A No-frills Beginners Guide to Cryptocurrency That You Can Read and Understand in 10 Minutes

Bitcoin, altcoins, and cryptocurrencies, in general, are always in the news – for the right/wrong reasons depending on whom you ask. Cryptocurrencies still generate a fair mix of support and skepticism from the general market but there’s no denying the fact that its mass-market adoption is an inevitable event. For people who missed the boat on Bitcoin, there are more than 1600 other cryptocurrencies in the market, most of which are promising to disrupt industries, markets, and economies.

However, for newbie cryptocurrency investors and traders, it might be somewhat difficult to know where and how to get started, especially with the sheer size of information overload in the market. I’m assuming that you’ve already read up on cryptocurrencies and understand the basics of Bitcoin and Blockchain. This piece provides a simple beginner’s guide to trading cryptocurrencies.

Difference between cryptocurrency, stocks, and fiat

Cryptocurrencies are essentially decentralized forms of money that seeks to take the control of the monetary supply from the hands of governments. Fiat currencies are simply money printed/minted by the government as a legal tender and a means of exchange for goods and services. Stocks give you part ownership in a company and they are usually sold at a share price. Cryptocurrencies are currently more similar to stocks than fiat money in that they have a trading price, people are more concerned about the fluctuation of their value, and they only marginally used for transactional purposes.

Getting started with a cryptocurrency exchange

The first port of call in getting started with cryptocurrency trading is to find an exchange where you’ll conduct your trading activities. A cryptocurrency exchange is simply a place to buy and sell cryptocurrencies, but you’ll want to find an exchange that offers a very wide selection of coins, altcoins, and tokens. In selecting an exchange, you’ll want to pay special attention to its security – has it ever been hacked and could it be hacked again?

Coinbase is remarkably the most user-friendly cryptocurrency exchange but you’ll also want to pay special attention to liquidity volumes. The top three exchanges by 24-hour volume rankings are Binance, OKEx, and Huobi.

Using Binance will give you a tremendous trading edge over people conducting their trading activities on Coinbase because you get access to hundreds of other cryptocurrencies and other trading functionalities. Beyond liquidity, you’ll want to examine deposit and withdrawal limits, spread, trading fees, and funds insurance among other factors.

Making smarter cryptocurrency trading decisions

After you’ve settled on an exchange here are a couple of key points that could help you make smarter trading decisions.

* It is interesting to read about folks that sold all of their stuff to invest in a cryptocurrency – that’s reckless. Of course, there’s no-one-size fits all formula for the size of your investment/trading portfolio that should be held as cryptocurrency; however, the fact that the inherent volatility of crypto makes things unpredictable is a good reason to be cautious.

* People under 30 years old might want to keep only 30% of their portfolio as crypto in a conservative move and not more than 50% in crypto for an aggressive portfolio. People between 30 and 40 years will do well to only keep 20% of their portfolio as crypto, and people older than 40 years might want to resist the temptation to put more than 10% of your portfolio into cryptocurrency.

* When trading in altcoins, you want to conduct due diligence on the dev team and pay special attention to the inclinations of the founding team. Many founders introduce new altcoins and manage to list on an exchange with nothing more than a whitepaper and a landing page. You should be doubly sure that the founders have not been involved in abandoned projects or outright scams in the past.

* When trading cryptocurrencies, you should have an entry plan, an exit plan, and an escape plan. The entry plan determines how and when you buy the cryptocurrency, the exit plan determines how and when you get out of the trade when it moves in your direction, and the escape plan determines how you get out of the trade when it doesn’t go in your direction.

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