A crypto trader is essentially a person that speculates the direction of cryptocurrencies such as bitcoin. Here is a guide to becoming a cryptocurrency trader that can help you identify the best options available to start trading Altcoin or Bitcoin.
There are specific rules and regulations that one needs to follow when getting into this industry. You can risk extremely hefty fines or even going to jail if all the rules are not followed. Do proper research and take the help of a lawyer or certified accountant to understand all the intricacies.
Steps to Become a Cryptocurrency Trader
Open an account with Cryptocurrency Exchange
While opening an account is the most crucial step to start trading in the Cryptocurrency market, you may want to consider a market place where you can deal with direct fiat money ( Euros, US dollar, and others ).
You can select a reputable crypto exchange website that offers fiat-to-crypto exchange options such as Coinbase. Once you open an account in a Cryptocurrency exchange, you should consider efficient tools to take care of all your coinbase tax concerns in a quick, hassle-free, IRS friendly manner.
Select the type of coins for your long term investment plans
Cryptocurrencies are defined in three key segments of valuation type :
- Large capital investment: Coins of higher value than 10 billion dollars
- Medium capital investment: Coins of value between 1 billion to 10 billion dollars
- Small capital investment: Coins of lower value than 1 billion dollars
The investment in coins may not be based on mere cheaply traded currency. The probability of a one-cent currency to rise is potentially low. The market valuation of coins is derived by the number of coins multiplied by its current price.
Research the current trading price of your preferred trading currency through multiple exchange platforms
Experts recommend that before actually investing in any coin, one may consider the theory of buy low, sell high. Therefore you may research the price of your chosen cryptocurrency in different markets and bid for the lowest buy and highest sell for your choice of investment.
Develop clear reasoning for investing in Cryptocurrency
The trader may develop clarity on what market is disrupting the target coin, such as finance, cloud storage, or virtual payments. Identify the technology that backs your chosen coin.
Blockchain technology is highly recommended in current trading trends. Ensure that the team and information behind the chosen cryptocurrency are solid, reliable, and has the potential to make the coin what it claims to be.
Store your coins in a Cryptocurrency wallet
Just like a bank account, the crypto wallet acts as a bank account for your crypto coins. Conduct a thorough research before deciding on a wallet for your cryptocurrencies as it has to be a safe space.
Rules to follow to become a cryptocurrency trader
Always track Bitcoin trends
Experts suggest that Altcoin and all other cryptocurrencies closely follow the trail of Bitcoin. A sudden rise in bitcoin price may lead to a fall in Altcoin as traders exit Altcoin to take benefit of the bitcoin profits. However, when the Bitcoin price falls Altcoin market also observes a decline as people exit Altcoin to convert it into fiat.
Diversify your investments
It is never a smart rule for an investor in any market to place all the eggs in one basket. Bitcoin has increased by 34x between 2016 and 2018. In contrast, the verge had increased by 13,000x so therefore, having a diversified investment plan is the best way forward.
Avoid crypto greed and excitement
A cryptocurrency trader should learn to withdraw profit when it exists and avoid excess greed. Say if the target profit is 30%, then they should withdraw and not wait for 40 or 50%. This waiting for more can cause you a major loss if the values suddenly drop and can be detrimental to your entire business.
Do not invest blindly in the Cryptocurrency market
The key to efficient investment in the crypto trade market is informed and researched investment. There are a large number of scammers and other potential opportunists that can misguide people in making substantial investments in bitcoin by manipulating information. Therefore, expand your research sources and do not blindly invest in cryptocurrencies.
Plan for long-term investment
Most of the inexperienced traders panic at the first sign of price drop and get excited even with a slight rise. To establish your place in the crypto trade market, you should consider planning for the long run.
Taking long-term and mid-term portfolios can reap a lot of benefits in the future. Make sure the investment is based on a reliable set of research and is not based on misinformed deceptive data.
Set stop-losses in case of active trading
If a coin is not in your long term or mid-term investing plans setting a stop loss is crucial. This rule shields you from unwarranted losses and safeguards you from the stipulated loss anticipation.
The setting of a stop loss in your active trading portfolio helps you in the mitigation of losses. It allows you to get clarity on the point of loss until which you are willing to experiment.
This rule can also help you measure your benchmark and effectiveness in the market for future trades. At times stop loss can automatically sell the currency at the stipulated price and opens the window for the trader to buy the same share at lower prices hence establishing a window to recover the loss.
Get into Investments Responsibly
Address the fact that Cryptocurrency is not a tool for getting rich quickly. It has substantial risk factors attached to it. Moreover, even the profits that are generated in the investment are bound to legal encumbrances, government rules, and other similar hindrances.
Therefore, do not opt for any amount that you cannot afford to lose in the crypto trade market as it has its uncertainties and risk. You can further invest in an efficient tax software to meet your tax management needs in an automatic, quick, reliable, and IRS approved manner.