Thinking about trying your hand at cryptocurrency trading? We’ll help you get started.
Ethereum could be the crypto for you. Our educational guides will teach you everything you need to know about Ethereum and how to get started trading the cryptocurrency.
Compare the best platforms for Ethereum trading
If you think you’re ready to trade Ethereum, the second-largest cryptocurrency in the world by market cap, check out the table below. If you need more time to study first, keep reading.
If you want to trade Ethereum, it’s important first to understand how crypto trading works. These are the important questions you need to consider, complete with short summaries of what you need to know.
What do I need in order to trade Ethereum?
First and foremost, knowledge! Get to know the key terms and principles that go with online crypto trading, as a basic grasp of both cryptocurrencies and crypto trading is essential when trading Ethereum. Learn about Ethereum’s trading history all the way from the foundation of the company and it’s cryptocurrency, Ether, in 2015 – all the way up to the present day to see if it’s the right investment for you.
Here are three of the most important pieces of the Ethereum trading puzzle:
- Exchange – A cryptocurrency exchange allows you to trade Ethereum in tandem with a fiat currency (such as U.S. dollars or British pounds) or other cryptocurrencies (such as Ethereum). Exchanges are recommended for more advanced traders, as they’re typically more challenging to navigate than other trading methods.
- Broker account – A broker account is any account you can open which allows you to facilitate investments, be that holding shares or being actively involved in Ethereum trading. There are many variations with minor differences. However, the most important thing to know is: A CFD (contract for difference) broker allows you to trade Ethereum without actually owning them. This means that you can trade Ethereum, but you wouldn’t be able to withdraw and spend the ether. Rather, you’d withdraw profits in your local currency.
- Wallet – A crypto wallet stores the keys used to receive, spend, and track ownership of cryptocurrencies, including Ethereum. A crypto wallet can take the form of a digital device, program, or service. If you’re trading a significant amount of Ethereum, a crypto wallet offers an extra level of security that can be well worth the wallet’s typically reasonable purchase price.
Should I trade Ethereum?
That depends on your own investment goals and the knowledge you have. Ethereum trading can prove to be a big money maker or money loser depending on the performance of the market. Check out the educational Ethereum articles & guides on our site as a study guide to nudge you one step closer to reaching the winner’s circle.
If you don’t want to risk your capital before understanding the process, many Ethereum trading platforms will let you trade with a demo account, a useful practice technique that will help you get acclimated to trading in real time.
What is the best way to trade Ethereum for a beginner?
As a beginner, you’re probably best off starting with a CFD broker, as this won’t involve having to buy and hold Ethereum. CFD brokers offer the ability for investors to buy and own a contract representing Ethereum ownership, without owning actual Ethereum coins. So you won’t have to worry about both the cost and hassle of finding a place to securely store your coins.
When trading Ethereum through a CFD broker, you can trade with leverage. Trading with leverage means that you only put down a small percentage of the overall trade amount, with the CFD broker covering the rest. Leveraged positions can be relatively small (such as 2x or 5x the size of your stake) or much larger (up to 100x the size of your own stake, or more).
If you guess correctly on the direction of your leveraged Ethereum trade, you can make big gains. On the flip side, you’ll lose lots of money when you guess wrong – particularly in volatile crypto markets such as Ethereum. We strongly recommend that beginner investors avoid trading with leverage, because of that big level of risk.
How to trade Ethereum using a broker
To trade Ethereum CFDs, you’ll need to sign up to an online broker. We have reviewed all the best Ethereum brokers elsewhere on our site, and here we’ll take you through how the process works.
1. Open an account with your broker
When shopping for a good crypto broker, choose one that offers a simple and secure platform, and narrow price spreads. Fill in your contact and security information to confirm your account, as you would when you open an online banking account. You’ve taken the first step toward trading Ethereum.
2. Deposit funds into your account
There are several different methods you can use to deposit funds into your brokerage account. Depending on your broker’s guidelines and limitations, you may be able to make deposits with a debit card, credit card, or PayPal, or by linking to your bank account to enable bank transfers.
3. Plan your trading strategy
When trading any asset, it’s good to have a well-thought-out investment strategy, and Ethereum is no exception. Here are the main ways you can trade Ethereum, have a think about which one suits your plans best:
- Day trading. This is when you open and close a Ethereum position on the same day (or even within a matter of minutes), with the goal of banking a quick profit. To day trade successfully, you’ll want to study up on how to read charts, also known as technical analysis.
- Swing trading. Swing trading is also a short-term trading strategy, but with a slightly longer timeframe than day trading. When swing trading Ethereum, you’re holding for a stretch lasting anywhere from one day to several days. The goal is to profit from the price swings that can occur during that period. CFD platforms typically charge overnight fees when leaving positions open over multiple days, so you will have to factor these in when swing trading.
- Scalping. Scalping aims to capitalise on market inefficiencies to produce profits. Two common approaches to scalping are arbitrage and spread scalping. In arbitrage you’re searching for a discrepancy between the bid and ask spread of two different brokers, then taking advantage of that discrepancy. Spread scalping is the same idea, but with the same broker. Scalping is designed to produce fast gains but also small ones, so you’ll need to repeatedly succeed before your gains start to add up.
- Automated trading. Automated trading depends on computer-generated algorithms, rather than human actions, to execute trades. Technical indicators and statistical arbitrage drive automated ETH trading, with software trying to process information and make trades before the market moves. Be careful when using automated Ethereum trading platforms, as there have been scams associated with them in the past.
Each of these trading strategies offers different advantages. If you’d rather buy and hold Ethereum for the long term, that’s better defined as crypto investing. By investing in coins like this you can earn big gains if the coin’s value rises over time.
4. Place your first trade
You’ve done your research, picked your trading platform that fits your needs, deposited money into your account in the manner of your choosing, and selected your preferred method for trading. It’s showtime…make your first trade!
That was easy, what should I do next?
When it comes to crypto investing, you can never know too much. Not only can you discover value by reading more into how the underlying technology of different coins works, but also news moves fast in the crypto space and you’ll want to keep on top of all developments.
One last tip: Trading Ethereum can also be done on an exchange. This can be can be more challenging to navigate and harder to make deposits, while also entailing a steeper learning curve. However, if you’d like to give exchange trading a shot, keep reading and we’ll take you through the process.
How to trade Ethereum using an exchange
If you’re looking to buy and trade Ethereum, your options aren’t limited to brokerages; you can do so on a crypto exchange. Here’s what you need to know when planning on trading Ethereum through an exchange: Decide which exchange you want to use. You’ll want to consider the exchange’s reputation, the size of its trading fees, and the choices/crypto pairs available to traders. Some exchanges allow you to buy just a few cryptocurrencies using fiat currency. Others offer more trading options, including trading a wide variety of crypto pairs that include Ethereum.
1. Set up an account
To open a trading account you’ll need to provide contact information, verify your identity, and link to an accepted method of deposit. We discuss the different deposit methods you can use to set up a ETH trading account below.
2. Select which cryptos you want to hold and trade
If you’re planning to trade Ethereum, you can do so on many different crypto exchanges. When you trade Ethereum, you can trade crypto pairs such as Ethereum with Ripple (ETH/XRP), Ethereum with Bitcoin (ETH/BTC), and Ethereum with the British pound (ETH/GBP) – among many others.
3. Place your trade
Here are some of your trading options when it comes to using an exchange:
- Buy order. This is simply when you buy some number of crypto units, such as buying one unit of Ethereum (the currency itself is technically called Ether) – either at the price at which it is trading or at a specified price set by you. With the latter, when Ether is being sold at that price, the exchange will process the trade.
- Sell order. This is when you sell your Ethereum, in the process either banking a profit or cutting your losses.
- Put/call. When trading Ethereum options, you can bet on Ethereum’s price either going up (which is known as a call) or down (this is known as a put). You’re purchasing a contract which gives you the option to buy or sell Ethereum at a specified strike price, by a specified date.
- Market order. This is when you want to buy Ethereum immediately, at the current market rate determined by the trading activity on the exchange.
- Limit order. This is when you want to buy Ethereum, but only up to a certain price, so you instruct the exchange you want to buy Ether as long as the price is below a certain amount.
- Stop-loss order. This is when you buy a cryptocurrency, then put in an order to limit the size of your loss. If you buy Ethereum at $170 and put in a stop-loss order at $153, your goal is to limit the size of your loss to no more than 10%, as the exchange will automatically sell your Ether if the price falls to $153.
4. Receive your coins
Your coins will be credited to your exchange account, which functions as an online “hot” wallet for your coins, so you can easily access them and trade them on the exchange.
5. Transfer your coins to a separate wallet
For extra security you can then transfer your coins from the exchange’s wallet to your own cryptocurrency wallet. This is recommended for security if you’re not planning on trading the coins in the near future.
Which exchange should I use to trade Ethereum?
Check out the table below, which features all the best exchanges currently for trading Ethereum.