- Cryptocurrency exchanges are not a part of a regular stock exchange.
- Trading on cryptocurrency exchanges takes a lot of time and commitment.
- Beginners will generally start by trading cryptocurrency stocks.
- The cryptocurrency market is extremely volatile.
Cryptocurrency trading is when a person or group of people speculate on cryptocurrency price movements through a trading account and this process is completed through the purchasing and selling of underlying coins through a cryptocurrency exchange.
A cryptocurrency exchange is a platform that facilitates the trading of cryptocurrencies for other assets, as this can include both digital and fiat currencies.
Cryptocurrencies are a form of payment that has the ability to be exchanged online for goods or services. Many companies have their own cryptocurrencies and these are known as tokens. These can be traded for the good or service that the company provides.
They work through a technology known as the blockchain, which is a decentralized technology that is spread out throughout many computers that have the responsibility of managing and recording transactions, and this is great due to its high level of security.
Fiat money on the other hand is a government-issued currency that is not backed by any physical commodity, think among the lines of gold or silver, and is valuable due to the fact that the government has issued it.
The value of this fiat currency is gathered by the relationship between supply and demand, as well as the stability of the government that has issued it. Many of the modern paper currencies are indeed fiat currencies, and these include the U.S. Dollar and the EURO.
The contract for Difference or CFD trading are derivatives that enable you to speculate on the cryptocurrency price movements without actually taking ownership of the coins themselves. You can buy if you speculate that the currency will rise in value, or sell if you think that it will go lower in value.
Both of these options are leveraged products, and this implies that you need to only put up a small deposit, which is known as a margin, to gain full exposure to the market. Your profit or loss are then calculated in accordance with the full size of your position, and leveraging it will magnify both the profits as well as the losses.
Exchanges allow you to purchase, trade, or sell cryptocurrencies. When you purchase a cryptocurrency through an exchange, you purchase the coins themselves altogether. You will need to create an exchange account and give the full value of the asset in order to open a position, and then you will have to store these cryptocurrency tokens within your own wallet until you are truly prepared to sell them.
These exchanges bring their own learning curve to them, as you genuinely have to get involved with how the technology works and learn how to analyze the data accordingly.
Keep in mind that many of these exchanges typically have limits associated with them on how much you are allowed to deposit, and accounts can be pricey to maintain long-term.
Now let’s talk about Cryptocurrency Markets…