on exchanges, most of which charge users to trade through them, but these commissions are relatively small. Hence, the stock exchange provides a suitable virtual environment that brings users together in one place so that they can trade in a safe environment.
The user makes a profit by trading encrypted digital currency. The size of the profit depends on many factors, the most important of which are the investment strategy he follows, the size of the digital currency market and its price fluctuations.
As we all know, digital currency trading is a risky investment because it does not provide you with certain guarantees in case you lose your digital assets. But rely on yourself, learn investment strategies in this field, and then I can tell you that this field is very profitable and fun!
What types of cryptocurrency traders are there?
Main types of cryptocurrency investors:
1- Long-term investors: They have invested in digital currencies such as Bitcoin for many years with the aim of making huge and real profits, and they are the ones who have contributed to the growth and prosperity of the crypto market.
2- Short-term investors: They invest for a short period of time, which can reach several weeks, not longer, and their profits are relatively large.
3- Speculators: They buy and sell digital currencies intentionally on a daily basis and may make dozens of transactions in a 24-hour period in hopes of making a quick profit.
The most common risks in cryptocurrency trading
Now we have the 4 most common risks for cryptocurrency traders:
1- Fluctuations in digital currency prices
The price of any cryptocurrency depends on market movements, especially supply and demand. For example, when people buy a certain digital currency in large quantities, the demand here exceeds the supply, so the price of the currency drops. However, when people sell digital currency in large quantities, the supply becomes greater than the demand, so the price of the currency rises.
The decrease and increase in value occur gradually or suddenly, so investors should use well-known technical analysis methods and technical analysis indicators for digital currency and stock markets in addition to relying on theoretical interpretation of market trends and general rules of investment. Should do of ,
NOTE: Depending on sudden or gradual currency fluctuations, the size of your losses will increase with the amount of money you allocate to cryptocurrency trading.
2- Fraud and theft
As we mentioned before, cryptocurrencies are built on secure blockchain technology, but that doesn't negate the possibility that you will be exposed to fraud knowing that your exposure is essentially human error or your negligence. Will be due to lack of experience from investors.
You should use secure storage methods for your digital assets, such as using secure e-wallets that employ cold storage, which is a way of storing currency that is not connected to the internet, and hot wallets that are connected to the internet. Stay away from e-wallets altogether. the Internet.
The most important thing is to master your wallet, don't worry that others will use your password to steal all your deposits or forget the encryption key of the cold wallet.
Cryptocurrencies can also be traded through the best 100% Trusted and Guaranteed Digital Currency Trading Platforms, we have many platforms that are already famous and their laws are well known now.
As for the last trap that most beginners fall into, not knowing the story behind the sudden appearance of a certain currency, and its price is often very cheap, thus attracting many users. They may not be aware of the risks involved. Buy it, fake money.
3- Entering a losing trade
When the price of a certain digital currency suddenly rises sharply, people rush to buy it, hoping that the price will continue to rise, and then resell it for a huge profit, which is not necessarily true.
Because currency prices can suddenly fall after that, it's called a "price correction," in which sophisticated long-term investors rather than speculators play a big role.
Note: The fear of missing out "FOMO" has become prevalent in the cryptocurrency trading market as beginners persist in entering losing trades, knowing the outcome is known. They don't realize the profit opportunity is missed and it's over.
4- Commissions and taxes imposed on traders
Trading platforms charge traders a certain amount of commission for each transaction they conduct, and the commission may be high or low, which will not only cause panic among cross-platform investors, but also cause panic among investors from various countries.
Some countries tax financial transactions in digital currencies, which are subject to taxation and value-added legislation after allowing individuals and entities (such as companies) to legally trade cryptocurrencies in accordance with laws authorized by the country.
Top Tips For Beginners In Cryptocurrency Trading
Here are the most important tips from AvaTrade to help you avoid the trap of losing your intraday profits or going short:
- Know the story of the emergence of any new digital currency, research its user numbers, market size and price action before considering buying, as it may be a fake and its revelation is just a scam.
- Stay away from any cryptocurrency that is making a lot of noise in the cryptocurrency market and don't rush into buying it because it is likely to be just a digital bubble that will burst soon and nothing more.
- Don't buy any cryptocurrency just because it's cheap, it probably doesn't have any real value and therefore you can't invest in it.
- If you want to invest in stablecoins, you need to know that not all stablecoins have high prices.
- You have to be able to afford to lose before you can make a profit, so get out of a trade if you are not prepared.
- Invest in more than one digital currency, don't rely on only one currency, because price fluctuations are a characteristic of encrypted digital currencies, so when you invest in more than one currency, you may lose money on one or more of them. maximum profit.
- Long-term investment, stay away from speculation to earn huge profits.
- Stay away from buying and don't get caught when everyone is going to buy some digital currency, the results in this case will never be satisfactory.
- Trading cryptocurrencies is easy for many beginners and has many advantages and disadvantages, but as a professional investor, you must avoid falling into the trap of negativity and invest in positive factors to profit.