• Interest in digital currencies has increased considerably during the last couple of years, so the vast world of cryptocurrencies lures more and more individuals.
• Though, there are so many things to learn before embarking on this journey, especially strategies that will further lead to gains.

Cryptocurrency is all the rage today, as many people prefer to invest in this asset. But this should come as no surprise since the value of virtual coins can soar up to thousands of dollars in just a couple of days. Any investor mastering trading can, thus, increase their revenue and collect rewards.

However, there are a few aspects you need to be mindful of before trying your hand at trading cryptocurrency. One thing is for sure – it is neither easy nor impossible. Let us detail it for you in the following:

What does it mean to trade cryptocurrency?

Taking a financial position on the price movements of digital currencies is defined as cryptocurrency trading. People trading virtual coins speculate on their price direction against another cryptocurrency (crypto-to-crypto pairs) or the dollar (crypto-to-dollar pairs).

Usually, individuals trade digital currencies by means of CFDs (contracts of difference). These CFDs are a popular trading method, as they allow for leverage, greater flexibility, and the capacity to take long and short positions. Suppose you want to trade Bitcoin; then, you can bet on the coin’s price fluctuations without actually owning the underlying currencies.

As for the long and short positions, let us explain them to you. When you believe the value of a particular cryptocurrency will drop, you will take a short position (sell). Instead, when you presume the price will surge, you will go long, i.e., buy. Both are advantageous instruments, meaning that all you need is a little deposit, also called margin trading crypto, to have complete exposure to the underlying cryptocurrency.

Nonetheless, you should know that your profit or loss depends on the total size of your investment, so if you aim at considerable gains, be sure you invest a proper amount of money in the digital currency that has grabbed your attention.

Our recommendation is to document any cryptocurrency you plan to trade thoroughly to have a more comprehensive understanding of this – let us face it – unpredictable market. If you have just decided to trade the world-largest cryptocurrency by market capitalization, be sure you have a full picture of aspects like Bitcoin price, liquidity, volatility, and worldwide adoption.

Crucial points to have in mind before trading

Cryptocurrency investments are sort of a trend at the moment, so it is easy for novices to get into the bear and bull traps. So, ensure you take your research seriously before buying your first cryptocurrency. We know you want a piece of the seemingly flavorful cake of digital currencies, but you cannot taste it without understanding these things first:

Market capitalization

Market capitalization (or, shortly, market cap) basically indicates the size of a crypto project or company, and this metric is determined by taking the crypto’s price and multiplying it by the total sum of existing shares. Without proper insight into a specific crypto’s market cap, there is a slight chance for you to assess the level of risk this digital currency implies.

Theoretically, cryptocurrencies with a large circulating supply and high market cap are less prone to whipsaw volatility and manipulation. In contrast, those having a smaller market cap can experience wild price fluctuations. When looking for your next crypto investment, you will ideally check this aspect before anything else.

Market cap will help you make a wise decision, and, trust us, you need this since there are more than 5,000 digital currencies out there, some more profitable than others.

The most promising cryptocurrencies based on their market cap in November 2022 are:

• Bitcoin (BTC)
• Ethereum (ETH)
• Tether (USDT)
• Binance Coin (BNB)
• U.S. Dollar Coin (USDC)
• Binance USD (BUSD)
• Ripple (XRP)
• Dogecoin (DOGE)
• Cardano (ADA)
• Solana (SOL)

Bitcoin is still at the top of the list, but for how long only remains to be seen.

Trading volume

Trading volume signifies the number of tokens purchased and sold daily, which is especially important in the quest to find the next promising crypto to invest in. This should not be a problem as long as you opt for digital currencies of the likes mentioned above.

But if you have got to explore some vague smaller market cap altcoins, investigating their trading volume should be a priority. A low trading volume should raise a concern, as it means the asset that has caught your interest is illiquid, i.e., you will find it hard to buy and sell. On the other hand, liquid cryptocurrencies can be smoothly converted into fiat currencies or other digital assets.

Cryptocurrencies with extremely low liquidity or trading volume could symbolize unhealthy markets likely to put you in hard-to-exit positions. Moreover, they can indicate a dead or ailing project, so ensure you pay special attention to this aspect before making any purchase and always avoid digital currencies with declining or questionable trading volume.

Safely storing your crypto

Once you start trading, you will need a safe storage method to store your crypto for the long or short term. You have two options: hot or cold wallets. Surely, you can simply keep your digital goods on some exchange, but we do not recommend so, as this method comes with some risks. So, ensure you opt either for a hot or cold wallet, based on your very needs and investment size.

Hot wallets rely on an Internet connection, so you will have the private keys related to your crypto stored online and, hence, more prone to get accessed by bad actors. Sure, they can be a viable option for small amounts of cryptocurrency that, let us say, you will spend in a given period.

But suppose you plan to invest long-term and buy considerable amounts of virtual coins. In that case, we encourage you to hold your assets on a cold wallet, i.e., offline, where the possibility of someone accessing your holdings is either inexistent or extremely minimal.

That is what you should know before embarking on your crypto trading journey.