How to trade cryptocurrency

If you’re new to cryptocurrency trading, we strongly recommend you read our overview article about cryptocurrency trading. This article will focus more around the specifics of how to use various cryptocurrency platforms, the different types of cryptocurrency trading, and a few tools you can use to help maximize your trades. It is important to note that nothing you read here is investment advice and you should always do your own research. That being said, we hope this article will be of assistance to that research!

How to start trading cryptocurrency

Uphold multi-asset platform

Before you start trading cryptocurrency, there are 3 things you need to do. The first is you have to figure out how you are going to buy cryptocurrency. This will vary based on where you live but thankfully fiat-crypto service providers are more numerous than ever. Many exchanges also allow you to buy cryptocurrency using a credit card, bank wire transfer, or even a debit card.

Of these options, your best bet is using an exchange or service that lets you pay with a debit card. This is because wire transfers can take a long time, during which the price of the asset you are trying to buy (whether it’s Bitcoin, Ethereum, Basic Attention Token etc.) can fluctuate substantially during that time period. In short, the key to successful trading is finding a way to get your funds from fiat to crypto and back from crypto to fiat in the fastest way possible. Note that most of these services will only allow you to purchase Bitcoin or Ethereum, which will then need to be transferred to the appropriate exchange (more on that in a second).

This must be sorted out before you start seriously trading, and you should also test any new platforms without established reputations with small amounts of money. A few things to watch out for are: minimum deposit amounts, large fiat-crypto exchange fees or bad exchange rates, and of course minimum withdrawal amounts and large fees for withdrawal. These can be occasionally hard to spot because the fees are often listed in the price of crypto, meaning you have to go to Google and copy-paste the amount being shown to see what the equivalent fee is in the fiat currency you are using.

The Trezor hardware wallet is considered to be the safest on the market

The second thing you need to do is decide on a wallet where you will store your funds. The wallet you choose depends on which cryptocurrencies you are interested in trading with. As a good rule of thumb, wallets such as Atomic Wallet (desktop + mobile) and Trezor (hardware wallet) are probably your best bets. You should make sure to check that they actually support the currency you are wanting to trade before you set up an account or buy the physical device, otherwise you’ll be left with a waste of time.

Bitfineon’s optimized trading dashboard

The final thing you have to figure out is where you’re going to trade the asset you are interested in. Not all exchanges offer every single cryptocurrency. After all, there are more than 5500 cryptocurrencies currently in existence. Furthermore, exchanges which do offer lesser-known coins tend to be less reputable, which means you could risk losing your funds if you play around with them. This is why you should also test these exchanges the same way you test the fiat-crypto payment gateways if they do not have an established reputation.

If you know which asset(s) you would like to trade, you can search it up on CoinMarketCap and click on the Markets tab to see which exchanges offer the asset. We recently wrote an article about the biggest cryptocurrency exchanges around. Although some of these have had issues in the past, basically all of the exchanges on that list are well-known and have a fairly solid reputation. If you do not see the crypto you want to trade on any of those exchanges, you might want to consider looking at another asset or at least waiting until it gets posted on a better exchange before moving forward with trading.

How to actually trade cryptocurrency

Okay, so you’ve bought some crypto, you’ve set up an account on the exchange you want to trade on, and you have your wallet ready in case you decide to want to hold on to the asset for a longer period of time. In fact, it is quite critical that you keep your assets on your wallet whenever you are not actively trading. Although moving funds back and forth may cost a few dollars here and there, it is definitely worth protecting against the risk of a hack or other attack on the exchange. Always remember that if you do not have the assets on your own personal software or hardware wallet, that cryptocurrency technically does not belong to you!

As mentioned previously, you would have most likely purchased an asset such as Bitcoin or Ethereum either with a third-party payments provider or directly from the exchange using a debit card, credit card, or wire transfer. Now we can take a look at what to actually do within the exchange.

How to use a cryptocurrency exchange

The top cryptocurrency exchanges according to CoinMarketCap

Although exchanges come in many different colors, shapes, and sizes, most offer essentially the same features and work in more or less the same way. Some can be substantially more complicated and offer way more features. In truth, an article could be written about how to trade on each of these exchanges (and perhaps will be soon enough) but for the sake of this article we will keep it simple. Chances are what you read here will apply to you, and if not then check out some tutorials on YouTube for the exchange you are using.

Unless you purchased your assets directly from the exchange, you’ll have to deposit the crypto your purchased into the exchange. If you skim the top of any exchange website once you’re logged in you’ll see a title that says something like “my wallet” or “assets” or “funding” or any other term that sounds like something related to a wallet. That is where you will find the various options to deposit and withdraw cryptocurrencies. Note that some exchanges will require you to fill out some Know Your Customer (KYC) / Anti-Money Laundering (AML) information and provide documentation before you can fund your account or withdraw from it.

The main landing page for the Kraken exchange

Now you must find the asset you need to deposit. Find the tab that says deposits (usually somewhere on the left-hand side of the screen). Find the appropriate asset you want to deposit. If it’s Bitcoin or Ethereum it will usually be somewhere near the top. If not, you can either select it from a drop-down menu or find it using Ctrl + F and searching for the ticker (BTC, ETH, etc.). Some exchanges generate your wallet address by default whereas others will tell you to click to generate one.

Once you have it, copy it into whichever third-party payment provider you are using as the destination address for your funds. If you are using a mobile app, it should let you scan the QR code that is offered by most exchanges. Alternatively, you can copy and paste it and send it to yourself by some secure method (honestly, I just send it to my mom or dad on Facebook and then copy it from our messages – they have no idea what it means anyways). Once the address has been inputted, send your funds to the exchange.

Trading on cryptocurrency exchanges

Your asset dashboard in HitBTC

Once you’ve sent your funds, it can take anywhere from 5 minutes to an hour to see your crypto in the exchange depending on which one you purchased and the amount of confirmations needed by the exchange to deposit the funds to your account. Usually these funds go directly into your trading account but sometimes they go into a separate funding account, meaning you will have to transfer them from the funding account to the trading account within the wallet dashboard on the exchange. Although this is supposed to be for security reasons, it seems quite silly. It doesn’t cost anything to transfer between your funding account and trading account, though some exchanges may require you to re-enter your password to do so.

You will be able to know once your funds are on your trading account once you have gone over to the exchange tab. Again, this is normally noted somewhere at the top of the webpage as “trading” or “exchange” or some other word which suggests trading. You will also often see a tab that says “markets” that can sometimes let you click and be directed to the asset pairing you’re looking for. Most cryptocurrencies are traded against Bitcoin and often also against a stablecoin such as USDT or USDC. Trading fees vary by exchange but all are well below 0%, meaning you might lose a few cents each time you make a trade.

Binance trading terminal

If you are an inexperienced trader, it may be much easier to work with a stablecoin such as USDT instead of BTC as a pairing. That being said, you’ll first have to buy the asset you want to trade. For example, I (the author of this article) purchased THETA using BTC. Then, I traded it against USDT to make it easier to get a grasp of how much money I was making or losing as time went on. This can be harder to gauge with BTC pairings in the often-complex exchange terminal.

Understanding trading dashboards

Coinsuper trading terminal

Now is an important time to note that some exchanges will give you many different options when it comes to how you want to trade. For example, Binance offers a simple trading feature which lets you instantly buy an asset. While this may be very useful, you often lose a lot more than using the more complicated Classic exchange option. Most exchange dashboards look something like this. In this setting, you will see a whole bunch of different things. For the time being, let’s ignore the actual price graph and take a look as to what’s going on around it.

Order books

To the left you will see the order books for buying and selling. These are all of the people who are buying or selling the asset closest to the current market price. This tends to change quite rapidly, especially when markets are hot or the asset is larger. For smaller assets this order book will not change as frequently because there simply isn’t enough volume. This means that sometimes you will have to spend more if you want to buy the asset right away (at least when the liquidity is low). You may also have to sell at a lower price if you want to sell a low-liquidity asset quickly.  

Successfully executed market trades

On the bottom right hand side you can see the market trades. These are trades which have been successfully executed. Above it you have your selection of all of the different market pairings which you can search, and way below the price graph you can see a box where your open and completed orders will be displayed. Now we can take a closer look at what’s going on in the actual graph and how to use it to maximize trading returns. We will also briefly cover the various options below it which you can use to protect your funds. Again, these options are offered in most exchanges and not just Binance so don’t worry about this not applying to your exchange (because it probably will).

Trading indicators on the price graph

Look at the timeframe and volume

The price graph can be a bit overwhelming but there are really only a handful of things you need to look at. The first is the Time option on the top left-hand side of the graph. This lets you look at the different time frames. Usually these are set to 1 hour or 1 day by default, meaning each price bar you see on the screen represents one hour. You can zoom in and out using your mouse wheel. The first thing you should take note of is the volume being traded. These are the bars at the bottom of the graph. If you see gaps in volume on the exchange you are trading on, this means the volume is either really low or fake volume (if it is showing up as having high volume on CoinMarketCap). In this case you should move your funds to another exchange with real and/or higher volume.

The MACD indicator

If you hover your mouse over the graph you will see a whole bunch of numbers changing as you hover between bars. Again, for most of you the only thing that you need to take note of is what’s being shown next to the VOL indicator (found just above the volume bars to the left) and the price being shown on the right hand side as you pan between bars. Moving your mouse to the top and the bottom of the bar can give you a sense of how much the price fluctuated within that time frame. Another useful indicator is the MACD, which is used to get a sense of the price momentum and trend (up or down). This indicator sort of looks and acts like a wave, going from positive to negative.

The CryptoMood desktop terminal

We at CryptoMood have developed 2 new indicators as well which measure the opinions of people on social media as well as news articles in real time to generate a social sentiment indicator and a news sentiment indicator, respectively. This has been shown to be extremely valuable for trading since it can occasionally allow you to forecast the movements of any given market. We track over 3000+ cryptocurrencies and our app and desktop terminal are free to use. You can read last week’s article if you want to see how a cryptocurrency trader used these indicators to double his trading profits. While these are not available on any exchanges yet, we are currently working with a few to get them to incorporate them including Bitfineon.

Time to start trading

Now that you have the basics down, you can start trading and speculating. Try setting the graph to daily and zoom out a bit. This will give you a bigger picture view of how your cryptocurrency has been trading lately. Again, take note of the volume and also the price range it has been within over the past few days, weeks, or months. This is where you’ll see experienced cryptocurrency traders start to draw lines and make projections on where the price will go. They usually take note of both the highest and lowest prices in recent times and use those as peaks and bottoms.

If the lowest prices of the asset has been gradually higher in recent weeks this means that it is unlikely the price will drop somewhere below the last low price, and if you draw your fancy line well enough then you can even speculate as to where that low might realistically be. The same applies for the highest price points in recent months. The ideal asset sets gradually lower lows, and higher highs. This means that the price will likely continue to rise, assuming that volume stays constant or increases over time. You can think of volume as the thing which ultimately determines the trajectory of a cryptocurrency – low volume means not much price action or extreme volatility to the upside or downside.

The last important thing to keep in mind involves sudden spikes in price. If you see a cryptocurrency jump 10, 20, or 30% in price in a very short period of time (a day or less) then chances are it will not sustain that gain for long. It may not drop back to its previous low, but such an exponential gain is not sustainable for very long. Keeping this in mind is the ultimate tool to maximizing your gains. Let’s go through a quick example using the cryptocurrency mentioned before, THETA.

I purchased THETA when it was around 8 cents. I used the previous price history to assume that it probably wouldn’t drop too much below that point again, and using the rules of thumb noted in our previous article about cryptocurrency trading led me to believe it was only a matter of time before THETA saw a serious boost. Lo and behold, a few weeks later they announced partnerships with Google and Samsung which sent the coin soaring to over 50 cents per token in a very short amount of time. Between buying and selling, I kept my THETA cryptocurrency on its native web-based wallet to be safe.

Seeing that the price was continuing to gain speed, I used the MACD to get a sense of when that upward momentum will start to fade, and sold at just over 40 cents for an over 4x profit. I used most of the profits to invest in other cryptos and used the amount I had started with to buy back in once the price settled down. I bought back in at around 25 cents, which based on recent price history is the new low for the asset (in my opinion). Although I was kicking myself a bit for not waiting until it hit 5x, there is no use in trying to perfectly time the highs and lows of any asset, crypto or otherwise. At the end of the day you have to use your own judgement and do your best to take modest profits. It’s often easy to forget that a 4x profit in a 1-2 month period is unheard of in legacy markets.

All of that being said, we hope that this article helped you in your quest to make some extra money trading cryptocurrency. The last thing you need to do is find a platform that will let you withdraw back into fiat currency when you’re ready to do so. There are dozens such platforms. If you’re in Europe, your best bet is the reputable exchange Bitstamp. Canadians are best off using Shakepay, and Americans should consider transferring their assets to Bitcoin and using the Coinbase or the Gemini exchange to withdraw. 

Remember that depending on where you live, you may need to declare your gains as income (though realistically there are very few countries which can keep track of this). Unless you are desperate for money, it is best to keep your assets in crypto since most governments don’t really care about it until you have exchanged it for fiat currency, which you probably don’t want to be in during a time when governments are printing money like crazy. You can refer to our recent article about how to keep your assets valuable during these crazy times if you’re wondering where to keep your profits.

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