Cryptocurrencies such as Bitcoin and Ethereum have gained a lot of media coverage over the past few years, with their highly volatile prices offering an opportunity for investors to potentially make money. Potential investors can purchase cryptocurrency on exchanges such as Tesla Coin, and it’s possible to either hold or trade.

Trading cryptocurrency can potentially yield greater profits compared to simply holding, although it does come with risk too. To be successful at trading cryptocurrency, you first need to know how it works. In this guide, we’ll be explaining how to get started trading cryptocurrency and giving you all the information you need to find success.

Long or Short-Term Trading

Trading, whether it’s stocks or crypto, can normally be categorised into long-term or short-term. Before you get started, you should know the differences between the two and choose which one suits you best. This decision will also impact how you trade and the type of research you’ll need to do.

Long-term traders hold their assets for several weeks, months or even years. The intention is to buy and hold until a certain price point, at which they sell the asset to complete the trade. This is closer to traditional investing, although prices in crypto can change much faster. Most long-term traders stick to popular cryptocurrencies, though it’s also possible to buy and hold smaller market-cap coins.

On the other hand, short-term traders take advantage of price swings to complete trades within the same day, buying a coin, waiting for a specific movement and then selling. Most short-term traders are classified as day traders, where all trades are completed by the end of the day. However, the crypto markets are always open, so there are fewer limits on when and how you trade.

Choosing a Trading Method

Aside from deciding on whether you’re trading long-term or short-term, you’ll also need to consider which trading strategy you use. Different strategies can help you reach different goals, although you’ll need to weigh up the advantages and disadvantages of each. Here are some of the most common ways to trade cryptocurrency:

• Swing trading – Swing trading is the most common way to actively trade cryptocurrency, not including simply buying and holding. This form of trading looks to take advantage of swings in the price of the coin, which are common within the volatile crypto markets. Swing trading can be done in the long-term and short-term, and there’s a lot of potential to make profits if you use fundamental and technical analysis to plan your trades.
• Algorithmic trading – Algorithmic trading has gained popularity among crypto traders in recent years, with bots and computer software tools used to execute trades automatically. You can program a trading bot in a number of ways, ensuring it only buys and sells assets once certain conditions are met. This is a great way to save time, as you can complete multiple trades throughout the day without having to watch the charts.
• Margin trading – Margin trading is also known as trading on leverage and involves borrowing capital in order to open trades. This type of trading is good if you have limited capital available, as it increases your potential rewards for successful trades. However, it also increases the risk. As a result, margin trading is only recommended for experts.

Risk Management When Trading Cryptocurrency

However you choose to trade, it’s important to always be aware of the risks involved. While trading cryptocurrency can potentially make you money, it’s also possible to lose money on your trades. Your capital is always at risk, as the value of your coins can go up and down. The nature of crypto means it’s more volatile, and therefore you need to be more mindful of risks.

Ensure that you research all of your trades carefully and avoid investing more than you’re comfortable losing. In addition, you need to be aware of the taxes that you’re liable to pay on each trade.