Cryptocurrencies have been enormously volatile since their introduction. Hence, it is not surprising to hear that many investors like to trade cryptocurrencies mainly because of their volatility.
Why so? If you rightly time the market, it can create many opportunities, giving you much higher returns than traditional investments. However, the volatility also brings about a higher risk when compared to other less volatile assets.
While Bitcoin has gained over a 33,000% increase since it was first introduced in 2015, it is presently significantly down from its previous highs. In a bull market, increasing your portfolio value in USD is considerably easy, but increasing the number of Bitcoins you hold is challenging.
How, then, do you increase your Bitcoin stake while trading cryptocurrencies? In this review, you’ll find out what cryptocurrency trading is, how to buy bitcoin in SG, and the significant risks you must look out for.
What is Cryptocurrency Trading?
Before going into cryptocurrency trading, let’s briefly explain cryptocurrency. A cryptocurrency is a digital asset that operates on a network spread over numerous computers. This decentralized nature allows them to exist independently of governments and other central authorities.
Cryptocurrency trading is the act of purchasing, selling, or exchanging digital currencies on different online markets. Unlike traditional financial markets like stocks, cryptocurrency trading, which operates around the clock, can occur at any moment. How then can you buy Bitcoin? Let’s take you through the steps to start your Bitcoin exchange journey.
How to get started with cryptocurrency trading
There are certain steps you must take to kick off your cryptocurrency journey. They include:
Set up a wallet
Before you begin your cryptocurrency trading journey, you must create a digital wallet to store and manage your digital currencies safely. There are many wallet types to choose from such as:
Hardware wallets: a hardware wallet is a physical device that stores your assets and private keys in an environment separate from an Internet connection. One of the advantages of a hardware wallet is that it can act as a cold storage and interact with smart contracts on the blockchain.
Cold wallets: A cold wallet is just like a hardware wallet. It is designed to store your assets and keys offline. The main difference between a cold wallet and a hardware wallet is that it cannot interact with smart contracts.
Hot wallets: A hot wallet is accessible via a web or mobile app. They are connected to the internet and suitable for everyday use. However, they are considered to be less secure due to online threats.
Mobile software wallet: They are mobile apps developed for smartphones and tablets. Mobile wallets are suitable for on-the-go transactions and moderately secure if the device holding the app is not compromised.
Desktop software wallet: These are installed on your computer. They are not always connected to the internet, so they are more secure than hot wallets.
NOTE: Always keep your private keys safe, as they grant access to your assets.
Choose a cryptocurrency exchange.
Now that your wallet is set up, the next step is to choose a Bitcoin exchange that will cater to your trading needs. Several centralized cryptocurrency exchange platforms allow users to trade spot and leveraged tokens. Some factors to consider before selecting a Bitcoin exchange in Singapore are:
Security: 2-factor authentication and data encryption are the two significant security details to take note of before choosing an exchange platform.
Reputation: User reviews, online reviews, and reputation research are paramount. These factors will tell you how end users like yourself feel about your chosen platform.
Currencies supported: Some exchanges support only a few cryptocurrencies. Ensure that your intended exchange platform supports the cryptocurrencies you are interested in trading before signing up.
User interface: This is crucial as it dictates how smooth your experience will be when using the exchange. A slick, intuitive user interface will significantly make your trading experience enjoyable.
Learn trading strategies
In cryptocurrencies, there are strategies that traders use to make a profit. Before you begin your Bitcoin exchange journey, learning and knowing some of these strategies is essential.
Position trading (HODL): HODL is a misspelling of hold but means the same thing. Holding or position trading is buying and holding onto a cryptocurrency or assets over a long period. This is a long-term investment strategy and is not moved by short-term volatility.
Swing trading: This strategy usually involves capitalizing on price swings over several days or weeks based on technical analysis.
Day trading: As its name suggests, this type of trading lasts a day. This means positions are entered and exited within the same day. Some traders choose this strategy to monitor their trades during the day before going to sleep.
Scalping: This is a type of day trading. However, scalpers would make several small daily trades, leveraging tiny price movements. Some traders scalp using leveraged tokens to increase profit percentage.
Fundamental and technical analysis: Fundamental analysis means evaluating and calculating a currency’s intrinsic value by studying financial models. Technical analysis, on the other hand, is based on past trading activity, price trends, and patterns seen on a chart. Knowing both will improve your trading skills.
Learn Risk Management
By now, you know that cryptocurrency is very volatile. As such, it is essential to manage your risks to avoid losing money in the market. Here are some tips:
Diversify your portfolio: The phrase ‘do not put your eggs in one basket’ comes into play here. Ensure you thoroughly calculate and spread your investments over several cryptocurrencies instead of putting all your money into one asset.
Set stop loss: Stop losses are orders you give your Bitcoin exchange platform to cut you off a trade once you have incurred a preset amount of loss. This will keep you from losing too much if a trade goes south.
Calculate the risk-reward ratio: Knowing the risk-reward ratio before entering a trade would help you determine if a trade is worth the risk.
Stay informed
To successfully trade cryptocurrencies, you need to stay informed and ahead of news and happenings. Certain events can affect the financial market, which can impact your trades. Some of the channels to watch out for are:
News
Social media platforms like Twitter, Reddit, and other crypto-based forums can give insights into more profound happenings in crypto.
Analytical tools available on your Bitcoin exchange in Singapore, like moving average RSI, can help you keep track of price trends and make informed decisions.
Regulations and tax
In some countries, there are specific regulations and tax laws in place. Know these laws and follow them.
What to Avoid
While cryptocurrency trading offers a lot of opportunities, there are common mistakes that need to be avoided.
Over-trading: Set a schedule. Know when to start and stop. Maintaining this discipline will help you stay focused even when you’re at a loss.
Fear of Missing Out (FOMO): Avoid making impulsive choices. Stay focused.
Trade what you see: You do not control the market; do not trade based on your feelings. Use the chart and fundamental and technical analysis.
Conclusion
Trading cryptocurrencies can be rewarding. However, to succeed at trading, you must be disciplined, knowledgeable in strategies, and careful not to overtrade. You can be confident of a smooth trading journey by managing your risk, safely storing your crypto assets, choosing a good exchange, and knowing trading strategies. Remember that the cryptocurrency market is volatile, so start small, gain experience, and gradually refine your approach as you progress.
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