How And Where To Trade Cryptocurrency - Best Platform To Trade
How and where to trade cryptocurrency is one of the most common doubts of new crypto traders. A lot depends on finding out the best platform or exchange to trade cryptocurrency.
Here, we will give you a basic idea about the introduction of crypto trading.
This article will give you a clear concept on cryptocurrency trading, trading process, best place of trading, and more.
You will learn the different methods to buy cryptocurrency and how to trade cryptocurrencies.
The word trading means to buy and sell financial assets in a financial market. Let’s understand what cryptocurrency trading is.
What Is Cryptocurrency Trading
Cryptocurrency trading means buying and selling crypto using a crypto platform or exchange.
You can exchange one crypto for another or exchange crypto for fiat like USD and Euro.
Which cryptos you choose for trading depends entirely on you. As of now, there are more than 2000 cryptocurrencies in existence.
But don’t worry, you need focus only one the top cryptos which have a serious usage and market cap. This applies specially when you are starting out.
You will need to analyze the market to decide when to enter the market and what to trade.
If you are trading crypto in exchange of crypto, you can acquire most coins with the help of major cryptos like Bitcoin, Ethereum, or Ripple.
Forex is still the popular method for trading in terms of transactional volume and exchanging one currency into another currency. But there are similarities between forex and crypto trading.
In forex trading, you exchange one currency for another. The similar concept applies to crypto as well.
Cryptocurrency brings a new era in the financial world. Now, users trade one digital currency with another digital currency where transactions are faster, more secure, and convenient.
In cryptocurrency trading, privacy is needed because trading happens over the internet and there is a chance you might get lose money due an exchange hack.
There are security measures in place such as cryptographic encryption and private keys but ultimately, the trader himself must be alert about their privacy.
To trade cryptocurrency, you need two things; one is cryptocurrency exchange or a trading platform and other one is cryptocurrency wallet.
Now, let ’s start with the first phase on how to trade cryptocurrency.
How To Trade Cryptocurrency
There are few processes that traders need to follow while trading.
There are two methods to trade crypto:
- Converting the fiat currency to crypto base currency
- Converting the crypto base currency to altcoins
The base currency is the currency which will help traders to buy or quote other digital currencies.
Bitcoin works as one of the base currency in digital assets. It is not possible to buy altcoins without buying Bitcoin or Base currency. On the other hand, Ethereum and Litecoin also acts as a base currency. It is also possible to covert the fiat currency into the base currency.
The only barrier is that domestic exchanges offers a limited number of assets for traders because these exchanges only accept your domestic fiat currency.
Make sure to use a reputed and trusted crypto exchange platform. We already mentioned that you need a crypto wallet when you will perform trading.
Wallets can be software wallets such as web-based, mobile wallets, and desktop-based.
Or they can be hardware wallets or paper wallets.
Hardware wallets are the most secure wallet out of the bunch. They can’t be hacked like software wallets, nor can they be burned or crumbled like paper wallets.
There are two types of key in crypto: private and public keys. Public keys are shared for transfer of funds and private key is confidential and must not be shared to anyone to ensure security of your crypto funds.
The next phase will describe the process of buying cryptocurrency
How To Buy Cryptocurrency
There are two ways you can buy cryptocurrency;
- Buying via fiat currency
- Buying via cryptocurrency
To buy Base currency you need to make a pair with fiat currency. Knowing the market value or the coin price is necessary before purchasing the coin.
For novice traders, buying via cryptocurrencies is complicated. Traders can buy cryptocurrency with the help of Base coins. The Base coins are bought with fiat currency. Here, traders need to complete the purchase in two steps.
First, buy any base crypto such as bitcoin or ether using fiat. Using the base crypto, you can then purchase your preferred crypto.
You can buy crypto from any of the following means:
Buying from an exchange: You can choose a reputed crypto exchange like Coinbase, Binance, Kraken, etc. Some of the exchanges support fiat-to-crypto while some are only crypto-to-crypto exchanges.
Keep in mind that there are fees for transactions when dealing with these exchanges.
You will also need to provide necessary documents to verify your ID before you can carry out transactions.
Buying directly using cash: If you are not willing to deal with a centralized exchange and want a little bit more privacy, you can buy crypto directly from a peer-to-peer marketplace.
This kind of OTC trading doesn’t have any impact on the price of the crypto. You can also do this in person with a trusted peer to exchange crypto for cash.
He can scan the QR code of your wallet and send you the crypto in exchange for cash.
Buying using a crypto ATM: You can purchase cryptos like Bitcoin using a Bitcoin ATM. These ATMs work both ways so you can even sell your BTC for cash.
These crypto ATMs are starting to get more and more common just like regular ATMs.
Buying crypto using payment systems: Using a supported platform, you can purchase cryptos using payment methods such as Skrill and PayPal.
You can use any of the above methods as it all boils down to personal preference.
We will now learn where to trade cryptocurrencies.
Where To Trade Cryptocurrency
A crypto exchange platform is by far the most popular way to trade cryptos.
In an exchange platform, you need to open an account to perform your trading. To open an account, traders need to submit the necessary documents required for ID verification.
Once you register and verify your account with the exchange, all you need is crypto wallet, and you are set. You can now start crypto trading.
Choosing an exchange should be a well-thought out process. You need to consider the location availability, reputation, exchange rate, and reliability.
Once you have made your choice, start browsing the exchange platform and get used to the features and interface. Most importantly, check out the asset index.
If you are just starting out, or never traded crypto before, we would recommend you to start with major coins such as Bitcoin, Ethereum, Ripple, and so on.
These are well-established coins that have been in the market for many years and have a solid backing by the crypto community.
You can slowly start exploring other altcoins once you get the hang of crypto trading and start making regular profits.
Another way you can trade crypto is through a crypto broker. Here, you will trade cryptos as CFDs. Therefore, you won’t own the crypto when trading.
With CFD’s, you only speculate on the price movement of the asset. Know more about CFD trading here.
Some brokers like eToro offer both real crypto as well as crypto CFDs so you have flexibility in your trading.
Choose a broker that is well reputed with a clean history, regulation, excellent features and a easy to use trading platform.
How Cryptocurrency Trading Works
Trading cryptocurrency has no major differences with trading Forex. Buying and selling currency pairs occur in Forex trading.
In cryptocurrency trading, traders exchange digital coins either in fiat currency or in fiat to digital coins.
You need an initial capital to start trading. If you trade real crypto, then you need to pay exactly the unit you are trading. Keep in mind that you don’t need to purchase a whole unit of crypto to trade.
You can purchase and sell fractional units up to the exact decimal mark. For example, the price of 1 unit of bitcoin costs $11835 (At the time of writing this article).
This is a high investment for many traders. Instead, you can purchase a fraction of the whole such as 0.05 BTC. As you trade more and more, you can deal with larger amounts.
When trading crypto CFDs, you can enjoy margin and leverage. We’ll explain how it works. Consider the hypothetical example where a crypto is priced at $1000.
The leverage on bitcoin is 5:1. This means you can open a long CFD position for the crypto worth $1000 using only $200 and the rest $800 will be provided by the broker.
The broker will charge interest over this borrowed amount.
So what happens when the price of bitcoin increases? Say, the price now stands at $1100. Your broker takes his lent money ($800) and you are left with $300. That’s a profit of $100.
You invested $200 and received $100 as profits. That’s a profit rate of 50%. If you traded crypto the normal way, you’d invest $1000 to earn a profit of $100. In this case, your profit rate is 10%.
Therefore you can realize how profitable margin trading can get. But at the same time, if you had lost your trade, your losses would be magnified too.
This is why we don’t recommend marginal trading to beginners. If becomes hard to recover from losses and may discourage the trader from trading altogether.
Trading Crypto With A Demo Account
Demo accounts is basically just a practice account. Many brokers offer demo account facilities for their traders.
You can implement your trading strategies there to test its effectiveness. Demo accounts get the same features as the real trading platform.
Demo accounts are recommended for both novice and experienced trader. New traders can get a sense of crypto trading through a demo account before trying out real trading. They can trade without any worries and the risk of having to lose money.
Brokers allow traders to test the platform before depositing money. Therefore, demo trading is a win-win situation for both parties.
The only difference between real and demo trading is that in demo accounts, the currency is not real. You will get a virtual amount after opening a demo account. Make sure you transition your demo trading skills to real trading.
How To Day Trade Cryptocurrency
Day trading is the form of trading where you open and close positions within the same day. It is labeled as short-term trading.
This type of trading is not a get-rich-quick scheme. Day traders, rather focus on small profits through these trades.
With crypto, day trading can be an interesting proposition. The crypto market is pretty volatile and there are mutiple price shifts within the same day for some assets.
First things first, never put more than 1% of your total capital on a single trade. Even if a trade seems winnable, don’t over invest. The market can be analyzed,but not predicted to the dot.
Scan out the assets that you are interested to trade in. Follow the news for that asset. News do influence the price movement of an asset so watch out for that.
Next, you have to perform technical analysis using the tools available in the trading platform. You will need indicators, trend lines, and graphical tools.
Most importantly, you will need a keen eye to spot trends and find entry points. This comes with practice. Since your trades will last a few hours or a maximum of single day, you need to adjust your time frame in the platform accordingly.
Don’t ignore the long term price trend too as it will help you further understand the price movement.
Other things you need to ensure are utilizing risk management tools like stop-loss and take-profits.
Another thing that you need keep in mind while day trading is taxes. Taxes are low when there is long-term capital gains. But for short-term, the taxes are high. So that’s something you need to consider when day trading.
Fees That Are Associated With Cryptocurrency Trading
Brokers and exchange platforms earn from different fees related to cryptocurrency exchange. These are:
The Trade Fee is mainly applicable when a trader places a trade into the exchange platform. Trading fees are calculated based on the total amount of your transaction. Some exchanges charge a flat fee from traders.
The taker fee and the maker fee are included in the Trade fee. Taker fees are eventually higher than maker fees. This is one of the important features in any exchange platform. The amount of fees is not more than 1%. The fee depends on the crypto pairs.
The Exchange Fee is incurred when the trader exchanges digital currency from their wallet or any exchange platform. The fee will depend on the cryptocurrency pairs. The exchange fee also varies from one account to another account.
Exchange fees also depend on some factors like account verification fee, depends on the trading volume, and length of the membership.
When traders deposit or withdraw their funds, Deposit and Withdraw Fee is charged. This fee differs from crypto to crypto.
Lower fees attract traders to use their exchange/platform.
After reading this article, you will able to decide where, when, and how to trade cryptos. The cryptocurrency market is open 24/7.
In this article, a clear explanation on what cryptocurrency trading is and how to trade them was given.
We then covered how to buy cryptocurrency using different methods. Then we explained as a trader, where you can trade cryptocurrencies.
A clear understanding on how cryptocurrency trading works was provided. The importance of a demo account has been elaborated.
Day trading can be a suitable way of trading crypto for some traders. We listed the things you need to keep in mind when day trading crypto assets.
Finally, we listed the various fees that are associated with cryptocurrency trading. You can now start trading crypto confidently and profitably.