Cryptocurrency trading is speculation on price movements and buying/selling crypto assets to gain profit. Most likely, you have heard about this activity. But many people are under the wrong impression that crypto trading is somehow more difficult than with other financial instruments.
We'll give you step-by-step instructions on how you can start using cryptocurrency trading platforms. You will see for yourself that it’s something that even beginners can handle.
Step 1. Choose a Cryptocurrency Trading Platform
There are fundamental features to consider when you're choosing where to trade cryptocurrencies. We recommend looking at the following criteria.
The cryptocurrency space is a relatively new industry, yet there are many exchanges out there. You need to look at reviews from real users. It will help you rule out services engaging in nefarious activities, hacks, and exit scams.
Functionality and Features
Does it support margin trading, advanced order types, and complex charts? Even if you’re a beginner at the moment, you may need advanced functionality in the future. You don’t want to feel constrained by what the exchange has to offer.
Since you will essentially be making a financial transaction, we need to keep your funds safe. Check what kinds of security policies the exchange has in place. Also, look at how they approach account access, key storage, recovery phrase, and insurance.
This is something you will encounter in each trade, so it's in your best interest to find affordable fee structures. Fees are not standard, and one platform may charge more than another. Pay attention not only to exchange fees but also to those for withdrawals.
Practically all cryptocurrency trading sites offer top digital assets, such as Bitcoin, Ethereum (ETH), and Litecoin (LTC). But you also want to look beyond that. See whether they also feature smaller cap coins and tokens that might be of interest to you. Once again, you want to have freedom to explore other opportunities in case you’ll be inclined to do so in the future.
Finally, you want the platform to be user-friendly and intuitive. Even if you end up choosing a complex exchange for experienced traders, the interface shouldn’t feel overpowering or cluttered. The more easily you can navigate these sites, the more efficiently you will be able to trade.
Best Exchanges for Different Needs
There are some exchange features that may or may not be necessary, depending on what you are looking to accomplish. Each trading platform in one way or another is suited to certain kinds of users with a specific set of needs.
- Coinbase and Coinbase Pro: Best overall. The exchange features a solid selection of currencies and packages all their features into a simple user interface.
- Cex.io: Best for beginners. What makes it good for beginners is that all relevant information is always just one click away. Also, the support team offers superb service in the shortest amount of time.
- Binance: Best for altcoins. A strong focus on altcoin trading puts this exchange at an advantage over competitors – over 600 trading pairs.
- Bisq: Best decentralized exchange. This one is an open-source, non-KYC platform, which aligns well with what cryptocurrencies’ concept was originally about.
Step 2. Start Trading Cryptocurrency with a Practice Account
It’s a well-known fact among traders – your first goal isn’t to learn how to make money trading crypto. Before you start investing real money, the smartest decision is to trade with pretend money.
Most crypto trading platforms offer demo accounts where you try trading risk-free. If you’re offered this option, don’t hesitate to take it. It’s a perfect opportunity to learn which function does what, what to expect in real-life situations, and how the market works in general.
Usually, you will need to submit with no other requirements for registration:
- Email address
There are also many cryptocurrency trading sites that actually simulate what it would be like in real life. Below are three examples, but even a quick Google search will reveal a host of similar platforms.
Bitcoin Hero allows you to jump right in. You will have virtual $10,000 and four cryptocurrencies to trade with: Bitcoin, Ethereum, Litecoin, and Dash. Prices are taken from the real world so you’ll be put in authentic conditions. Here, you can practice basic trades and see whether they would make you any money.
Niffler is a game-based simulator where you can practice trading cryptocurrency using leverage, going long, shorting a position, and so on. As you progress in this “game”, you will earn progression badges. To finally receive verified status, you will need to complete a minimum of 30 trades, have an average profit margin of 1.5%, and minimum $25,000 earned.
CoinMarketGame is a more sophisticated tool for delivering an accurate experience. You will be awarded $20,000 to start with and a wide variety of coins to choose from. You might even find less-known altcoins that may turn out to be profitable.
Step 3. Determine the List of Currencies to Trade With
Each trading platform features cryptocurrency selections that are different from each other. But usually, you should at least find some major coins that can make you good profits. Here is a top 10 list that you can use as a general guideline:
- Bitcoin (BTC)
- Ethereum (ETH)
- Litecoin (LTC)
- Ripple (XRP)
- Tether (USDT)
- EOS (EOS)
- Bitcoin Cash (BCH)
- Bitcoin SV (BSV)
- Binance Coin (BNB)
- Monero (XMR)
Step 4. Define a Trading Strategy
During your first steps as a cryptocurrency trader, you should be using simpler strategies. Even if they don’t bring you massive profits, at least they don’t leave you too much room for silly mistakes.
Buying and HODLing
This is the simplest approach you can take. If you’re new to the scene, this one is perfect as it only requires you to perform fundamental analysis and not technical.
Let’s take an example. You know that a certain coin has shown stable results for the last year. It’s unlikely to go frow to massive values since the cryptocurrency bubble burst back in 2018. However, if you invest in a project that you think has practical application, and its native coin might grow along with it, your investment can be appreciated with time.
For traders who want to experience more action and learn how to make money trading crypto in a more involved way, day trading might be a better choice. Here, you can try your hand at Japanese candlestick charting or perhaps apply indicators to charts. This will, of course, require you to have a deeper understanding of the technical elements.
Basically, the premise behind day trading is very simple – enter and exit trades within one day. But in reality, it will be a little trickier. Even subtle fluctuations can cause the difference between profits and losses.
Cryptocurrency arbitrage involves purchasing and selling currency to profit from an imbalance. It also doesn’t require you to know the technical side of trading – rather, you just need a very good understanding of how exchanges work.
This strategy relies on the fact that different exchanges offer cryptocurrencies at slightly different prices. This spread can be anywhere between 5 to 40%. So, you buy coins from a cheaper exchange and then quickly sell them on another exchange for more. Your profit is the difference between these transactions.
Step 5. Learn Constantly and Systematically
The last step in learning how to trade with cryptocurrency is the most labour-intensive – to keep trading and keep learning. You will inevitably have profits as well as losses along the way. But the key is to adjust your strategies, analyze results, and always work on improving your skills.
Keep these tips in mind when you practice:
- Set stop losses and take profits.
- Diversify your portfolio.
- Know why you’re entering each trade.
- Figure out your risk tolerance based on your goals and experience, how much time you have, financial resources and your fear factor.
- Never buy only because the price is low.
Hopefully, this guide gave you a proper introduction to the topic of how to trade with cryptocurrency. Obviously, there is a lot you couldn’t cover here, which is why we specifically focused on conterminous learning.
Remember that crypto trading is a complex skill that you need to devote time and effort to. Also, mentally prepare yourself for mistakes since these markets can be truly unpredictable. As you get a hold of the trading basics, try slowly incorporating advanced strategies or increasing your trading volumes.