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CRYPTOCURRENCY TRADINGOur definitive guide to cryptocurrency tradingIndependent British blockchain and crypto news PREVIOUSWHAT ISCRYPTOCURRENCYTRADINGEXCHANGES ANDWALLETS: WHAT YOUNEED TO KNOWTHE BENEFITS OFPEER-TO-PEERTRADINGTHREE REASONSYOU NEED TO AVOIDTRADING BOTSCONCLUSIONNEXT
CONTENTSWHAT IS CRYPTOCURRENCY TRADING?What do you need to begin with?What you need to know about cryptocurrency tradingWhat are pairings?How to choose the right trading platformHow does trading with an exchange work?333444EXCHANGES AND WALLETS: WHAT YOU NEED TO KNOWHow an exchange worksTypes of exchangesWhat is a cryptocurrency wallet?Features, characteristics and types of cryptocurrency walletsHardware cryptocurrency wallets555667THE BENEFITS OF PEER-TO-PEER TRADING8THREE REASONS YOU NEED TO AVOID TRADING BOTSCryptocurrency trading bots arenot for beginnersBacktesting – You need to finelytune the rulesGood cryptocurrency tradingbots don’t come cheap9CONCLUSION 2 PREVIOUSWHAT ISCRYPTOCURRENCYTRADINGEXCHANGES ANDWALLETS: WHAT YOUNEED TO KNOWTHE BENEFITS OFPEER-TO-PEERTRADING99910Independent British blockchain and crypto newsTHREE REASONSYOU NEED TO AVOIDTRADING BOTSCONCLUSIONNEXT
WHAT IS CRYPTOCURRENCY TRADING?Interested in the world of cryptocurrency and want to begin trading? If you are unsure of what cryptocurrency trading isand how it works, then this guide is for you. Let’s break down the basics to help get you started.As a note to begin with, trading inany capacity, much more so withcryptocurrency, comes with a great dealof risk. Investments can be volatile at thebest of times. Before making any move,ensure you have done your own researchand are happy with the decisions you aregoing to make, and only invest åas muchas you can afford to lose.What you need to know aboutcryptocurrency trading What do you need to begin with?Before you can start trading, you will firstneed to make sure you have the following: A cryptocurrency wallet (youcan choose from paper, mobile,software, or hardware wallets)Access to an exchange that allowsyou to buy, sell, or trade crypto A cryptocurrency exchangeis not part of a regularstock exchange. Two popularcryptocurrency exchanges areCoinbase and Coinbase Pro,formerly GDAX, both of whichfunction differently to Wall Streetexchanges. Coinbase is designed forbeginner to intermediate traders,whereas Coinbase Pro is aimedtowards people who have a greaterunderstanding of crypto trading.Binance is another leading exchangethat is popular with many traders. Cryptocurrency trading is a24-hour market. This is differentto traditional stock markets which donot trade within a 24-hour window.Beginners may prefer to tradecryptocurrency stocks. One ofthe biggest Bitcoin (BTC) stocks isGBTC, which is a trust. Tradingwith stocks means users do not haveto trade crypto directly, thoughthis comes at a cost. Stock tradingworks through premiums. It is anavenue for beginners to help themget acquainted with trading.The market is incrediblyvolatile. The impact of volatilitycannot be understated. Markets arenot concrete. Much trading is donethrough speculation. Therefore, any“tips” you might see from traderscarry substantial risk. Eventually,you may feel comfortable makingyour own speculations after spendinga lot of time with the markets,but to begin with, do not go on aspree of trading anything you can.Make smart trades, and only onesyou will feel comfortable with evenin the event you lose money. 3 PREVIOUSWHAT ISCRYPTOCURRENCYTRADINGEXCHANGES ANDWALLETS: WHAT YOUNEED TO KNOWTHE BENEFITS OFPEER-TO-PEERTRADINGIndependent British blockchain and crypto newsTHREE REASONSYOU NEED TO AVOIDTRADING BOTSCONCLUSIONNEXT
What are pairings?When delving into the world ofcryptocurrency trading, you will typicallystart by buying your first crypto withfiat currency. Fiat refers to a nationalcurrency such as the pound or the dollar.So, an example might be that you wish totrade your USD with Bitcoin (BTC).However, once you have tested thewaters, you might want to begin tradingbetween two cryptocurrencies, such asBitcoin and Ripple. In this case, theywould be abbreviated as BTC (for Bitcoin)and XRP (for Ripple) on an exchange.For a newcomer, this can be slightlyoverwhelming as exchanges tend to listpairings in their abbreviated formsHow to choose the right trading platformChoosing the correct platform is veryimportant. There are differences acrosscompeting exchanges, and as such, it isuseful to do some research to decide whichis best for your needs. Below is a brief listof some of the key things to look out for: Available currencies: As mentionedabove, Bitcoin to USD is common,but other trade pairings might beavailable on one platform and notanother. Be sure that the crypto youwant to trade with is supported.Leverage: This refers to the amountyou are allowed to trade above your initial deposit and by how much youcan multiply your gains. A higherleverage will suit risk takers wholook for the high reward. A highleverage is not recommended forbeginners, however. A commonleverage is typically 20:1 with crypto.Again, though, this is dependenton your chosen platform.Hedging: Hedging is a risk reductiontactic that typically involves taking anoffsetting position on your primaryasset. This provides insurance andreduces the possibility for loss.Minimum investment: Thisrefers to the minimum amountyou can deposit and invest with.This is important as differentplatforms will require differentminimum investments. Chooseone that suits your budget.How does trading with an exchange work?Users either transfer their existingcrypto to their account on an exchangeor use the exchange to buy cryptowith fiat currency (note that not allexchanges provide the option to buycryptocurrency with fiat currency) The exchange then holds onto the cryptocurrency The exchange finds a seller orbuyer to match your trade 4 PREVIOUSWHAT ISCRYPTOCURRENCYTRADINGEXCHANGES ANDWALLETS: WHAT YOUNEED TO KNOWTHE BENEFITS OFPEER-TO-PEERTRADINGIndependent British blockchain and crypto newsTHREE REASONSYOU NEED TO AVOIDTRADING BOTSCONCLUSIONNEXT
EXCHANGES AND WALLETS: WHAT YOU NEED TO KNOWTo get started with cryptocurrency, you need to decide on what sort of exchange and wallet you want to use.Below, we give you an overview of both so you can be best prepared for the world of trading.A cryptocurrency exchange, ordigital currency exchange (DCE), is anonline platform that allows you to buyand trade cryptocurrency or digitalcurrency, then sell it to convert it back tofiat money. These exchanges will eithertake a commission or simply charge usagefees for their service.How an exchange worksCryptocurrency exchanges don’t work inexactly the same way as stock exchangesand foreign currency exchanges.However, having a grasp of generalexchange fundamentals and procedureswill allow you to more easily navigatecryptocurrency exchanges.If you’re familiar with placing buy andsell orders through stock brokers, you cansafely assume cryptocurrency exchangesfunction in a similar, third-party mannerto these brokers. Brokers take yourdesired cryptocurrency price andorder quantity, wait for an order to becompleted, and then typically collect apercent commission (plus an upfront fee)on your order.Similarly, a cryptocurrency exchangeis usually programmed to accept yourdigital buy and sell orders (along withprice and quantity), waits in a similarmanner for your order to be triggered(met by a buyer or seller on the otherend), completes the trade, and thenupdates your on-exchange holdings, allwithout human brokers.Another of the unique aspects ofcryptocurrency exchanges is the abilityto exchange one cryptocurrencydirectly with another. This is somethingyou can’t do with stocks, where you’dneed to liquidate shares to fiat moneybefore using those funds to buy newstock shares. Be aware though thatyou won’t necessarily be able to tradeone cryptocurrency with all othercryptocurrencies under the sun.Types of exchangesOutside of the heavily usedcryptocurrency exchanges themselves,brokers and more discreet exchangesprovide opportunities to move from onestore of value to another. These can bemore risky to you as an investor, but canalso allow you to dodge the fees involvedwith trading on exchanges. Those feesadd up, but only if you’re a heavy trader.If not, it’s probably in your best interestto stick with the easier-to-use,higher-volume, and more thoroughlydeveloped exchanges.Aside from choosing a reputable,trustworthy exchange, one last factorto consider would be the exchangetype itself. If you’re just getting into 5 PREVIOUSWHAT ISCRYPTOCURRENCYTRADINGEXCHANGES ANDWALLETS: WHAT YOUNEED TO KNOWTHE BENEFITS OFPEER-TO-PEERTRADINGcryptocurrency investing and don’t holdany coins or tokens, you should look fora fiat-to-cryptocurrency exchange thatallows you to purchase BTC or ETH bylinking your bank account or some otherpayment method.Your initial BTC or ETH can thenbe traded into other altcoins on acryptocurrency-to-cryptocurrencyexchange. From there, your portfoliowill probably have such a wide range ofcryptocurrencies that you’ll never lookat investing the same way again. Havefun and embrace the exchanges!Independent British blockchain and crypto newsTHREE REASONSYOU NEED TO AVOIDTRADING BOTSCONCLUSIONNEXT
What is a cryptocurrency wallet?A cryptocurrency wallet is a digitalwallet for holding digital currency.Cryptocurrency wallets rely oncryptography for security.Public and private keysPublic key cryptography (also referredto as asymmetrical cryptography), is anycryptographic system that uses pairs of“keys”. A key is a piece of informationthat unlocks or decodes a cryptographicalgorithm).There are two types of keys – publickeys which may be spread widely andknown to many people and privatekeys which are only known to the keyowner. The use of public and privatekeys accomplishes two functions– authentication and encryption.Authentication is where the public keyverifies that the message was sent bythe holder of the paired private key.Encryption is where the paired privatekey holder (and them alone) can decrypta message encrypted with the public key.Public and private keys in acryptocurrency walletNow we completely understand publicand private keys, let’s think about howthis works in a cryptocurrency wallet.Obviously, there is no cryptocurrencyactually stored in the electronic wallet.In the case of Bitcoin (andcryptocurrencies derived from it), thecryptocurrency is stored and maintainedin a publicly available ledger. Every pieceof cryptocurrency has a private key. Withthe private key, it is possible to write inthe public ledger, effectively spending theassociated cryptocurrency.Your wallet stores your private andpublic keys. This facilitates the sendingand receiving of coins. It also acts as apersonal ledger of transactions. Features, characteristics and types ofcryptocurrency walletsWallets come in different formats witha range of features and benefits. Hereare most of the main types with briefexplanations.Some web-based wallets useadditional security – you may havecome across two step verificationlike Google authenticator. Themain benefit of this additionalauthentication eliminates the risk ofa hacker using keystroke logging totry and gain access to the wallet.A cryptocurrency exchange (forexample the Kraken exchange) linksthe user’s wallet to the exchange’scentrally managed wallet. Any tradesare written in the exchanges ledgeras an off-chain transaction. Whena user enters their cryptocurrencyinto the exchange or takes it out ofthe exchange then the transactionis written into the blockchain.Multi-currency cryptocurrency walletA wallet that supports different types ofcryptocurrencies that can be “stored” atthe same time.Software cryptocurrency walletThis is the main type of wallet as youmight expect with a digital currency. It’sworth briefly considering the differenttypes of software wallets. They come indifferent forms like: An application installed locallyon a computer or device(smartphone or tablet) 6 PREVIOUSWHAT ISCRYPTOCURRENCYTRADINGEXCHANGES ANDWALLETS: WHAT YOUNEED TO KNOWTHE BENEFITS OFPEER-TO-PEERTRADINGIndependent British blockchain and crypto newsTHREE REASONSYOU NEED TO AVOIDTRADING BOTSCONCLUSIONNEXT
Hardware cryptocurrency walletsIt’s interesting that a hardware walletexists when you consider cryptocurrenciesand the whole concept of a decentraliseddigital currency. A hardware wallet is asmall digital device that can be pluggedinto a computer to be used to authenticatecryptocurrency transactions. The rationaleis to provide added security. Some types ofwallets require the user to physically pressor touch the wallet in order to signa transaction.When the user of a wallet requests apayment, the wallet creates the transactionand provides a public key which is sentto the network. In effect, the signing keysnever leave the wallet.Watch-only cryptocurrency walletWith a watch-only wallet someone cankeep track of transactions but transactionscan’t be initiated since there is no privatekey stored in the wallet. The private keycan be kept safe in another location.Multi-signature (multi-sig)cryptocurrency walletA wallet where multiple users have to signa transaction using their private key.Deep cold storage cryptocurrency walletStoring cryptocurrencies in cold walletsthat were never connected to the internetor any kind of network.Brain cryptocurrency walletA brain wallet requires the owner toremember the information required toregenerate the private and public keypair. This is often facilitated by the usermemorising a mnemonic sentence the seed(or basis) of which is generatedby software.Deterministic cryptocurrency walletA single key (or “seed”) can be used togenerate an entire “tree” of key pairs.The single key serves as the “root” of thetree. The advantage of this system is ifa hard drive becomes corrupted and thewallet unrecoverable, a new wallet can becreated using the same seed. All of
TRADING 3 Independent British blockchain and crypto news WHAT IS CRYPTOCURRENCY TRADING? Interested in the world of cryptocurrency and want to begin trading? If you are unsure of what cryptocurrency trading is and how it works, then this guide is for you. Let’s break down the basics to help get you started. As a note to begin with, trading in
