Diving into the crypto-trading world can be quite intimidating. In addition to understanding technical aspects behind cryptocurrencies, you also have to know the theory and nuances of trading. If you want to hold cryptocurrencies and profit from them, you have to know how to buy or sell them on the exchange, what factors to look out for and how to manage your coins. We will go over the basics of crypto-trading step-by-step.
Your first step is buying the base currency - Bitcoin, Ethereum, or Litecoin. The base currency is defined as the common currency, against which all cryptocurrencies are quoted. There are almost 1,300 cryptocurrencies, and most of them can only be bought using these three cryptocurrencies. They all have their pros and cons. Most traders currently choose ETH and LTC, as the confirmation time is much shorter, and they are cheaper to transfer.
Remember that it’s strongly advised to store your coins in a private wallet to ensure the security of your funds.
Your second step is crypto-trading, and it can be done only via a crypto exchange and only if you have one of the base currencies. During this step you will exchange (trade) your base currency (BTC, ETH, LTC) for an altcoin.
To go further, you will need to learn about cryptocurrency trading pairs.
During the first step of the basic trading process, you will be able to see what your coins are worth in your domestic currency. For example, if you bought 0.5 BTC for USD $10,000 with the currency rate of 1 BTC = USD $20,000, and then the price of a Bitcoin went up 50% to USD $30,000, then your BTC has also increased by 50%, with the value of your 0.5 BTC now equal to USD $15,000. Therefore if you were willing to sell all your BTC when the rate is up you would make USD $5,000 profit.
At the second stage, however, it won’t be so straightforward, because you can’t buy altcoins using FIAT currency, therefore we cannot talk about a direct value in your domestic currency here. For example, you’ve got your BTC ready and want to buy Fantasycoin (FTS). To do that you would go to a crypto exchange platform, choose ticker Fantasycoin (FTS)/Bitcoin (BTC), or FTS/BTC, and confirm the deal. But because the price is set in BTC, you have to know both the currency rate of FTS/BTC and BTC/USD to calculate the price for the altcoin. It means that you can’t make any trading decisions based only on one of them, you need to know and follow both to make profit.