Here at CryptoSignals.org – we regularly promote education and learning alongside our top-rated cryptocurrency trading signals.
After all, the end goal is for you to become a seasoned trader that is able to make consistent gains in a risk-averse manner – rather than rely exclusively on our team of expert analysts.
With this in mind, this guide is going to walk you through the basics of How to Trade Cryptocurrency.
How to Trade Cryptocurrency Now – Quickfire Walkthrough
Strapped for time and want to learn how to trade cryptocurrency right now? If so, follow the simple step-by-step walkthrough outlined below!
- Step 1 – Open a Crypto Trading Account: In order to trade cryptocurrency online, you need a good broker on your side. We like Captial.com, as the platform is heavily regulated and it allows you to trade crypto at 0% commission.
- Step 2 – Make a Deposit: Capital.com allows you to deposit funds with a debit/credit card, e-wallet, or bank account transfer at a minimum of just $20.
- Step 3 – Search for Crypto Pair: You can now search for the crypto pair that you wish to trade. For example, if you want to trade Bitcoin against the US dollar – search for BTC/USD.
- Step 4 – Choose From a Buy or Sell Order: You now need to tell your chosen broker whether you think the crypto pair will rise or fall in value. If you think it will rise, place a buy order. If you think it will fall, place a sell order.
- Step 5 – Confirm Order: Finally, enter the amount you wish to stake on the crypto trade and confirm the order.
71.2% of retail investor accounts lose money when trading CFDs with this provider.
What is Cryptocurrency Trading?
In a nutshell, cryptocurrency trading involves speculating on the future value of a digital currency like Bitcoin or Ripple. In a similar nature to forex, stocks, and commodities – cryptocurrencies will move up and down in price throughout the day. This price movement is dictated by market forces, meaning that when buyers outweigh sellers – the value of the cryptocurrency will rise.
Similarly, when there are more sellers than buyers, the digital asset will decrease in value. Being able to determine whether a cryptocurrency is likely to rise or fall is the secret sauce that one day – you will be able to master. In order to do this, you will need to have an understanding of fundamental and/or technical analysis.
In a time not so long ago, the cryptocurrency trading scene was minuscule. By this, we mean that trading volumes were tiny, as there was little interest from the wider markets. Fast forward to 2021 and the cryptocurrency trading scene is now worth trillions of dollars. It is important to note that when trading cryptocurrencies online, you will need to use a trusted broker.
There are hundreds of such providers to choose from, albeit, we discuss some of the best platforms later on in this guide. Before we get to brokers, we need to dive a little bit deeper into the basics of how to trade cryptocurrency online.
Cryptocurrency Trading Markets and Pairs
When learning how to trade cryptocurrency, you first need to have a firm grasp of how pairs work. If you have previously traded currencies through a forex broker, then you’ll be pleased to know that cryptocurrencies work much the same.
This is because cryptocurrency pairs always contain two competing assets. Furthermore, the exchange rate of the cryptocurrency pair will fluctuate by the second. With that said, cryptocurrency pairs come in two forms.
The first is a fiat-to-crypto pair.
As the name implies, this consists of the exchange rate between a fiat currency like the US dollar and a digital asset such as Ethereum. In this instance, the pair being traded is ETH/USD.
If, for example, the pair was priced at $3,000, this means that the market is prepared to pay $3,000 for every 1 Ethereum token. Therefore, in order to make a profit from this crypto-to-fiat pair, you would need to predict whether the exchange rate will rise or fall from its current price of $3,000. Naturally, a correct prediction will invariably result in a profit.
Here’s how the trade might pan out.
- You are trading the crypto-to-fiat pair ETH/USD which is currently priced at $3,000
- You believe that the exchange rate of the pair will rise.
- You place a buy order with your cryptocurrency broker at a stake of $400.
- A few days have passed and ETH is now priced at $3,500
- This represents a price increase of just over 16%
- On your original stake of $400 – this means you have made a profit of $64
To close the above crypto trade and subsequently lock in your gains – you would need to place a sell order.
The vast bulk of successful cryptocurrency traders will stick with the previously discussed fiat-to-crypto pairs. This is where you will find the most trading activity, which in turn, attracts a large amount of liquidity. With that said, some traders will also dabble with crypto-cross pairs.
The underlying fundamentals work the same, insofar that crypto-cross pairs move up and down in value throughout the day. However, they do not contain a fiat currency. Instead, crypto-cross pairs consist of two competing digital currencies – such as Ripple and Bitcoin. In this example, you would be trading XRP/BTC.
Let’s look at an example of how a crypto-cross pair trade might work in practice.
- You are trading XRP/BTC – which is currently priced at 0.00002543
- This means that for every 1 XRP token – the market is prepared to pay 0.00002543 BTC
- You think that the pair will fall in value, so you place a sell order worth $1,000
- A few hours later, XRP/BTC is priced at 0.00002043
- This translates into a decline of 20%
- On a stake of $1,000 – that’s a profit of $200
Now, as you can see from the example above, the process of trading crypto-cross pairs can be extremely daunting. This is because there the quote currency of the digital pair is cryptocurrency as opposed to a fiat currency.
As such, it’s super challenging to assess whether or not you are making money from a trade. This is why when you learn how to trade crypto for the very first time, you are strongly advised to avoid crypto-cross pairs.
Using Cryptocurrency Trading Orders
Irrespective of what asset class or financial instruments you are trading – you’ll always need to use orders so that your chosen broker knows what position you wish to take. Some brokers will give you access to dozens of different order types, albeit, many of these are aimed at seasoned traders.
If you’re a complete beginner in the world of cryptocurrency trading, we would suggest focusing on a select number of orders while you learn the ropes.
This includes the following:
As the name suggests, entry orders to your broker how you wish to enter the market. First and foremost, you need to choose from a buy or sell order.
- A buy order should be selected if you think the crypto pair will rise in value
- A sell order should be selected if you think the crypto pair will fall in value
If you entered the market with a buy order, closing the position would require a sell order. Naturally, if entering with a sell order then to close the position you’ll need to place a buy order. It goes without saying that buy and sell orders are compulsory when trading cryptocurrency – as this illustrates which positions you wish to take.
Another entry order that needs to be placed is with respect to the price that you want to trade carried out at.
- A market order should be selected if you want the trade executed instantly. You will get the next best available price available.
- A limit order allows you to choose the price that you enter the trade at. The order will only be executed if your specified price is matched by the marketers.
We should note that in most cases, market orders result in slippage – especially when trading cryptocurrencies. This simply means that there will likely be a small disparity between the price your position is executed at with the price you see on screen. For example, you might place a market order on ETH/USD at $3,000 but have the trade executed at say $3,001 or $2,998.
Once your buy or sell order is executed by your chosen broker, your cryptocurrency trade is live. At this point, you are at the mercy of the wider markets. At some point in time, you will need to exit the position by placing an order. You can do this manually, but seasoned traders will always have an exit strategy in place before entering the market.
Even as a beginner, you can easily create an exit plan by placing both a take-profit and stop-loss order.
- A take-profit order allows you to set a profit target. If this profit target is matched by the markets, the broker will close the position automatically.
- A stop-loss order allows you to specify a price point in which a losing trade is closed automatically.
These exit orders are absolutely crucial when learning how to trade cryptocurrency – as they ensure that your positions are executed in a risk-averse manner.
With this in mind, below we offer an example of how you can use a buy/sell, limit, take-profit, and stop-loss order before your trade is executed.
- You are looking to trade BTC/USD – which is currently priced at $39,000
- You think the price of BTC/USD will increase, so you select a buy order
- You want this trade executed when the price of BTC/USD hits $40,000 – so you set up a limit order
- You wish to make a profit of 10% on this trade – so you set up a take-profit order at $44,000 (10% above the entry price of $40,000)
- You do not want to lose more than 5% on this trade – so you set up a stop-loss order at $38,000 (5% below the entry price of $40,000)
Once you confirm the above position, you can allow the crypto trade to play out organically rather than need to keep an eye on the markets. This is because your trade will be closed by the broker automatically. This will happen when either your take-profit or stop-loss order is triggered.
How to Create a Cryptocurrency Trading Strategy?
At this stage of our guide on how to trade cryptocurrency, you should know the difference between a fiat-to-crypto and crypto-cross pair and know how to set up orders.
Next, we need to discuss the importance of how to create a cryptocurrency trading strategy. Although there are many different strategies and systems on the table, the most pertinent consideration to make is whether you see yourself as a long-term investor or a short-term trader. Making this decision early is crucial, as it will dictate how you approach the digital currency marketplace.
In the sections below, we expand on the long-term vs short-term conundrum in more detail.
Long-Term Cryptocurrency Investing
When you invest in a cryptocurrency, you are typically taking a similar approach to stocks and shares. This is because you will purchase a digital currency, add it to your portfolio, and then keep hold of the investment for months or years. This is a great option for first-timers to take, as you don’t need to worry about short-term volatility.
After all, the cryptocurrency markets are highly speculative, so seeing a digital coin increase or decrease by over 20% in a single day is still not overly uncommon. But, by electing to take a long-term approach to cryptocurrencies, this will allow you to ignore this short-term market noise.
Short-Term Investing Cryptocurrency Trading
If you’re looking to embark on a cryptocurrency trading career that will see you actively buy and sell digital currencies on a regular basis – you might be more suited for a short-term strategy. Unlike long-term investing, you will indeed need to have a strong focus on shorter-term volatility and price action.
In terms of profit potential, this will ultimately depend on whether you want to day trade cryptocurrencies or take a more flexible approach via swing trading.
Day Trading Crypto
Day trading involves entering a cryptocurrency position and then closing it on a same-day basis. For example, you might go short on XRP/USD at 10 am and then close the trade at 3 pm. In other cases, you might even enter and exit a trade in a matter of minutes.
Either way, having a trade open for such a short period of time will mean that the amount you can make or lose will be limited – even in the case of digital currencies. On the flip side, cryptocurrency day traders will potentially enter several positions throughout the day – so these small profit margins can quickly add up to attractive gains.
We should note that being able to make these gains worthwhile is dependent on the size of your trading capital and how much you stake on each position. For example, being able to make 1% per day throughout the month would be deemed very successful in the world of crypto day trading. However, if you are staking an average of $100 per trade, that 1% amounts to just $1 per day.
Note: There is a way around this limitation in trading capital in the form of leverage and margin – which we discuss in more detail later on.
Swing Trading Crypto
Swing trading is another short-term strategy that is popular with cryptocurrency investors. Unlike day trading, swing traders do not force themselves to close a position on a same-day basis. On the contrary, they approach the crypto markets in a much more flexible manner. This is because swing traders will look to focus on newly formed trends.
They will seek to enter a position that stays with the trend for as long as it is in place. This might be over the course of a couple of days or as much as a few weeks. Although not set in stone, the general rule of thumb is that swing traders will never keep a position open for more than two months – as these would then fall within the camp of long-term investing.
Trading Crypto With Leverage
We mentioned in the section above that it’s possible to boost the value of your trading capital by applying leverage. This is a tool offered by a number of popular online brokers and it allows you to trade with more than you have in your account. For example, if you stake $150 and apply leverage of 1:10 – your profits and losses will be multiplied by a factor of 10x.
You might decide to apply leverage because you only have a modest amount of money available to trade cryptocurrencies or because you are targeting small profit margins. Either way, the best way to obtain leverage when trading digital currencies is through a CFD broker.
This is because CFDs track the real-world price of an asset, so it’s easy for regulated brokers to offer you leverage. For example, the likes of Capital.com and AvaTrade, offer leverage on all of their supported crypto markets. The amount of leverage you can get will depend on where you live and whether you are a retail or professional client.
Nevertheless, let’s look at an example of how leverage works in the context of cryptocurrency trading:
- You are trading LTC/USD at a regulated CFD broker
- You decide to go short on this pair – so you place a sell order
- You stake $200 and apply leverage of 1:10
- A couple of days have passed and LTC/USD has dropped in value by 15%
- You cash out your gains by placing a buy order
As per the above example, LTC/USD dropped by 15% so your short-selling position would have made just $30 on a stake of $ 200. But, because you applied leverage of 1:10, your $30 profit is boosted to $300. You do need to go easy with leverage though. After all, not only will it boost your profits, but your losses, too.
We should also note that some countries are very strict when it comes to leverage limits on digital assets. For example, countries in the European Union, alongside the UK, Australia, and several others – are limited to leverage of just 1:2. At the other end of the scale, some countries have no limits at all.
Ultimately, the best way to protect yourself from losing too much money when trading with leverage is to ensure you always deploy a stop-loss order.
Cryptocurrency Trading Fees
When you learn how to trade cryptocurrency from the comfort of your home, it’s important to factor in brokerage fees. This is no different from buying stocks or trading forex – as brokers are in the business of making money.
The most important fees that you need to consider when learning how to trade crypto are as follows:
The spread is effectively a mark-up on the buy or sell price that you are offered by the broker. For example, let’s say that you are trading ETH/GBP – and your broker offers a buy and sell price of £2,305 and £2,365, respectively. This amounts to a difference of 2.5%. As such, when your cryptocurrency trade is executed, you will notice that its value is immediately at a 2.5% loss.
This means that you need the value of your position to grow by over 2.5% to make a profit. It goes without saying that a spread of 2.5% is costly – especially if you are planning to day or swing trade. This is why it’s super important to assess what types of spreads your chosen broker charges before you proceed to open an account.
The vast majority of trading platforms will charge you a commission when you enter a position. This is usually charged as a percentage which is then multiplied against your stake.
For example, you will pay 1.49% to trade crypto at Coinbase – which is beyond expensive. At the other end of the scale, the likes of Capital.com and AvaTrade allow you to trade commission-free. Instead, the aforementioned platforms will simply charge you a spread – which we discussed above.
You don’t need to worry about overnight financing if you are looking to take a long-term investment strategy. However, if you are planning to trade cryptocurrencies on a short-term basis alongside leverage, overnight financing is a crucial fee to consider. In effect, when you apply leverage, you are borrowing capital from your chosen CFD broker.
In turn, the broker will need to charge you interest – much like a bank charges borrowers on a loan. The overnight financing fee will be charged as an annual percentage which is then multiplied against the value of your open position. This can and will vary considerably, so be sure to check this before you execute a leveraged position.
Note: In comparison to forex, the leverage fee charged on cryptocurrencies is much higher.
How to Perform Cryptocurrency Analysis
As we have stated many times throughout this guide on how to trade cryptocurrency, digital assets increase and decrease throughout the day. This means that you need to predict which direction the crypto pair in question is likely to take in the future. The only way to come to this conclusion is, of course, to perform analysis.
Like all trading markets, this comes in two forms – fundamental analysis and technical analysis.
Fundamental research is actually not too difficult to perform – even as a complete newbie. The main concept here is that you will be keeping tabs on key news developments from the cryptocurrency arena. Once a news story is posted, it’s then just a case of assessing whether this is likely to impact a digital currency in a possible or negative way.
- For example, let’s suppose that Coinbase – which is one of the largest cryptocurrency brokers globally with over 35 million clients, announces that it is planning to add Decentraland to its portfolio.
- Naturally, with so many traders using the platform, this is great news for Decentraland, as more people will be able to purchase the coin with ease.
- As such, you should expect the markets to react positively and thus – the value of Decentraland would likely see a bullish upward trend.
On the other hand, if a news story is negative, then expect the value of the digital coin in question to fall. It goes without saying that keeping tabs on what is happening in the world of cryptocurrencies throughout the day is extremely time-consuming. A good solution here is to sign up with a cryptocurrency news platform that can send you alerts when a major story breaks.
If you are planning to take a long-term approach to cryptocurrency investing, then you can just about get away with relying on fundamental research. However, if you want to day or swing trade digital currencies, this alone will not be enough. On the contrary, much of your focus will need to be on the technicals.
In a nutshell, technical analysis refers to the process of studying pricing charts. The end goal is to identify where the value of a digital currency might go in the short-term based on historical price action. You won’t be able to do this by just looking at the specific price of the cryptocurrency. Instead, you will need to make sure of technical indicators.
There are dozens of indicators to choose from and each one will look for a specific metric. For example, the MACD looks at the relationship between two moving averages and the RSI looks at whether a cryptocurrency is potentially overbought or oversold. You then have the like of Bollinger Bands, which focuses on both volatility levels and price action.
The bad news is that learning how to trade cryptocurrency through technical analysis can take a very long time to master. The good news is that the internet is jam-packed with free guides and video explainers – which can help you fast track the process from the comfort of your home.
Choosing a Broker to Trade Cryptocurrency
With the cryptocurrency trading industry now home to billions of dollars of volume each and every day, it makes sense that there are hundreds of brokers that can give you access to this marketplace. This is a really important part of your crypto learning journey, as choosing the right broker will ensure that you give yourself the best chance possible of making a success of your trading endeavours.
The most important considerations that need to be made are as follows:
Most cryptocurrency exchanges operate without a license, so are best left alone. Instead, you’ll want to choose a broker that is regulated by a reputable financial body. For example, Capital.com is regulated by the FCA and CySEC, while AvaTrade is authorized and licensed in six different jurisdictions. Having the safety net of a regulator on your side is crucial for many reasons.
For example, the broker will need to keep your capital in separate bank accounts from its own and all clients must upload identity documents as per KYC rules.
As we covered earlier, all crypto brokers charge a fee of some sort. The problem is that these fees can and will vary quite considerably. The most important fees to look out for is the commission, spread, and overnight financing. You should also look at what fees you will be charged when you make a deposit and withdrawal.
Although there are almost 10,000 cryptocurrencies that can now be bought and sold online, this isn’t to say that your chosen market will be supported across all brokers. Sure, virtually every crypto platform in the online space will support the likes of Bitcoin and Ethereum. But, if you have your eye on a smaller-cap project that you wish to trade, be sure to check whether or not this is supported.
For us, Capital.com really stands out in this respect, as the platform offers dozens of cryptocurrency markets. Not only does this include a huge selection of fiat-to-crypto and crypto-cross pairs, but heaps of DeFi coins, too.
Education and Research
We prefer crypto brokers that allow you to learn while you trade. For example, some brokers offer a full suite of educational tools, such as guides, videos, glossaries, courses, and even webinars.
Additionally, it’s also important that your chosen broker offers research tools. Not only should this include technical indicators and chart drawing tools, but forms of fundamental analysis like cryptocurrency news and market insights.
Deposits and Withdrawals
By using a top-rated crypto trading platform like Capital.com or AvaTrade, you will be able to deposit funds with a wide variety if payment types. This includes everything from Visa and MasterCard to Paypal and bank transfers. You should also assess how long the broker typically takes to authorize withdrawals. The best platforms in this space will do this on a same-day basis.
Best Brokers to Trade Crypto Online
If you don’t have time to choose a cryptocurrency broker yourself by following the strict criteria discussed above – below you will find a small selection of platforms that stand out from the crowd.
1. Capital.com – Overall Best Cryptocurrency Trading Platform 2021
Make no mistake about - Capital.com is one of, if not the best cryptocurrency trading platforms in the market right now. This popular CFD broker - which is regulated by the FCA and CySEC, is perfectly suited for beginners. In fact, if you are learning how to trade cryptocurrency for the first time, it might make sense to start off with the Capital.com demo account. This allows you to trade digital currencies in live market conditions without needing to deposit or risk any money.
As we briefly noted earlier, Capital.com offers dozens of cryptocurrency markets. You can trade fiat-to-crypto pairs, crypto-cross pairs, and even DeFi coins. All cryptocurrency markets on Capital.com can be traded at 0% commission and you can go long or short on your chosen market. You can also trade cryptocurrencies with leverage, albeit, limits will depend on your country of residence. There are no transaction fees to deposit or withdraw funds, which is another bonus.
Capital.com supports debit and credit cards, as well as a number of popular e-wallets. When opting for one of these payment methods, the minimum deposit is just $20. The minimum of bank transfers is much higher at $250. Alongside a free demo trading facility, Capital.com also offers an educational department that includes guides, courses, and webinars. On top of cryptocurrencies, the platform also supports CFDs in the form of stocks, indices, forex, ETFs, hard metals, energies, and more.
- Easy to use trading platform - great for newbies
- Regulated by the FCA and CySEC
- 0% commission, tight spreads, and $20 minimum deposit
- Too basic for experienced traders
2. Avatrade – Great Trading Platform for Technical Analysis
We mentioned earlier that short-term cryptocurrency traders rely almost exclusively on technical analysis. Although it might take you a while to grasp, learning the technicals is the best way to ensure that you are able to make consistent gains. In our view, the best broker to trade cryptocurrencies alongside technical analysis is AvaTrade. This online platform specializes in CFD instruments and is regulated in no less than six jurisdictions.
The platform hosts a great selection of digital currency markets, all of which can be traded with leverage. Much like Capital.com, the platform also allows you to choose from a long or short position. AvaTrade offers several trading platforms that each come packed with technical analysis tools - such as indicators and the ability to draw trend lines. This includes support for third-party platforms like MT4 and MT5. AvaTrade also offers its own native trading platform that can be accessed through your web browser.
When it comes to fees, AvaTrade is a spread-only broker. This means that rather than paying a variable commission, you only need to cover the difference between the buy and sell price of your chosen crypto pair. There are no fees to deposit or withdraw funds and the platform supports debit/credit cards, bank transfers, and e-wallets. You can get started with a minimum deposit of just $100, albeit, AvaTrade also offers a free demo account for those who wish to start off with paper trading.
- Lots of technical indicators and trading tools
- Free demo account to practice trade
- No commissions and heavily regulated
- Perhaps more suited to experienced traders
How to Start Trading Cryptocurrency Today – Tutorial
If you have read our guide up to this point – it is hoped that you are now ready to start trading cryptocurrency online. Need a bit of assistance to get started? If so, the tutorial below will show you how to place your first cryptocurrency trading order in less than 10 minutes!
Step 1: Open a Crypto Broker Account
You will first need to open an account with your chosen cryptocurrency broker. We like Capital.com and AvaTrade, albeit, there are many others active in this space. If you are yet to choose a provider, you can scroll up to our section ‘Choosing a Broker to Trade Cryptocurrency’.
71.2% of retail investor accounts lose money when trading CFDs with this provider.
Irrespective of which regulated broker you choose, you will need to provide some personal information.
This will include your:
- Country of Residence
- Home Address
- Date of Birth
- Contact Details
As per KYC regulations, you will also be asked to upload a copy of your government-issued ID.
Step 2: Make a Deposit
You can now make a deposit into your newly created crypto broker account. The platforms that we have discussed on this page allow you to deposit funds with a debit/credit card, e-wallet, or bank transfer.
Step 3: Search for Crypto Pair
You can now use the search box to find the crypto pair that you wish to trade.
Step 4: Place Order
Finally, you will need to set up an order. As we discussed earlier, you should select a buy order if you think the pair will increase and a sell order if you think the opposite. You should also select from a limit or market order and consider deploying a stop-loss and take-profit.
Finally, enter your stake and confirm the order.
How to Trade Cryptocurrency: The Bottom Line
This guide has covered everything there is to know about trading cryptocurrencies for the very first time. We have explored the importance of choosing a suitable market – with most newbies opting for fiat-to-crypto pairs such as BTC/USD or ETH/USD. Additionally, we have explained why you need to have a firm grasp of common cryptocurrency order types, as well as fundamental and technical analysis.
If you’re ready to take your newfound knowledge into the live cryptocurrency markets, you will need to open an account with a top-rated broker that is heavily regulated. In doing so, you could have your first-ever cryptocurrency trade executed in less than 10 minutes!
71.2% of retail investor accounts lose money when trading CFDs with this provider.