Retirement sometimes leaves a lot of time on your hands that you can use to pursue a hobby, a business idea, or anything that catches your fancy. Many people use this time to do something productive that can create an extra source of income during retirement.
While most income-generating ideas require you to venture out of your home, you may not want to keep driving into an office. And there’s no need to keep that awful commute if you don’t want to — there are many things you can do in the comfort of your home, like trading crypto.
Yes, you read that right. Crypto trading is not something that only millennials or GenZs pursue. A retiree with some knowledge about crypto can easily trade this type of asset as someone in their teens (even better, in fact). All you need to do is follow some basic steps, and voila! You can be trading crypto in a matter of hours.
Why trade crypto instead of stocks?
Before discussing the steps to start trading crypto, it is natural to ask why one would want to trade cryptos instead of stocks or other securities.
There are many reasons to do so, but let’s start with the obvious: many crypto assets have generated much more returns over the past five and ten years than most other securities you can trade.
By just holding these crypto ‘tokens’ — thousands of people worldwide have made a fortune in the past couple of years. Tokens are units in which a cryptocurrency is transacted, and for convenience, you may want to think of them as coins (I do!)
There are other benefits to trading crypto over stocks, like being able to trade 24 hours a day, seven days a week, while with stocks, you’re limited to a few hours during weekdays. Additionally, the crypto market never takes holidays, so you can get your money in or out whenever you want.
Now that we know the benefits of trading crypto over other assets let’s explore how a retiree can begin their crypto trading journey.
Step One: Start by reading
I cannot emphasize this enough. If you are a retiree who is entirely unaware of the crypto world and how it operates, you must start by reading about it. Multiple websites, most of them free, will help you understand the basics.
The basics begin with knowing that cryptocurrency is a digital or virtual currency that uses cryptography for security. Cryptocurrencies are also decentralized, meaning they are not subject to control from the government or financial institutions.
Bitcoin, the first and best-known cryptocurrency, was created in 2009. Since then, we’ve witnessed the launch of numerous cryptocurrencies, some of which today trade at multiple times their original value.
Step Two: Research what you trade
Cryptocurrencies, or just ‘crypto,’ has become an all-encompassing term for any blockchain-based digital asset or security.
People often interchange the term crypto and coins because coins are the most widely followed cryptocurrencies. However, these days you’ll find multiple cryptocurrencies or tokens that are not used for transactions or as a store of value but to provide some other utility to their users.
Decide on the type of crypto you will trade
Therefore, as a part of your trading journey, you need to decide what type of crypto asset you want to trade and select which specific asset within that class to start with.
Making these choices is key to financial stability and success. For example, you wouldn’t randomly apply for a balance transfer credit card without researching the available options and associated benefits first, would you? The same applies to choosing an investment vehicle like crypto.
Where do you find your research?
If you start trading popular cryptocurrencies, you can research which one to choose by visiting free-to-use websites like coinmarketcap.com. This website’s homepage shows you multiple cryptos ranked by their market cap (i.e., the total dollar value of all the tokens of that particular crypto in circulation). In addition, Coinmarketcap.com also shows you the volume or the total dollar amount of transactions in that cryptocurrency over the last 24 hours.
Information like this can help a new trader gauge which cryptocurrency to trade based on its liquidity and the number of its tokens in circulation.
If you are starting your crypto trading journey, my advice is to first stick with the most liquid cryptocurrencies like Bitcoin. Then, you can venture into more exotic coins once you have more experience.
An important concept related to crypto trading is stablecoins. A stablecoin is any coin or token whose value is meant to remain stable over time.
The most common stablecoins are Tether (USDT) and USD Coin, whose values are pegged on a 1:1 ratio to the US dollar. So, you can buy one Tether or USD Coin for $1 and exchange your Tether or USD Coin anytime for $1 in fiat currency.
To make things easier, you can think of these stablecoins as digital coins always worth $1, €1, £1, or whatever value the underlying asset it’s pegged to is worth.
Understanding what stablecoins are is essential because many crypto exchange platforms allow you to trade cryptocurrencies by pegging them to a stablecoin, mostly USDT or USD Coin.
Step Three: Start with paper trading
Before putting your money at risk, starting with a paper trading account is always advisable. Paper trading is nothing more than trading with fake money. It’s the crypto-trading equivalent of playing Monopoly in real estate. When you “trade on paper,” you basically perform imaginary trades and track their performance to see how profitable those trades were, all of it without risking your money.
You can visit a website like TradingView, which offers a free charting tool with multiple indicators for beginners. On such websites, you can plot charts of various cryptocurrencies and cryptocurrency pairs you wish to trade. You can also develop your own trading strategies and more.
Step Four: Learn Technical Analysis
If you are going to trade crypto, it is critical to brush up on your technical analysis skills or learn it from scratch if you don’t know anything about it.
Unlike other assets like stocks, where you can make trading decisions based on fundamental metrics like earnings and cash flows, in the crypto world, technical analysis is the only type of analysis that can take you far in your trading journey.
How to begin in Technical Analysis
If you are a novice in technical analysis, start with the easier things like plotting trendlines on a chart or drawing support and resistance lines.
Once you master that, you can move to the next step, i.e., using indicators. My advice is to start with simple indicators like moving averages first. A simple moving average is the arithmetic mean of a given set of prices (often closing prices) over a specific number of periods.
So, a 50-day simple moving average based on closing price tells you the arithmetic mean of an asset’s past 50-day closing prices. You can use this simple moving average to gauge whether a cryptocurrency is in an ‘uptrend’ if it’s trading above the moving average or in a ‘downtrend’ if it is trading below the simple moving average.
Once you learn how to use the different tools and indicators that websites like TradingView provide for free, you are ready for the next step.
Step Five: Find a reliable broker
Many brokerage platforms allow you to trade crypto. However, not all of them are safe or reliable. You must find a crypto broker registered in the US or regulated in countries or jurisdictions known for strict financial regulations.
Ideally, you should opt for a broker like Robinhood, Binance, or Coinbase, which are well known and has proper security protocols to ensure that a client’s account or wallet is not hacked.
Enter the digital wallet
You need a digital wallet to store and transfer your crypto when transacting in crypto. This wallet will contain your crypto holdings, and only you will have the ‘keys,’ i.e., the password for that wallet.
You can store your key virtually on the cloud or keep it in a drive that is not connected to the internet if you want to secure your wallet completely.
Finding your broker
Once you have selected a broker and opened your trading account, get acquainted with the platform. Look at all the features, especially the ones that allow you to add and withdraw money from your account.
If your broker allows you to trade crypto using stablecoins, exchange the money you have added to your trading account for the stablecoins you prefer.
Also, don’t forget to look at your broker’s free charting tools and indicators. If they offer a demo or paper trading account, use it extensively until you completely master all its tools and menus. Once you’ve done that, you should be ready to trade crypto on your own.
Tips on how to trade crypto safely
Until now, we’ve discussed what you need to know as a retiree to start trading crypto. Next, discuss things you should avoid in the crypto trading business.
Tip #1: Avoid Leverage
Most cryptocurrencies are much more volatile than conventional assets like stocks or bonds. So if you add leverage on top of that, you’re setting yourself up for failure.
Many crypto trading platforms have futures and options on cryptocurrencies, allowing an individual trader to take leverage easily. However, I advise you not to touch these products even with a barge pole.
Margin funding — just don’t
Some brokers also provide you margin funding to trade the cryptocurrencies at spot prices, i.e., the price quoted for that cryptocurrency in real-time. This margin funding is the leverage you are taking on to buy more cryptocurrency than you can afford.
Remember, most crypto brokers have a strict policy towards lending money or margin funding. Therefore, as soon as the value of your collateral, i.e., the crypto assets you will pledge with your brokers to get additional funding, goes below a pre-disclosed level, your crypto broker will sell your assets.
Most of the time, they will do this even without informing you. So, ensure that you never use leverage when trading crypto.
Tip #2: Avoid things you don’t understand.
The crypto landscape changes fast, and every other day there is a new coin offering, a non-fungible token launch, or a new yield farming scheme that offers fixed returns that you can’t get anywhere else.
My advice, if you are entirely new to the crypto world, is to avoid anything you don’t understand or are having doubts about. Unfortunately, like any new and upcoming industry, the crypto industry has also attracted a lot of bad actors whose only goal is to swindle your money.
If you are going to trade a cryptocurrency, make sure it is widely known and traded. Avoid trading coins that have just launched or don’t have a reliable team or institution backing them. More importantly, avoid trading tips that you get on random Internet threads or Reddit posts.
The Bottom Line
Cryptocurrencies and crypto trading have become extremely popular in the last few years. The younger generations have lapped it up, while most retirees either don’t understand crypto or don’t trust the ecosystem.
However, with so many crypto exchanges and brokers available, some of them registered and regulated in the US, many retirees are now beginning to trust crypto trading to generate extra income during retirement.
Trading crypto is just like trading any other asset. You need to be sharp, willing to learn, and avoid things you don’t understand.
Once you have found a suitable broker and learned at least some technical analysis, you can trade crypto like any millennial or Gen Z kid.