[OT] Trading Bitcoin & Co. - Beginner's Tutorial # 1

 

Hey you! 

In the beginning of the 2018, you may have read more often about the hights the price of Bitcoin has reached. Maybe - hopefully! - you also read how low the price has fallen in the last few weeks and months. Presumably you also heard about all these great stories. Thus about people who supposedly have become incredibly rich within a few hours / days / weeks. Yesterday depending on social welfare, today able to afford an expensive sports car and a villa. 

You want to have that for yourself, too?

Sorry, but I'm not a fairytale uncle, not a financial advisor and certainly not a trading guru. 

My help for you 

Theoretically, you have the opportunity to trade more than 1600 cryptocurrencies on over 200 file sharing exchanges. In fact, not all currencies are traded on all exchanges and not all exchanges are available to inhabitants of all countries. That makes our topic a little clearer? Not realy. Besides the possibility to trade cryptocurrencies, there is the possibility to trade prices in the form of CFD's. Another possibility is that you buy yourself into ICO's (similar to an initial public offering of a start-up). You are feeling confused now because of the supposed complexity and the vast amount of information? Do not worry, that only shows that you are healthy and why we both meet here. Let us walk through it step by step.

Where do you start now? CFD or not?

That depends very much on what you want. What I can and must advise against, is you to open an account somewhere in order to just buy something that does sound good and using your credit card or loan money for it. First answer the question how long you want to keep your position (s).

Why is that important? As far as I know, CFDs or financial instruments are treated differently for tax purposes (capital gain) than trading in the currency itself (private sale -> income tax or completely tax-free). At least in some countries that is the case. Check with your tax advisor or tax office before you decide, in order for you to be legally safe. Besides that you might be able to keep more of your gains to yourself. 

Of course you can use both methods in parallel. That makes sense, as it allows you to skim off short-term profits and maintain long-term investments. For starters, I would advise you to start with just one thing. That you have a positive feeling for and in your decisions is, in my experience, the most important point when trading cryptocurrencies. Especially since one thing is certain: Prices do not rise all the time. Drops in price do happen and they can happen in a devastating scale. If your position loses 80% in value, your purchase decision is under scrutiny. A carefully made purchase decision is your first and best protection against panic or a panic sale.

Trading platforms

So you've decided to trade in financial instruments or cryptocurrency.

The first step is now that you inform yourself on the Internet which trading platforms offer the product you want. You should not only pay attention to, whether the currencies you are interested in, are traded.

If you decided to trade financial products, please pay attention to the following:

1. the platform offers its services specifically to residents of the country where your residence is registered. There are always users who do not pay attention to it and therefore lose their money
2. the platform is registered and accredited by a financial regulator responsible for your place of residence. Platforms without this registration / approval can be closed at any time by authorities. This means that your money is likely lost.
3. inform yourself in advance what conditions must be met for the platform to transfer your money from your trading account to your bank account
4. Pay attention to fees, leveraged products and margin requirements. For example, fees may be incurred when an item is opened, closed, or held overnight. For leveraged products, the value of your position is increased by a certain factor. Most platforms explain that this can make more profit. !WARNING! What they do not explain is that losses are multiplied, too. If they do not close the position automatically, you can lose a lot of money in the position and also through additional obligations!
5. read reviews on the platforms or providers. Please keep in mind that people who are having bad experiences are more inclined to give feedback. Please also pay attention to whether the bad experience could not be self-inflicted.

If you want to trade cryptocurrencies directly, please pay attention to the following:

1. the platform offers its services specifically to residents of the country where your residence is registered. Most recently, exchanges have ceased service to residents of specific countries as a result of newly implemented reglations or changes in legal frameworks
2. Pay attention to fees and requirements for transactions
3. The purchase of Bitcoin and Ethereum often takes place on separate exchanges, please pay attention to the same features as the exchanges for trading in financial products
4. read reviews on the platforms or providers. Please keep in mind that people who are having bad experiences are more inclined to give feedback. Please also pay attention to whether the bad experience could not be self-inflicted.

If you have decided on a platform, please do yourself a favor. Test them with the smallest possible amount of money.

 
I will be happy to answer your questions and suggestions in the next parts of this tutorial.  

Until then 

Your JP 

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