How Crypto Trading Works: An Easy Guide to Understanding

FinanceFeeds Editorial Team

Everything about crypto trading, explained in basic and simple terms.

As cryptocurrencies are slowly, but surely, starting to take over the world, the market has gained immense popularity in recent years. Over the past decade, since the launch and introduction of Bitcoin in the market, its steep development and its value now surpassing that of gold, there has been an uproaring interest from consumers.

It’s all about timing. If you time it correctly, then you can have much higher returns. The aim is to ideally make a profit by either buying or selling cryptos, based on the changing value of the underlying asset. However, since cryptocurrency prices are still so volatile, many traders opt to HODL, as it sounds like a much safer and appealing option to them.

It’s a lot! So, here’s an easy guide on simply understanding what crypto trading is and how it actually works.

What is Crypto Trading?

Crypto trading is the act of speculating the fluctuation in prices and value of digital currencies. Due to their volatility, we are talking about price movements that can be potentially high highs and low lows.

How Does Crypto Trading Work?

One way of crypto trading is to use a digital wallet to buy and sell cryptocurrencies via an exchange, where their value would depend on the market rates at the time. Similarly to the stock market, once you buy a cryptocurrency, you can make a profit if you sell it at a higher price than what you paid for it.

CFDs (contracts for difference) are another popular way of crypto trading. It is a much more advanced trading strategy that is mostly used by experienced investors. If you trade cryptos as CFDs, you don’t own the underlying asset. Instead, a contract is made between the buyer and the seller to exchange the difference in value between the opening and closing of the contract.

Crypto trading is still not a simple task.  It involves a risk that not many people are used to compared to traditional markets and exchanges. It requires relevant skills and knowledge in understanding, following and analyzing the market.

Risk Warning: Cryptocurrencies are highly volatile and trading can result in the loss of your invested funds. Before investing you should be aware that cryptocurrencies may not be suitable for all investors. You should therefore carefully consider whether trading or holding digital assets is suitable for you in light of your financial condition and not invest money that you cannot afford to lose.

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