The world of cryptocurrency is a daunting one. With so many different currencies to consider, and all the complicated elements that make up the practice, it can often be difficult to know just where to start. Like anything in life though, it can be broken down and made more manageable with some simple steps.
Ultimately, the goal is to make money. However, there’s always an element of risk when trading as well. The suggestions we offer below will help you to navigate the potential and the risk and hopefully enjoy a successful foray into the crypto world.
1 – Estimate Your Disposable Income
The most important thing you can do before the trading cryptocurrency is to figure out just how much you can afford to invest. You are going to spend real money, so having a handle on your finances beforehand ensures you aren’t putting yourself or your dependents at risk. We recommend creating a monthly budget for trading, which allows you to trade safely with money you don’t need to allocate to other aspects of your life. This budget can then increase or decrease as your portfolio grows, such that if all goes well, your trading activity becomes self-sufficient.
2 – Secure Your Accounts
Cryptocurrency is often billed as a more secure way to handle money, and in certain respects, this can be an accurate description. Notably, transactions are anonymous and encrypted. However, you shouldn’t let the common refrain that “cryptos are secure” lull you into carelessness. It’s still your responsibility to secure your accounts, primarily by taking advantage of safeguards like two-factor authentication and by establishing the safest possible passwords for any crypto wallets you may use. At the very least, you should use a reliable password protector to store information for a software wallet –– though Vox recommends keeping passwords on paper for optimal security. Similarly, you also have the option of storing any crypto you invest in on a “hardware wallet,” for all intents and purposes is a disc drive that stores your crypto and only connects to the internet when you hook it up to a device to make transactions.
3 – Consider Other Investment Options
Trading cryptocurrency isn’t for everyone. Before really getting into setting everything up, it is also wise to consider other investment options as well. The goal is to make money, and there might be something out there which you’re better suited to for one reason or another. This is not to say that crypto is the wrong choice –– merely that it’s only one possibility out of many. Assess the crypto market, but look also at some o the ‘6 Wealth Building Alternatives Without Buying Stocks’ we posted about previously as well.
4 – Practice, Practice, Practice
Whether you’re learning to ride a bike, play an instrument, or trade cryptocurrencies, practice is important. And for those who want to learn a market and how to trade, there are ways of practicing without having to spend real money to begin with. Some people eyeing the crypto market actually set up practice trading on their own, keeping track of price swings and hypothetical purchases and sales in spreadsheets. But there are other ways of doing it that more closely approximate the real environment of the crypto market as well. Numerous demo trading sites and apps have emerged in recent years, and FXCM notes that MetaTrader 4 –– a real trading platform for crypto and other assets –– now supports its own demo trading option as well. Options like this allow users to get to grips with trading, without the danger of losing real money during the learning process.
5 – Choose a Safe Storage Space
If and when you start making money from crypto trading, it’s important to also decide on a safe place to keep it. This times into the security discussion before; indeed, a lot of the same services you use to invest will double as digital wallets for storage. Because these exchanges can be hacked, however (CNBC reported a $90 million theft of this kind earlier this year), some do opt for the aforementioned hardware wallet option for safer long-term storage. This option requires only that you pull what crypto you earn in an exchange out and transfer it to your hardware wallet, making it invulnerable to online risks.
Follow these tips, and you’ll be better positioned for a secure and productive start in crypto trading.