If you have been planning to try your hands at crypto trading but did not know how to go about it. Here is the guide to help you start your journey. Crypto is the newest asset class that has emerged in the last decade or so. It is new, it is unique, and it is volatile and somewhat mystical in nature which makes it attractive as well as confusing for newcomers.

Is It a Currency?

While these virtual digital assets are called Cryptocurrencies, only a few and the most popular ones can be actually used as a currency or money for buying goods. That too is only for select goods as of now. That does not really hurt its popularity since world cryptocurrencies are traded like an asset with ease.

Gold 2.0?

Cryptocurrencies are often compared with gold as a hedge against inflation. Experts argue that world-over central banks like the US Federal Reserve, European Central Bank and Bank of Japan etc. have been printing currency somewhat indiscriminately, leading to the loss of purchasing power. Therefore, one should hold his or her savings in cryptocurrency or Gold. While gold prices tend to maintain a narrow range in the short to medium term, Cryptos swing widely and create better trading opportunities.

Volatility Is My Friend

Crypto is the most volatile asset class today. Wild swings are not confined to the lesser-known tokens. Even Bitcoin has lost half its value before going back to the lifetime high within a few quarters, more than once. This looks scary, but is it? Expert traders study the price patterns in every asset class and learn to ride the volatility. They study the correlation of bitcoin and other crypto prices with global stock indices to identify swing trades. Similar correlations are studied with fiat currency values, in particular US Dollar.

This technical knowledge is not to scare you away, but just to suggest that there is a method in the madness. There are useful lessons for a common trader as well. An attractive opportunity comes at least once every year that should be captured for a longer-term commitment. While short-term traders need to manage their positions with strict stop-loss levels or by using derivatives if it’s available in their country.

Is It Different from Other Securities?

Investing in crypto is not too different from investing in equities or commodities. What is unique, this market operates round the clock, which means you can trade any time for 24 hours. Let us explore the similarities as well as differences, step by step. In the stock market, one can buy and sell shares. While in the crypto market there are different coins or tokens that can be traded. The most famous one is of course Bitcoin, the oldest and the most valuable of them all. It is followed by Ethereum, and Tether (USDT) among others.

How To Choose the Right Exchange?

While trading in stocks you first open an account and then decide which stock to buy. In cryptos or digital assets, you may like to decide which coin you want to buy first. Why? Because not every exchange offers every coin for trade. The number of coins traded on each exchange varies from a few dozen to up to a few hundred.

Compare The Cost

One needs to incur various charges on crypto transactions.

1.     Charges for depositing funds

2.     Transaction charges

3.     Maker and taker charges

4.     Charges for withdrawing funds

When you place an order and a portion of it gets executed immediately you pay taker charges for that portion and wait for the balance portion to get executed on which you pay maker charges. This is the charge for market making or providing liquidity to ensure that trades get executed quickly.

Then one needs to compare the minimum investment amount required and the interest offered on Fixed deposits in various tokens. Interest rates are different for each coin and vary across exchanges. The deposit facility is usually available only for select popular coins.

Funds can be transferred through Net Banking, mobile wallets, and other modes of payment available. It is important to check and compare charges, as they are different for different modes of fund transfer, and you may find an option that is free of cost.

Ease Of Trading and Supporting Tools

Last but not the least, one should also check out the trading interface and tools offered on the website as well as on the mobile app. Good software provides better tools to watch the most active coins and pairs and helps you identify trading opportunities. It tells you when a particular pair is over-bought and good for booking profit or selling and when it is over-sold and good for buying. Technical charts also help a trader identify a move when it is about to start, and a trade can be initiated with relatively low risk. Many exchanges provide limited functionalities on the mobile app compared to their websites.

Know Your Screen

Now Bitcoin, Ethereum and other cryptos are all currencies. This means if you want to buy bitcoin, for example, you can pay for it in dollars or in Ethereum or any other cryptocurrency that you already own. It is very much like the forex market where one can exchange a dollar for Euro, Yen, or Pound among others. At the same time, if you own Euro, it can be used to buy Yen or Pounds. Similarly, each platform offers quotes for several such pairs where you can exchange one cryptocurrency for another.

Usually, people trade an individual currency or pair at a time. So, one can buy Bitcoin for a dollar or pay for Bitcoin in Ethereum or buy Ethereum for Litecoin. However, exchanges also offer a basket of currencies for buying and selling. If you do not like the portfolio of the readymade basket, you may create your own tailor-made portfolio including the coins of your choice and invest your money in lumpsum as well as SIP.

Other Ways of Earning from Crypto

You can become a crypto miner and earn tokens as a reward. This requires you to solve complex cryptographic puzzles. One needs specifically configured computer hardware and a large supply of power for running these machines.

One can also earn from crypto exchanges by referring them to a friend. If your friend starts trading you will earn a commission depending on his turnover.

Apart from investing directly in crypto assets one can invest in Crypto focused funds as well as buy the stocks of the companies that participate in the Crypto value chain. Crypto mining companies and specialised hardware companies catering to such mining activities are some examples.

Some companies hold a significant investment in Cryptos and buying their stocks may provide indirect exposure. Thousands of companies across sectors now accept payment in crypto for their goods. Some investors look to buy the stocks of such companies hoping that these early birds might reap handsome rewards as cryptos gain a wider acceptance in years to come.

Asset Allocation, The Golden Mantra

Crypto trade is largely unregulated and is believed to be in its infancy compared to other matured securities. The investors are therefore advised to do proper research before trading. Experts also suggest that initial investment should be made in smaller amounts so that the loss is bearable.

New investors should stick to the most liquid and popular tokens like Bitcoin, Ethereum etc with an established track record. Owning a basket of cryptos is better than holding just one currency. Keep a fixed percentage of your portfolio in Crypto, add more on dips and keep booking profit on rise.