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- 1. How to trade cryptocurrency online
- 2. What do I need to trade cryptocurrency?
- 3. Should I trade cryptocurrency?
- 4. What service should I use to trade cryptocurrencies?
- 5. What is the best way to trade crypto for a beginner?
- 6. How to use a broker
- 7. That was easy, what should I do next?
- 8. How to use an exchange
- 9. Which exchange should I use?
- 10. FAQs
How to trade cryptocurrency online
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77% of retail CFD accounts lose money.
What do I need to trade cryptocurrency?Copy link to section
You’ll need a basic knowledge of both online trading and the crypto market first. That includes understanding bid and ask prices, and figuring out if the current price of the cryptocurrency you want to buy makes sense.
You’ll want to find an online platform on which you can make your crypto trades. Let’s take a look at some of your options.
- Crypto Exchange – A cryptocurrency exchange platform is a service that lets you swap coins for other currencies, be it fiat currency or other cryptocurrencies. Exchanges are recommended for more advanced traders, though, as they’re not always easy for beginners to navigate.
- Crypto Broker – A cryptocurrency broker account is any account you can open which allows you to facilitate investments, be that holding shares or actively trading cryptocurrencies such as Ethereum, Bitcoin, Ripple and more. There are many variations with minor differences. However, the most important thing to know is: A CFD (contract for difference) broker allows you to speculate on the price of assets without actually owning them. This means that you wouldn’t be able to withdraw and spend your coins. Rather, you’d withdraw profits in your local currency.
- Crypto Wallet – A crypto wallet is a digital device, program, or service which stores the keys used to receive, spend, and track ownership of cryptocurrencies, including Bitcoin. Having your own wallet provides a more secure platform for your Bitcoin than just leaving it in the custody of an exchange. If you’re trading a significant amount of Bitcoin, this level of extra security can be a worthwhile purchase.
Should I trade cryptocurrency?Copy link to section
This one’s up to you, what we’re here to do is give you all the information so you can make sound choices as to your own investments. Trading crypto can be a profitable venture when done right, but like any form of investing it comes with a degree of risk. We suggest reading this page about how to trade Bitcoin, our crypto guides in order to educate yourself, and then using a demo account on a broker can be a useful way to practice before spending real money.
What service should I use to trade cryptocurrencies?Copy link to section
If you already know everything you need to know about cryptocurrency and just want to start trading, see the table below. We recommend the below services so take a look and make sure they meet your needs. If you need more time to research or just want to learn more, keep reading.
77% of retail CFD accounts lose money.
82% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
What is the best way to trade crypto for a beginner?Copy link to section
If you’re a beginner in the crypto space who wants to make money trading crypto, using a CFD broker (compare the best CFD brokers here) means you won’t have to go through the process of buying and holding actual coins. This is because CFDs allow you to speculate against the value of cryptocurrencies without literally buying them.
Essentially, CFD trading enables you to own a contract related to the value of the cryptocurrency in question, which can then be cashed out for the new value of the coins after the market has moved up or down. This means you don’t need to worry too much about learning about cryptocurrency wallets or all the different pairs you’ll find on an exchange. Later on, you can always move onto trading on a crypto exchange, especially if you want to trade different cryptocurrencies for each other and/or hold a variety of cryptos at once.
When using a CFD platform, you’ll usually have the option to trade with leverage – but be careful of this. Trading with leverage means that you can make large trades while only staking a small percentage of the overall trade amount. The size of that leverage 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), depending on the platform you use to trade.
Leveraged trading can maximise profits, which makes it a viable option for more experienced investors. The problem is that leverage can also quickly produce huge losses, particularly in volatile markets such as cryptocurrencies. For this reason, we don’t recommend that beginner investors trade with leverage.
How to use a brokerCopy link to section
There are many cryptocurrency brokers that offer platforms you can use to trade various crypto assets, with some of the most important variables to consider when choosing a platform being the security offered and fees charged.
You’ll find links to some of the best crypto brokers above, and here’s how trading with a cryptocurrency broker works:
1. Open an account with your crypto brokerCopy link to section
Signing up with a crypto broker is a fast and easy process. First, choose a broker that offers a secure platform, low transaction costs, and narrow price spreads. You’ll need to provide some contact and security information to confirm your account, similar to when you open other kinds of online accounts. Then, select the cryptocurrency you want to trade.
2. Deposit funds into your accountCopy link to section
You’ll need to add money to your account in order to begin trading. There are several different methods you can use to deposit funds, and the options available will depend on the broker you choose. Some of these methods can include linking to a debit card or credit card, linking to your bank account and then using bank transfers, or using PayPal. Once your payment method has been set up, you’ll be ready to trade.
3. Plan your crypto trading strategyCopy link to section
Picking and sticking to a sound cryptocurrency trading strategy will help you stay disciplined in your trading. Here are the four most common methods for trading crypto:
- Day trading. This is when you open and close a crypto position in the span of one trading day. In this case you’re aiming for the quickest gain possible, albeit not necessarily the largest. Successful day trades can occur in a matter of hours, or even minutes.
- Swing trading. This is also a short-term trading strategy, albeit with a slightly longer timeframe than day trading. When swing trading crypto, you’re holding for somewhere between one day to a few days, in an effort to profit from price changes, otherwise known as swings. CFD brokers will usually charge overnight fees for leaving positions open across multiple days, though.
- Scalping. This is an intricate technique that seeks to capitalise on small market inefficiencies, producing lots of small gains. Two common approaches to scalping are arbitrage and spread scalping. Arbitrage entails finding a discrepancy between the bid and ask spread of two different brokers, and taking advantage of that discrepancy. Spread scalping is the same idea, but with the same broker. Some crypto brokers ban this practice, so make sure your broker allows it if you’re considering this approach.
- Automated trading. This is a way to trade through computer-generated algorithms, rather than with your own hands. Technical indicators and statistical arbitrage drive automated crypto trading. These are also known as; bitcoin robots, crypton robots, or robot trading, and it is worth noting that it’s good to be careful of these platforms, as not all are legitimate.
Each of these strategies offers certain advantages to crypto traders. Consider how short you want your trading time horizon to be and whether you want to place your own crypto trades or have a machine do it when deciding which trading method to use. If you’d rather buy and hold crypto, that falls more under the category of investing than trading, and can be a profitable venture in its own right if done correctly.
4. Place your first tradeCopy link to section
You’ve done your research, picked a trading platform, deposited money into your account, and selected your preferred method for trading cryptocurrencies. You’re now ready to make your first trade.
That was easy, what should I do next?Copy link to section
Congratulations, you’ve made your first trade! We recommend continuing to learn more about trading strategies, risk management, and other key principles, to ensure that you stay ahead of the curve. It is also advisable to keep up-to-date with all the latest cryptocurrency news, as crypto markets are often very reactive to new information and move fast.
Additional hints and tipsCopy link to section
We do not recommend trading crypto on an exchange until you have more experience, as they can create an environment that can be more challenging to navigate, harder to make deposits, and require a steeper learning curve. That said, if you’d like to give exchange trading a shot, keep reading and we’ll take you through what you need to know.
How to use an exchangeCopy link to section
If you’re looking to buy and trade coins, you can do so on a crypto exchange. That’s a different approach than with CFDs, where you don’t own the actual cryptocurrency being traded. There are numerous different types of exchanges, with the biggest ones letting you trade a wide variety of cryptocurrencies, and smaller ones allowing you to purchase a limited range of cryptos instantly with fiat currency. Here’s what you need to know when planning on trading crypto through an exchange:
1. Decide which exchange you want to useCopy link to section
Which exchange you plan to use can depend on a number of factors. Those include the strength of the exchange’s reputation, how low that exchange’s fees are, and the breadth of choices available to crypto traders. For instance, some exchanges aim for simplicity, allowing you to buy just a few cryptocurrencies using fiat currency. Others will offer a huge range of trading options, including trading a wide variety of crypto pairs. Figure out whether your crypto-trading goals are simple or more varied when picking an exchange.
2. Set up an accountCopy link to section
Once you’ve chosen an exchange that suits your goals, the next step is to set up an account. You’ll need to provide contact information, verify your identity, and set up a method of deposit. We discuss the different deposit methods you can use below.
3. Select which cryptos you want to hold and tradeCopy link to section
If you’re planning to trade popular cryptos such as Bitcoin, Ethereum, or Ripple/XRP you’ll find them on any exchange. If you’re considering a different cryptocurrency, you’ll want to check with the exchange you’re considering before signing up, since some exchanges only offer a limited number of cryptocurrencies for trade.
4. Place your tradeCopy link to section
Once you’ve selected the market and cryptocurrency you wish to trade, it’s time to place your trade. Here are some of your trading options:
- Buy order. This is simply when you buy some number of crypto units at their current price.
- Sell order. This is the flip side of a buy order, where you’re either cashing in your crypto trade to make a profit, or to cut your losses.
- Put/call. When trading crypto options, you can bet on price either going up (call) or down (put). Here, you’re purchasing a contract which gives you the option (but not the obligation) to buy or sell crypto at a specified price by a specified date.
- Market order. This is when you want to buy a crypto immediately at the current market rate determined by trading activity on the exchange.
- Limit order. This is when you want to buy crypto, but you’re only willing to pay up to a certain price, known as a limit. You set a limit at which the exchange is instructed not to buy any more coins for you.
- Stop-loss order. This is when you buy a cryptocurrency, then put in an order to limit the size of your loss. So for instance, if you buy Bitcoin at $7,000 and put in a stop-loss order at $6,300, your goal is to limit the size of your loss to no more than 10%, in the event that Bitcoin falls in price. The exchange will automatically sell your coins if the price of Bitcoin falls to $6,300.
5. Receive your coinsCopy link to section
You’ve now bought the Bitcoin, Ethereum, Ripple, or another cryptocurrency you’ve been seeking. If you plan to store your coins on the exchange you’re trading on, then you don’t need to do anything else.
6. (Optional) transfer your coins to a separate walletCopy link to section
In general, if you’re not planning on trading your coins in the near future, it is advisable from a security standpoint to transfer your coins to a separate personal wallet.
Which exchange should I use?Copy link to section
We’re here to help you decide! Check out the table below to see the most reputable exchanges around for cryptocurrency trading.
FAQsCopy link to section
Not directly, but PayPal is accepted as a payment method on some brokers and exchanges. The way it would work is, if it’s a broker or exchange that accepts PayPal for funding purposes, you could use your PayPal account to make deposits into either your brokerage or exchange account.
Same idea as PayPal: some brokerages and exchanges will allow you to buy Bitcoin with debit card via your trading account, but you can’t trade directly with a credit card or debit card. Again, you should check first, before you select a broker. Our buying Bitcoin with credit card trading guide will walk you through the process.
As with PayPal and cards, you can’t simply buy coins directly from your bank account. This is because your bank account cannot store cryptocurrencies. What you can do is fund your trading account with either a brokerage or exchange to do so, as most brokerages and exchanges will accept bank transfers as a form of deposit. Note that you would need to confirm your bank information, and there may be a waiting period of a few days before you’re approved. Our bank transfer trading guide will help you get acclimated if you decide to go this route.
As with all trading methods, it does carry the risk of losses. The more study you put in to learn the tricks of the trade, the better your chances for success. Also, consider using stop-loss orders will allow you to limit the size of your loss, should your trade not pan out the way you’d hoped.
No commodity is entirely safe, as they all run the risk of producing losses. Moreover, history tells us that cryptocurrencies can also be quite volatile, testing traders’ nerves. That said, volatility can also give you more chances to capitalise on big price swings, if you do the work necessary to prepare and are patient when you trade.
24/7! Cryptocurrencies are one of the only tradable assets that offer round-the-clock market access. That can be a big plus if you see a trend emerging, say, after typical weekday business hours, or on the weekend.
Yes. Choose a reliable crypto app, and you can complete your mobile crypto trades quickly and simply.
It’s usually relatively easy, though different platforms will have different policies on withdrawals. It can often take a couple days before you can access your funds, and you’ll sometimes have to pay a fee for withdrawals. Pick a trading platform that best fits your needs in terms of speed and cost of withdrawals.
An easy way to describe a crypto wallet is that it’s like a bank account for cryptocurrencies. Crypto wallets are made up of two ‘keys’. The first is a public key (which is like your account number). The second is a private key (which is like your PIN number, but much more secure). Having your own wallet offers a more secure platform for you to store cryptocurrencies than merely leaving it in the custody of an exchange.
There are four widely recognised forms of cryptocurrency wallets that you can use for storing crypto away from an exchange:
- A hardware wallet. This is a hardware device not connected to the Internet (such as a USB stick) that will store your private keys away from danger. It’s the most secure option available for crypto storage.
- A paper wallet. This enables you to store your private keys and public addresses on a piece of paper, which you can use to store your coins.
Hardware wallets and paper wallets are known as “cold wallets,” as they are not accessible on the Internet and thus not at risk of being hacked.
- A desktop wallet. This wallet is a piece of software that works with Mac, Windows, and Linux operating systems. You can store, access, and manage your coins with a desktop app.
- A mobile wallet. This is similar to a desktop wallet, but it’s accessible through an app on your phone. A mobile wallet enables you to store and access your coins through iOS- and Android-based mobile devices.
Both desktop and mobile wallets are less secure than ‘cold’ storage options as they store your private key on a device that is connected to the internet and can therefore be vulnerable to malware.
That depends on your trading goals, but we strongly advise against leveraged trading of cryptos for beginner investors because of the added risk it brings.
When you trade with leverage, you only need to put down a small percentage of the capital needed for the trade, with your broker putting down the rest. The advantage of that method is that if you guess right, you pick up a much bigger gain. But if you guess wrong, you suffer a much bigger loss.
Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >