Although it is called a digital currency and can be exchanged for goods in some establishments, Bitcoin (BTC) is not legally considered a currency in Brazil. The asset is also not part of the Brazilian Payments System, nor does it fit the definition of the central bank of payment modalities. So far, the Central Bank has not even signaled any intention to lead a movement to regulate Bitcoin and other digital currencies.
What is Cryptocurrency Trading? How it works?
- 1 What is cryptocurrency about?
- 2 What is cryptocurrency trading?
- 3 Pros and Cons of Cryptocurrency Trading
- 4 Is cryptocurrency trading legit? Is it Regulated?
- 5 Can I do Day Trade trading?
- 6 How can I trade cryptocurrencies?
- 7 How to start trading cryptocurrencies — a step-by-step guide
- 8 Best cryptocurrency exchanges
- 9 Binance
- 10 How much can I earn?
- 11 Cryptocurrency trading frequently asked questions
Before the advent of digital currency — like cryptocurrencies, conventional currencies dominated the world of finance. However, since the beginning of Bitcoin In 2009, cryptocurrency became a popular and rapidly growing alternative means of payment and trading. Many investors and companies across the world have adopted cryptocurrency because of its many advantages.
If you want to start trading cryptocurrencies, it would be better to understand cryptocurrency and everything related to it. This article will provide a step-by-step guide on how to trade cryptocurrencies.
What is cryptocurrency about?
Before we delve into cryptocurrency trading, let’s start with the basics of cryptocurrency.
Cryptocurrency is any digital currency that secures transactions through Encryption. Therefore, cryptocurrency derives its name by merging “cryptography” and “currency”. Cryptocurrency is purely virtual and exists only as digital records in an online database.
Cryptocurrency encryption is a series of complex algorithms that ensure security and verify transactions. The basis of cryptography is Blockchain technology.
Blockchain is a digital ledger that records replicas and distributes transactions across a computer network. When you receive or transfer cryptocurrency funds, transactions are recorded in this ledger.
Each block contains some distributed transactions being linked by cryptography. So if a block in a chain changes, it will be discovered. Therefore, this technology makes it difficult for hackers to manipulate the system.
Unlike traditional currencies, cryptocurrency is decentralized and works without third-party intermediaries. This means encryption works without banks, government or other financial bodies. This makes cryptographic transactions fast and efficient, but prone to illegal activities or fraudulent.
Cryptocurrencies are called “currencies” and are stored in a digital wallet. Interest in cryptocurrencies has increased because they can be used as investment instruments and traded for goods and services.
Furthermore, some decentralized financial networks rely on cryptocurrencies for their operations as they use Tokens as tools for making transactions.
What is cryptocurrency trading?
Cryptocurrency trading is buying and selling cryptocurrency coins through an exchange or brokerage. Cryptocurrency trading is also speculating on cryptocurrency price trends through CFDs.
Like stocks and other financial markets, cryptocurrency trading can be complicated and requires knowledge.
Cryptocurrencies are high risk and highly volatile. Once you learn to time the market, study trends and speculate accurately, you can earn high returns in a short time. However, you can lose your money quickly if you don't understand the market.
Cryptocurrency investing is a somewhat speculative investment and may not be suitable for all investors.
The potential for high returns in the long run may be vague, as no one can determine the outcome in the future. However, you can invest in cryptocurrencies if you have high risk tolerance and good speculation.
Pros and Cons of Cryptocurrency Trading
Is cryptocurrency trading legit? Is it Regulated?
The legitimacy of cryptocurrency trading depends on the type of country. While some countries accept and adopt cryptocurrencies, others prohibit their use.
Cryptocurrency is still a new invention. Thus, government authorities and regulatory agencies around the world are working to understand its nature.
The decentralization of cryptocurrencies can pose some legal risks for cryptocurrency users. Thus, it would be wise to confirm the legitimacy of cryptocurrency trading in your country before starting to trade.
Can I do Day Trade trading?
Cryptocurrency trading is a high-risk strategy of buying and selling cryptocurrencies on the same day. The dynamics of cryptocurrency markets make it liquid and volatile, making room for day trading.
Unlike actions, the day trading it is unlimited and accessible. That's because in day trading, you don't need to open a brokerage or margin account, which gives you easy access to make short-term trades. However, day trading is high risk and you should trade with what you are willing to lose.
How can I trade cryptocurrencies?
In general, there are three different platforms for trading cryptocurrencies:
Cryptocurrency exchanges are likened to a digital marketplace where cryptocurrency traders can buy, sell and convert cryptocurrencies. When deciding on the best cryptocurrency exchange to use, be mindful of pricing, withdrawal options, and security. Examples of cryptocurrency exchanges are Coinbase, Binance and Changelly.
A broker is an individual or company that functions as a financial intermediary between people who wish to exchange goods or services and money. The broker can become a direct seller by buying many cryptocurrencies to sell on their platform.
A contract for differences (CFD) is an advanced cryptocurrency trading strategy that can be complex for beginners. It is a contract between a trader and a CFD broker to trade the difference in the value of a financial asset such as cryptocurrency during the trading period.
How to start trading cryptocurrencies — a step-by-step guide
Below is a four-step process on how to start trading cryptocurrencies:
Step 1. Choose a cryptocurrency trading platform.
The first step in trading cryptocurrencies is deciding on a reliable cryptocurrency trading platform and opening an account. Some of the best cryptocurrency trading platforms are eToro, Coinbase, Binance and Changelly. These platforms offer a good range of altcoins and are easy to use.
Create an account by providing basic identifying information such as name, date of birth, and email address.
Step 2. Start with a minimal investment.
The next thing to do is fund your newly created account. Bank deposits via bank transfers and debit cards are a good way to fund your account.
You can start trading with as little as $100. Remember that you must invest with capital that you are willing to lose. This is because you may not be able to tell the outcome of your first trade. That's why you need a trading strategy.
Step 3. Test your strategy.
When you decide what currency you want to trade with, you need to develop and test your strategy. This strategy will depend on the cryptocurrency knowledge you have accumulated.
As a beginner, try downtrend strategies that use low leverage. keep in mind that manage risk is an important skill in trading.
Step 4. Learn, Learn, Learn.
You should learn how the cryptocurrency market works and its terms before starting cryptocurrency trading. This is because the cryptocurrency market differs from other financial markets and you can lose your capital.
As a beginner, you need to learn trading strategies. It would be better to have a mentor or financial advisor to guide you through this process.
Best cryptocurrency exchanges
How much can I earn?
When trading cryptocurrencies, there is no fixed return amount. With the right strategy, patience and investment, you can win big in the long run.
Cryptocurrency market conditions are a significant factor influencing the price of cryptocurrencies and the amount of earnings you will earn. When the market is up, it's easier to make money. When it's down, it can be difficult.
Therefore, understanding the market is a must to include in the trading strategy you employ.
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