Crypto trading for beginners

Is it really worth it?

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DEFINITION

Crypto trading

Crypto trading means speculating on the price movements of digital currencies known as cryptocurrencies. You’ve almost certainly heard of the most famous cryptocurrency of all: Bitcoin. Though this was virtually worthless when it launched in 2009, it’s received a lot of attention over the last few years due to phenomenal price leaps as well as significant falls in value.

So, why are people interested in trading crypto?

Well, when they see how much bitcoin has risen in price over the last decade, it’s hard not to buy into the hype. Plus the fact it’s digital and seen as a revolutionary product fighting against central banks can make it seem more exciting than traditional assets.

However, crypto trading isn’t as sparkly as it may appear. There are a lot of downsides that can prove costly even to experienced traders, let alone beginners. That’s why Trade Nation is proud not to offer crypto trading to its community, and we’re going to explain why we came to this decision.

Is crypto trading right for you?

Back in 2014, US tycoon Warren Buffett famously told his shareholders he only invested in "simple businesses" because "if there's lots of technology, we won't understand it." This is a sound rule to follow whatever you want to trade: make sure you get how it works.

Cryptocurrency by its very nature is incredibly complicated. For one, you’ll need to get to grips with the minefield that is blockchain technology to even begin to process the intricacies of this asset. If not, you could miss a vital piece of blockchain news that turns the market on its head — a terrible position to be in.

Forget FOMO - crypto is very complicated

If you’re a beginner trader, there’s probably nothing harder to get your head around than crypto. Yet in spite of this, the FOMO is incredibly hard to shake. Lots of people hear about the latest crypto craze turning ordinary people into millionaires and even if they know nothing about it, they’re terrified of passing on a chance to make this their story too. It really isn’t that simple and getting involved is far more risky than you probably realise.

Not to mention that as a beginner, you’ll be spending time learning how to trade, so why set yourself up for failure by getting into trading with one of the most complex and volatile markets there is? We instead offer a range of markets that can be just as exciting, but far more accessible.

Three risks of crypto trading

  • Extreme volatility - Crypto is notoriously volatile. This often attracts people as there’s a chance to profit very quickly, but remember the market won’t always go your way. If the value instantly drops by hundreds or thousands of dollars, you could be seriously out of pocket.

  • Crypto cyber crime - There are countless horror stories about unsuspecting traders falling victim to crypto cybercrime. Unfortunately, cryptocurrencies are particularly prone to scams as they are so difficult to regulate.

  • Forks and discontinuation - Crypto trading carries additional risks such as hard forks (a radical change in the blockchain network) which cause real uncertainty and even more market volatility. It’s also worth noting cryptocurrencies can be discontinued at short notice.

HOW CRYPTO TRADING WORKS

Crypto trading using leveraged products is BANNED by the FCA

Crypto trading can be done through an exchange, which means buying and selling coins you own. It is also possible to trade crypto without directly owning any cryptocurrency through leveraged products such as spread trading and CFDs. This means you’re only required to put up a small deposit (called the margin) to open a position. However, profits and losses will be magnified in comparison as these are calculated based on the full trade value.

However, the UK’s Financial Conduct Authority (FCA) has BANNED leveraged crypto products. As it’s impossible for cryptos to be reliably valued, they believe consumers might suffer harm from sudden and unexpected losses if they invest in these products. Therefore, if a platform offers leveraged crypto trading services in the UK, it certainly won’t be a reliably regulated one and should be avoided at all cost.

SPECULATION OVER APPLICATION

What is crypto worth in practice? Nothing!

Perhaps the biggest red flag when it comes to crypto is the fact it currently exists purely to be bought and sold: most cryptocurrencies have no practical application. With other assets like stocks, forex and commodities, their value is calculated by looking at external factors like profits and risks. This isn’t the case with cryptocurrency.

  • When you trade crypto, you are purely speculating on something that offers nothing in material terms. The hype means some people do profit quickly, but given that this is essentially just gambling on coins that have no function, it’s no surprise it’s so risky.

WHEN A LITTLE KNOWLEDGE CAN BE A DANGEROUS THING

The perils of trading a young technology

Young technology is exciting but comes with its perils. Crypto is very much still in its infancy, which means there’s a lot people don’t yet know about it, making it easy for them to be exploited. Beginner traders are particularly vulnerable to such scams, but even knowledgeable, experienced traders can be duped and end up losing a lot of money. So, if you haven’t put in the groundwork and are considering copy trading a crypto trader, don’t think that means your money is safe.

Check out this scary story reported by CNET about a successful trader named 'Adam' who was intrigued by the latest cryptocurrency craze making a storm in the markets. He put $2,500 into a cryptocurrency called DeTrade, which he had researched and concluded it seemed safe and genuine. Imagine his shock when he learned DeTrade wasn’t a real crypto! All the videos he’d watched on it were fake, including one of a CEO that turned out to be a deepfake created with AI. Although Adam lost his $2,500, he was one of the luckier ones. In total the scammers pocketed around $2 million.

NO SHORTCUT TO SUCCESS

Crypto trading vs forex trading

Crypto has its fans, most notably Elon Musk and a mob of passionate Redditors. But don’t be sucked in. Sure, there are people championing it but there are an awful lot of sceptics too. Many governments have taken a stand against cryptocurrency, such as China which has launched a series of regulatory measures to crack down on crypto activities. Meanwhile, Google, Facebook and Twitter have largely banned crypto ads from appearing on their platforms.

There’s no shortcut to success and you could experience some huge losses by trading something so complicated. However, if you do have an interest in currency movements, we think forex is a much better place to start.

This is a fast paced market that can also be pretty volatile, so it’s important to remember that both profits and losses can accumulate very quickly. That’s why you should ONLY trade money you can afford to lose. We strive to help you control the risk by allowing you to place orders to limit your potential losses, and have a dedicated customer support team here to help you 24 hours a day Monday to Friday. Trade Nation is also pleased to offer low fixed spreads that ensure your trading costs won’t suddenly change if the market becomes volatile.

Let’s get real - trading is challenging no matter what market you’re following

However forex is certainly easier to get your head around than crypto, and we have lots of helpful educational resources to help you build your knowledge before you make your first trade!

A platform that helps traders - try trading with us

We aspire to be the most honest and transparent trading company there is, so in light of all the pitfalls we’ve explained, we just don’t think it’s in our customers’ best interests to offer crypto trading.

However, we offer plenty of other markets and provide a straightforward platform, low fixed spreads, excellent customer service, and a range of useful educational resources. If you want to start trading, we’re here to guide you every step of the way.

Join our nation of traders

Financial spread trading comes with a high risk of losing money rapidly due to leverage. You should consider whether you understand how spread trading works and whether you can afford to take the high risk of losing your money.