Beginners Guide to Trading Cryptocurrencies

by Darwin on March 23, 2018

If you have been paying attention to any of the news lately, then you will know that cryptocurrencies are slowly taking over the daily lexicon. People are increasingly becoming aware to the benefits of decentralized digital currency. However, there is another angle to cryptocurrencies that many people have only just starting discovering. That is the amount of money that can be made from trading these instruments. Traders have begun to realize just how volatile these assets are. Does this present risks? Indeed it does, but in trading everything is a risk reward balance. There are a number of different cryptocurrencies that you could have made a large return from merely holding them over the past year. We will take a look at some of the most simple first steps that you can take in order to start trading cryptocurrencies.

Finding the Right Broker

Before you can begin trading cryptocurrencies, you have to have a good idea of what type of instruments you want to trade. Do you want to trade CFDs or cryptocurrency options? If you wanted to trade CFDs, then you are probably best suited to set yourself up with a regulated broker. There are any number that you can use globally so it all comes down to the type of cryptocurrencies that you want to trade. IQ Option Cryptocurrency CFDs are probably the best brokers in Europe as they offer a range of assets as well as the best prices on the market. They are fully regulated and have one of the most advanced platforms out there. If, on the other hand, you would prefer to use asymmetric trading instruments such as options then there are a range of cryptocurrency option brokers that you can choose from. Like the CFD brokers, it really will come down to the regulation as well as the amount of assets that you can trade.

Get Down to Basics

Before you can even open any trade, you have to know the basics about cryptocurrencies. You need to know the various differences at a high level. You need to know what may drive a particular currency in the way of news and announcements. There is no use trading a cryptocurrency that could quickly move based on factors that you had no knowledge of. Take a look at previous episodes so you have the best gauge of how the markets will move based on this news. Another really important thing to consider is the amount of money that you would like to put up to risk. Risk management requires you to only ever risk as much as you can afford to lose. It is up to you to be disciplined and choose a reasonable number.

Study Simple Strategies

Now that you have a basic understanding of what cryptocurrencies are and which pairs to trade, you must now decide on which types of strategies you want to employ to make the most of the market opportunities. Quite simply, there are two basic groups of strategies that you can focus on. One of them is fundamental trading strategies and the other are technical trading strategies which include charts are other studies. Fundamental strategies will try and make trades based on factors underlying the cryptocurrency itself. These include factors such as the technology underlying the coins, the partnerships the coin is entering into as well as adoption rates of the coin. These are sometimes easier to understand as they rely on information that is “as is”. Once you see the news, the price of the coin will react and that is certain. You will just need to make sure that you can enter the trade quickly to take advantage of it. If you are going to use technical trading strategies then you will have to understand the basics of charting, studies and price action movements. This is where advanced charting software can come into play and help you improve your trading. There are a number of resources that can help you improve your technical trading skills including trading view and infinite alpha. It also helps to use a practice account like that offered by IQ option before you invest any money.

Have Risk Management

As with anything in life, you have to manage your risk. Make sure that you have proper risk limits in place. Don’t invest more than you are comfortable with. Always trade with stop loss orders and make sure to take profit regularly. You should also have daily risk limits. These are limits that will restrict how much trading you will do on a daily basis. For example, you can set a limit that is either based on amount won / lost or trades won / lost. Whatever risk management strategy you decide on, make sure that you are religious about it. Keep to these limits as you do not want emotion to cloud your judgement and impact on your profit / loss.


Now that you have the essential tools to start trading cryptocurrencies, you can take your first steps. Start a practice account at one of the brokers and try some of the strategies that you have zeroed in on. Lastly, never allow emotions to dictate your trading. The markets as well as the price of the cryptocurrency will not react to how you feel. Don’t allow these feelings to cloud your thinking. Happy Trading!

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