Highly successful traders have almost always achieved cumulative gains over several years through persistence, careful research, unemotional decisions, realistic approaches, and lots of time and patience.
Cryptocurrency trading is highly speculative
Cryptocurrency traders are fully responsible for their cryptocurrency holdings
Thorough research and observation are part of any successful trading strategy
Cryptocurrency prices are very volatile and therefore subject to strong fluctuations
In this lesson, you will learn everything you need to know before you start trading cryptocurrencies.
How Cryptocurrency Trading Works
As you already know from Advanced Bitpanda Academy Lesson 1, cryptocurrency brokers and cryptocurrency exchanges are the first choice to get started in cryptocurrency trading.
Bitpanda is Europe’s leading digital asset trading platform, offering users both a cryptocurrency broker — Bitpanda — and a cryptocurrency exchange — Bitpanda Pro.
Direct platforms would be a third possibility, but we won’t go into detail about them. These are online marketplaces for peer-to-peer trade between buyers and sellers without fixed market prices, which obviously carry inherent risks and are not recommended.
Trade cryptocurrencies responsibly
There are many websites on the internet that offer entry into trading with cryptocurrencies. However, it cannot be overstated that continuous research is essential when trading crypto, and this includes choosing a platform that best suits your needs. Any experienced trader will recommend it to you.
Mount Everest, not Mount Gox
In Bitpanda Academy for Beginners Lesson 11, we talked about the Mt. Gox hack. The Mt. Gox crypto exchange hack is considered the largest malicious attack on a cryptocurrency exchange since the inception of Bitcoin and ended with Mt. Gox filing for bankruptcy in 2014.
We mention at new this incident here because it is always important to be extra careful when dealing with cryptocurrencies, even when trading on an exchange and when speculating with cryptocurrencies.
Before you start investing in cryptocurrencies, it’s important to make sure your balances — both fiat and cryptocurrencies — are kept safe, as we describe in this Bitpanda Academy article .
Proceed with caution
We all know the friend of a friend who is a bitcoin millionaire, owns five Lambos, and is said to have gotten rich overnight through speculation. In real life, things are usually a bit different. Highly successful traders have almost always achieved cumulative gains over several years through persistence, careful research, unemotional decisions, realistic approaches, and lots of time and patience.
They also learned from their mistakes while trading cryptocurrencies and steadily and responsibly increased their balances. However, the path to successfully trading cryptocurrencies is much more like climbing Mount Everest than suddenly waking up one morning as a millionaire.
Choose an exchange
Once you are satisfied that you have sufficient understanding and knowledge of cryptocurrencies and blockchain technology, your search for a reputable cryptocurrency exchange that meets your needs can begin.
As a first-time user looking to trade on a crypto exchange, you should first find out if the exchange of your choice has state-of-the-art security systems in place. In addition, it is necessary to read current user reviews as well as research all information about the API technology used and the team behind the exchange, as well as analyze traditional financial indicators including the performance of the exchange. exchange in the past and the present. Then there are a number of other factors you should consider when choosing the best exchange for you.
Market research in progress
As a trader, it is essential to keep up to date with the current status and news in the international crypto markets. For trading decisions, you should always be aware of the latest technological developments of the cryptocurrencies you wish to trade and current trends and upcoming forks as well as regulatory issues and developments.
This is the only way to react in time to unexpected developments. You can find the information you need in articles from reputable and relevant crypto publications and media, on social media, and by attending cryptocurrency events.
Loss of all credit
Before you start trading, you must be absolutely sure that in an emergency you are ready to lose all the funds you used for trading. Yes, you read that right. We don’t mean to be pessimistic, but you really need to be aware of all the risks that cryptocurrencies pose as a store of value. Never invest more in trading than you can afford to lose.
High volatility and value of cryptocurrencies
Almost all cryptocurrencies, some more than others, are subject to large fluctuations in price, known as «volatility». Therefore, cryptocurrencies are often affected by sharp, sudden and often unpredictable price drops and increases.
The high volatility and the fact that cryptocurrency trading takes place internationally 24 hours a day, 365 days a year, without borders or intermediaries means that you should be prepared to take the time to monitor your assets closely. A cryptocurrency is valuable as long as the market assigns value to that coin. When this is no longer the case, the price of the coin will drop or even crash at times.
Exchange Hacks and Regulation
Despite constant improvements and innovations in security, exchanges are still at risk of hacks and scams. Cryptocurrency trading is not regulated by any central authority such as governments or banks.
Therefore, all cryptocurrency traders and investors are solely and personally responsible for monitoring and executing their own transactions and the safety of their funds, including cases of negligence and fraud.
Secure access and transfer of cryptocurrencies
Be absolutely sure that you understand everything about the function of private and public keys as well as wallet addresses. One of the strengths of blockchain technology is its high level of security.
But the fact that transactions on a blockchain, for example, can never be undone also means that once your coins have been transferred to an address, that transaction is final and cannot be undone.
Your cryptocurrencies are also irretrievably lost if you lose your wallet’s private keys, so you should keep them safe. Also, be sure to double and triple check every transaction you make on the blockchain to avoid errors. True to the motto: Trust is good, but control is better.
Invest on your own
Investments in and trading with cryptocurrencies are classified as highly speculative. Therefore, investments in cryptocurrencies are also associated with high risk. Do your research and create a plan before you start investing.
It goes without saying that the amount you invest should in no way affect your personal financial situation or negatively affect your life in any way. You should divide your invested balance into different projects, always monitor these projects and make timely adjustments so that you can trade successfully.
losses due to errors
Despite research, careful observation of market trends and developments, almost no crypto trader manages to avoid temporary losses caused by unsuccessful trades, volatility or emotional decisions. Sometimes you will find yourself in a situation where, having made a rational decision, you have to exit certain trades early. Then it’s time to weigh your losses and learn from your mistakes in crypto trading and how it happened.
If you are willing to invest not only money but also time in trading, do intensive research, constantly monitor the markets and create a solid trading strategy, cryptocurrency trading could prove to be exciting and promising for you.