
Cryptocurrency is gaining popularity worldwide, and Australia is no exception. With Bitcoin’s value skyrocketing to over AUD60,000 per coin at one point in 2021, it’s no wonder that people are becoming more interested in this digital currency and the trading possibilities that come with it. Crypto trading involves purchasing and selling cryptocurrencies like Bitcoin, Ethereum, and Litecoin. It entails wagering on the price fluctuations of these digital currencies to generate profits.
Australia has seen a surge in crypto trading activities, with several exchanges and brokers offering services to residents. But for beginners, the world of crypto trading can seem daunting. This guide simplifies the process for beginners in Australia by breaking down the steps in crypto trading.
Understanding cryptocurrencies
Before diving into crypto trading, it’s essential to understand what cryptocurrencies are and how they work. Unlike traditional currencies, cryptocurrencies are entirely digital and decentralised, meaning they operate independently of a central authority like a bank or government. Cryptocurrencies are created and secured using blockchain technology, a secure and transparent digital ledger.
Bitcoin was the first cryptocurrency to be introduced in 2009, followed by numerous others, such as Ethereum, Litecoin, and Ripple. Each currency has unique features and uses, so it’s crucial to research and understand their differences before trading.
Cryptocurrencies have gained popularity due to their potential for high returns in a relatively short period. However, they are also highly volatile, meaning their value can fluctuate significantly quickly. This volatility makes them riskier to invest in than traditional assets, so it’s crucial to proceed cautiously.
Choosing a crypto exchange
It’s time to select a cryptocurrency exchange, a platform that empowers users to effortlessly buy, sell, and trade cryptocurrencies. In Australia, some popular exchanges include CoinSpot, Swyftx, and Independent Reserve. When choosing an exchange, consider various factors, including the range of currencies available for trading, the fees and commissions imposed, the security measures implemented, and the level of customer support provided.
Researching and comparing different exchanges is essential to find the one that best suits your needs. Some exchanges may require a more extensive verification process, while others may have lower fees or offer a wider variety of cryptocurrencies.
You can also choose to use a broker instead of an exchange. Brokers typically have a more user-friendly interface and handle the trading process for you, but they may charge higher fees.
Setting up an account
Once you’ve selected an exchange, setting up an account is next. It involves providing personal information and verifying your identity, a requirement by Australian law for all crypto exchanges. Most exchanges will ask for a government-issued ID, proof of address, and sometimes a selfie to complete the verification process.
After your account is set up and verified, you can deposit funds using AUD or other cryptocurrencies to start trading. It’s crucial to understand that crypto exchanges differ from banks, so keeping large sums of money on an exchange is not advisable. Instead, transfer your funds to a secure wallet after trading.
Implementing two-factor authentication (2FA) is crucial to enhance security. With 2FA, an additional verification method, like a code sent to your phone, is required for account login.
Develop a trading strategy
Having a trading strategy is crucial for success in the crypto market. It involves setting clear goals, understanding risk tolerance, and researching market trends.
Some common strategies include day trading, swing trading, and HODLing (holding onto a cryptocurrency long-term). Day trading involves buying and selling cryptocurrencies within a day, while swing trading involves holding onto currencies for a few days or weeks to capture short-term price fluctuations. HODLing, on the other hand, is a long-term investment strategy based on the belief that cryptocurrencies will increase in value over time.
Researching and understanding these strategies before choosing one that aligns with your goals and risk tolerance is essential.
Starting trading
Once you have a strategy in place, it’s time to start trading. It’s recommended to start with small amounts and gradually increase your investments as you gain experience. Familiarise yourself with the exchange’s trading interface and tools, such as technical analysis charts and limit orders, which allow you to set a specific buying or selling price for a cryptocurrency.
It’s also crucial to keep track of your trades and regularly review your strategy. As the crypto market is highly volatile, it’s vital to be prepared for potential losses and have an exit plan if things don’t go as expected.
Stay updated on market news and developments, which can significantly impact cryptocurrency prices. You can use resources such as social media, news sites, and online communities to stay informed.