A lot of people who make up the booming cryptocurrency investment market are new to it. This past April in fact, TechCrunch reported that Robinhood alone had seen a 9.5-million customer boom in crypto trading in just the first quarter of the year. That speaks to a remarkable influx of new traders, and is one reason why crypto prices skyrocketed for portions of the summer.
It’s an exciting time in the crypto markets, and experienced traders have learned how to manage the volatility and high volume of trades that accompany emerging assets. For many of those who are new to crypto markets though — and often new to investing in general — things are a lot trickier to manage. It is best in most cases for such people to find ways to practice before testing the real market, which is why we want to devote a few words to how and why to do so.
How to Practice
The most straightforward way to practice cryptocurrency trading, or any kind of investment for that matter, is simply to devise your own system to list mock trades and track price movements. This can quite literally be done on a notepad in the most “bare-bones” sense. However, some do practice market trading by constructing spreadsheets that amount to more complex market simulations. How thorough such simulations are can vary, but the bottom line is that you can record would-be trades, update prices, and gain an understanding of how you might perform and why.
If you’re looking for something a little more concrete, there are programs that simulate market conditions for you. And while these have mostly been designed for stock and forex traders, an FXCM write-up on MetaTrader 4 makes clear that crypto charts are now included. What we’re talking about here is a program that acts as a full imitation of the market of your choice, allowing you to make trades with fake money. It’s the most accurate way to experience crypto trading without diving into the real thing.
Why to Practice
Some might be inclined to skip practice and simply start investing in small volumes. Among various trading platforms included in our piece ‘What Are the Most Popular Websites ‘n Crypto?’ after all, most specifically advertise that they accept low minimum investments. This does allow people to ease into crypto affordably. However, it also tends to involve fees. They’re not typically that large, but they can add up when you’re buying and selling cryptocurrency merely to feel out the market. The fees will be there eventually either way, of course, but if you practice outside of a real trading platform you won’t be spending money to do so.
Another reason to practice without any actual financial stakes is to get used to the extreme volatility of cryptocurrency. This volatility can wax and wane, but as CNBC expressed regarding bitcoin specifically, it is ultimately a result of the design of cryptocurrency. That is to say, volatility is likely to be part of the equation permanently. It’s a little unlike any other financial market, and something newcomers should seek experience managing before they’re invested.
As a final point, practice is also invaluable because it allows people to experience a market that is often framed somewhat sensationally. Cryptocurrency generates all sorts of dramatic headlines, not to mention extraordinary predictions by self-proclaimed experts. It can take some time for a newcomer to see cryptocurrency as an actual financial market, as opposed to merely an exciting new environment with lucrative potential. A little bit of practice can help a new trader to gain this more grounded perspective before getting started.