Literally Why and How Should I Start Trading Cryptocurrency?

Chad Davis
Aug 31, 2018 · 8 min read

Is investing in Bitcoin worth it? I really don’t know.

What I do know is there are over 1600 other cryptocurrencies other than Bitcoin. Instead of waiting for the price of Bitcoin to spike, you can chase profits by trading cryptocurrencies, instead.

You don’t even have to know a ton about crypto to start. You just need to know enough.

Hopefully, this guide will be “enough.” I’m writing the guide that I wanted to read when I first learned that trading crypto was even a thing. I’m not here to overwhelm you with technical jargon and choice overload; I’d rather have you hit the ground running and learn the rest as you go.

But I won’t have you follow me entirely in darkness, either. There’s a ton to learn in both crypto and finance, so I’ll provide links to some resources along the way. But first, we’ll start with a brief foundation.

Part 1: Blockchain 101

The one question people usually have is this one: How do cryptocurrencies — like Bitcoin — have any kind of value?

To know the answer, you have to start thinking about blockchains.

Let’s take what we do know about Bitcoins: they’re a type of currency that exists only on the internet. But how could something like that be secure? How can we ensure they aren’t hacked, or duplicated, or somehow manipulated? How could this ever actually work as real money?

The answer to all of those questions is blockchain technology. This step-by-step guide on blockchain technology is well-worth reading, but you can also settle for my definition:

A blockchain is a public record of transactions secured by really, really complex and unhackable codes.

People invested in Bitcoin not just for the sake of Bitcoin, but for what blockchain technology was promising to do with it: To create a decentralized currency that can be used to pay for goods and services without government or third-party involvement.

But remember, Bitcoin is just one type of cryptocurrency.

Every other cryptocurrency on the market uses blockchain technology to offer something unique.

It’s All About Ethereum, Not Bitcoin

Branching from that logic, what else can blockchain technology offer, other than a decentralized currency?

The answer is in Ethereum. Whereas Bitcoins merely use a blockchain network to trade Bitcoins (to purchase services or goods), Ethereum uses blockchain networks to fuel programmable applications.

These programmable applications are called smart contracts, and they can run automatically based on a set of conditions. Upon completion of the program, recipients can receive payment in Ethereum’s currency, ether. Blockgeeks, the site that provided the blockchain guide linked above, also wrote an amazing and succinct explanation of Ethereum.

In short, Ethereum-based cryptocurrencies are using blockchain technology to do unique and amazing things in every industry, from real estate to cannabis.

Some of them have huge potential, and people are willing to bet their money on it. This is the source of value that creates a market for our trades.

For more on what blockchains and cryptocurrencies actually are and how they function, check out this video:

Part 2: Let’s Get Some Crypto

If you’ve done enough reading, you should now be convinced that the road to the future is paved with cryptocurrencies. Let’s take advantage of it while we can.

Learn How You Store Crypto

Before you pour your money into digital currency, give yourself the primer on how cryptocurrencies are stored. You’re going to be converting dollars into data, meaning it can vanish if you’re not careful. Whatever you plan to use in trades will be stored online, and the rest can go wherever you feel most comfortable. That can be anything from storing it offline on your harddrive, to printing it out on paper and locking it in a safe.

Buy Ethereum

There are dozens of digital currency exchanges, and you’ll need to find one that operates in your country. For those of us in the US, let’s use Coinbase. Here’s the quick rundown on how that works:

  1. Make your account on Coinbase.
  2. Link your bank account.
  3. Verify your identity.
  4. Buy Ethereum using USD.

As explained above, the future of crypto is (arguably) with Ethereum, so most of the cryptocurrencies on the market are based in Ethereum. Plus, it’s cheaper than Bitcoin, so it will be easier to calculate your trades. This isn’t a hard and fast rule by any means, but it’s the best option for a newbie.

How Much Should You Buy?

There’s no magic number here. You should only buy what you’re willing to lose. But there is one thing to consider:

Buying crypto through Coinbase is slow. You might be waiting 7 to 10 days just to get your USD exchanged for ETH. Buy what feels reasonable now instead of playing it too safe.

Anything you don’t use can be converted back to USD much quicker. Alternatively, you can stash that extra into your crypto wallet or in a cryptocurrency you believe has long-term growth potential.

Register for Binance

Binance is a cryptocurrency exchange, and it’s where you’ll be doing your day trading. Binance is only one of many exchanges, but it’s one of the best for beginners. It has a good interface and one of the lowest exchange rates.

Unfortunately, we can’t buy directly into Binance with our USD. That’s why we’re going through Coinbase, first.

While we wait for Coinbase to process our order, you can register a Binance account. Signing up is easy, but be prepared to verify your identity once more.

Part 3: Learn How Day Trading Works

While you wait for Coinbase, start reading up on day trading.

When I did this, I came in with 0% knowledge of stock markets and finance. Buy low and sell high, right? Sure, but there’s a bit more you can go off of.

Trading Disciplines

Assuming you know as little as I did about interpreting the stock market, it helps to have a brief rundown on the two schools of thought: fundamental analysis and technical analysis.

Fundamental analysis is what most of us think of when we hear “investing.” We look at Apple and say, “That’s a good company, look how big they got.” We see the history of Apple’s success, we think about their potential for more success, and we make assumptions about the value of their stocks.

And then there’s technical analysis. This is like investing in a vacuum. You only make predictions about the market based on the prices, volumes, and other data in the charts.

Both techniques have their place in crypto, but you’ll primarily be using technical analysis. When scanning the exchanges, you’ll only be looking for which coins have the most potential for trading at that moment. These trades will happen within hours and minutes.

However, keep in mind that the world of cryptocurrencies is volatile and full of FUD (fear, uncertainty, doubt). There are plenty of real-world factors affecting the value of crypto, and that’s where technical analysis can fail you.

Reading the Charts and Interpreting Data

Your next big objectives are to understand candlestick charts and how to analyze patterns and trends. Along with that, general advice on day trading strategies.

You can easily learn candlestick charts in this video. As for identifying patterns and trends, that’s what you’ll be studying and testing for the rest of your day trading career. Honestly, the best way to get started is through YouTube. Search for general cryptocurrency trading lessons and see where it takes you.

However, these videos don’t always go easy on you with the investing terminology. When that happens, pause your video and use Investopedia’s investment section for some brief lessons.

Part 4: Your ETH is Now Available in Your Account

Finally, the day you’ve been waiting for. You should get an email notification from Coinbase when it happens. Now, we’re ready to transfer your ETH from Coinbase to Binance.

First, get your ETH Deposit Address from Binance:

  1. Log into Binance, hover over “Funds” and click “Deposits.”
  2. Use the dropdown to select “ETH — Ethereum.”
  3. You will find a jumble of letters in the field labeled “ETH Deposit Address.”
  4. Click the “Copy Address” button, and a “Succeed” dialogue box will appear.

Second, open up a new tab for Coinbase:

  1. Log into Coinbase, click “Accounts,” and find the list of cryptocurrencies.
  2. In the “ETH Wallet” box, click “Send.”
  3. In the field labeled “Recipient,” you’ll be prompted to enter your ETH Deposit Address.
  4. Paste the ETH Deposit Address you got from Binance.

WARNING: You need to ensure that you’re transferring from Ethereum to Ethereum as outlined in these instructions. You also need to verify that the ETH Deposit Address you paste into Coinbase is the same as what you copied from Binance. Your money will disappear into cyberspace if sent to the wrong address.

5. Type in the maximum amount of coins and click “Continue” to finish the process. (If my warning scared you, you can start by transferring a small amount. But keep in mind that Coinbase will charge you a transfer fee every time.)

6. You’ll have one last chance to confirm the transaction with a 2-step verification process via SMS. If all seems well, enter the confirmation code and click “Confirm!”

Now, hold your breath for 15 minutes. That’s about how long it will take for the coins to appear in Binance. When they do, Binance should send you an email confirming that a deposit was made. You can now use your coins immediately.

Start Trading

From Binance’s home screen, hover over “Exchange” and click “Advanced.” Your screen will now be filled with candlesticks and lists of numbers with several 0’s before their decimal point.

In the top-right corner, there’s a drop-down where you can explore the various cryptocurrencies in the exchange. Since we’re using ETH, you will be exchanging coins paired with ETH. These are the ones that end with “/ETH.” This means you can buy these coins with your ETH balance, and when you sell that coin later, you’ll receive a balance in ETH.

What I do recommend is taking some time to get familiar with the Binance interface. Experiment with small amounts, simply to get familiar with the Buy and Sell functions, if that’s what it takes. But be careful about going too small, otherwise you’ll collect crypto dust.

Conclusion

This is where I leave you. There are too many other directions we can go in.

Which coins are worth trading, and at what times? How much should I buy-in for a trade (this is called “positioning,” by the way)? Should I use stop-limits? The majority of these things will be brought to your attention or answered for you through your research.

Next Steps

  • Start learning more about cryptocurrency and blockchain technology. You can start by looking at Coinmarketcap.com. Every cryptocurrency on the market worth investing in has its own development team, mission, and whitepaper backing it. Follow their developers on Twitter. Get involved. Follow the industry.
  • Get a solid foundation in finance. If you’re new to finance like I was, then what you really should be doing is spending only a little bit of your time day trading and way more of your time understanding the stock markets and how they operate.

Chad Davis

Written by

ideas man www.chaddavis.moe

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