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The Complete Guide to Cryptocurrency Trading

02.11.2020

Cryptocurrency trading is has picked up popularity again as it often does during economic uncertainty. With the global pandemic in 2020, people’s interest in crypto trading picked up rather fast again. And with the increasing variety of crypto assets available to trade, more people want to get on board. Are you also looking to try out crypto trading? Then you’ve come to the right place!

We have know trading and crypto like the back of our hand, and we’re happy to share with you. Right here, you’ll learn all about cryptocurrency trading, including how to get started and how to succeed. Ready? Let’s begin!

Cryptocurrency Trading 101 – Learn the Basics

If you’re new to the world of crypto, no worries! We’ll start with the ABCs of crypto to ease you in nice and slow. First up, what is trading? 

What is Trading? 

Trading involves buying and selling of assets for profit. Traded assets include intangible property like shares, bonds and other securities. They could also include tangible property like gold, silver, oil or other commodities. The goal of trading is to profit from a favorable change in the value of an asset over time. Good so far? Now, let’s talk about cryptocurrency trading. 

What is Cryptocurrency Trading? 

Crypto trading involves buying and selling of digital assets. Cryptocurrency is usually traded on a crypto exchange. This is where you find other people that want to trade crypto. Trades can also happen on a brokerage or through an investment trust. A brokerage is similar to an exchange. But the difference is you don’t actually need to own crypto assets to trade here. An investment trust is a pool of funds invested in crypto assets and operated by a company. It is generally safer, but can be more expensive than direct trading, this is the way for institutional investors and the small guy doesn’t often get in. 

That said, there are two basic types of trading. There’s fiat to crypto, and crypto to crypto. First you need to get your dollars or euros or krona exchanged into crypto. Fiat to crypto trading is often limited, since not many exchanges support this. It is also often limited to the largest crypto tokens like ethereum (ETH) and bitcoin. Crypto to crypto trading is much wider though. Here, you can exchange thousands of pairs of crypto.

Lastly, let’s discuss the basic ways to trade. There are a few different options – CFDs and buy/sell. CFD means contracts for difference. Usually, you only trade this way on a brokerage. CFD trading lets you trade crypto without owning the assets rather than speculate on the price changes, but you won’t be able to withdraw your BTC outside the brokerage. With buy/sell trading, you actually trade crypto that you own. Need to learn more about how crypto trading works? Check out our guide on cryptocurrency trading for beginners to learn more. 

Brief History of Cryptocurrency Trading

Crypto trading has matured incredibly over the years. But just a few short years ago, the times were very different. Before crypto, there were several other digital currencies. The most popular of these was e-gold, created in 1996. E-gold offered a way to trade gold electronically, but backed by actual gold reserves in physical vaults. The popularity of e-gold led to the creation of websites where people could trade the e-currency. These were essentially the precursors of modern crypto exchanges. 

Modern crypto trading started with the launch of bitcoin by Satoshi Nakamoto in 2009. Curiously, no one really knows who Nakamoto is, as the founder is very secretive. It has been speculated to be a group of people, with Hal Finney being the main contributor. He has since passed away and we don’t know the whole truth. Many people have come forward stating that they are Satoshi Nakamoto however the proof was lacking.

 After the launch of bitcoin, the first modern crypto exchange – Bitcoin Market – went up in March 2010. Soon enough, other popular exchanges would launch, including Mt. Gox in July 2010, Bitstamp in 2011 and Coinbase in 2012. These exchanges had lots of problems though. From ties to money laundering, to hacking events and lost crypto assets. But these were pretty early days. The entire market cap of bitcoin only reached $1 million in November 2010. The price of one bitcoin only hit $1 in 2011.

Today, things are much different. Currently, crypto exchanges are safer than ever. Crypto trading is incredibly popular now. In December 2017, $50 billion worth of crypto was traded in a day, for the first time. But now, the global crypto market cap is over $350 billion. And global daily trading volumes are closer to $100 billion.

Cryptocurrency Trading – How to Get Started?

Now that we’re done with the basics, let’s get down to business. Crypto trading is a lot of fun. But it can also be risky due to its volatility. This means it experiences rapid changes in value. So you want to make sure you’re starting on the right track. Here’s what to do. 

Pick an Exchange 

Crypto trading starts with picking a great exchange. The exchange you pick determines a lot. This includes the cost to you in fees, the security of your trades and the variety of trades you can make. Crypto exchanges may be centralized or decentralized. A centralized exchange has its entire infrastructure in one place. A decentralized exchange is the direct opposite. It has a distributed infrastructure. But while this makes it more secure, it can be slower than centralized exchanges. A decentralized exchange keeps hold of your money whereas on a decentralized one, you hold your private keys. This comes with its benefits but also has downsides. Forget your password or lose access to your private keys? You lose access to your money. 

How do you pick an exchange? First, make sure it’s available in your country. Then look at their reputation. The most reputable exchanges are registered and verified by industry regulators. Next, look at their security. Interact with their customer support and see if there’s an active community. If you have an issue, you want it to be resolved fast. Service in many exchanges is lacking and understaffed. Finally, look at the transparency of their fees and exchange rates. CoinMetro is a great option to trade crypto at transparent fees. Check it out!

Buy Crypto 

Buying crypto is relatively straightforward. As mentioned earlier, you can either trade fiat for crypto, or crypto to crypto. So, you need to buy crypto assets in order to trade crypto to crypto. Ensure you have a valid ID, as a secure exchange will want to verify your identity. To buy, simply login to your account. Then follow the instructions. If you have any problems, the support team can help. At CoinMetro, our support team is available 24/7. Say hello! 

Want more info on how to buy? Here’s a great guide on best crypto to buy now

Store Securely 

After buying your crypto, your next step should be storing your assets. Crypto tokens can be stored in digital stores called “wallets”. But you have many options. You can choose hot storage, or cold storage. Hot storage is connected to the internet. This includes web-based wallet apps like Mycelium and Exodus. Cold storage includes hardware wallets in the form of a USB, or even paper. An example is Ledger. 

Here’s an important thing to note. When you create your wallet, you will get two things – a private key and a public address. Your private key is secret and should NEVER be disclosed to anyone. This is what you use to verify transactions. Your public address can be shared with people. It lets you receive money in your wallet. 

Start Trading 

Finally, it’s time to start trading! To begin, login to your account and visit the trading page. Navigate to your crypto exchange and start. You can trade on your normal exchange or use the margin trading platform if you are feeling confident in your trading and want to use leverage to enhance your profits. To set a trade, select the crypto asset you want to buy or sell, and lock it in – you can either buy at the current market price or set up limit orders to execute when it reaches the desired price for you. Looking for more practical tips? Here’s a hands-on cryptocurrency trading guide you can check for more info. 

How to Succeed at Crypto Trading? 

With all the above info, you’re ready to start trading. But what do you really need to succeed in crypto trading? That is difficult to answer. Successful trading takes a lot of experience, and sometimes, even a good dollop of luck. However, there are ways you can make success more likely. Start by using the right strategies and tools. 

Crypto Trading Strategies 

There are many ways to trade crypto. Each of these gives you options to make quick, slight gains, or enjoy long-term appreciation in value. Some of the most popular strategies involve short term trades though. They are popular because you can rapidly make little gains in a short while. And these can compound into bigger gains. Popular short-term trading strategies include day trading, swing trading, copy trading and margin trading. Although these strategies can be profitable, they can also be very risky. Click on the links to learn more about these strategies. 

You can also choose long term strategies. One of the most popular is “HODLing”. This is crypto community jargon for holding crypto for long periods. So, instead of holding for as little as minutes, hours, days, weeks or months, you hold for years at a time. This can also be quite profitable. If you held bitcoin from 2011 when it was just $0.35 per token, you could have sold for $20,000 each in 2017. That’s over 57,000% profit.

Crypto Tools and Indicators 

Successful crypto traders maintain a close relationship with their tools and indicators. These give you important insight into the market. There are hundreds of crypto tools and indicators available though. As a result, not knowing what to look for can be confusing. 

The best tools to start with are charting tools. These tools let you visualize trends so you can see where the market is going. For instance, TradingView gives you live charts to see all the data at your fingertips. Another important group of tools are market data tools. These tools let you know all about the data behind trades. Great tools here include CoinMarketCap and OnChainFX. Calendar tools give you a heads up on vital future info. You can try out CoinMarketCal to get started. 

Trading bots are a special kind of tool – these are automated trading systems that execute trades based on a set strategy and a variety of indicators. This way, you can keep trading, and making money, even while you sleep. Read up on our guide to cryptocurrency trading bots to learn more. 

 

And that’s it! Now that you know everything about cryptocurrency trading, it’s time for some practice! Head on over to CoinMetro for some hands-on trading today. If you have any questions, our support team is ready to help. Get in touch!