Other than being a powerful substitute for fiat currencies, crypto has a lot of potential in trading. Of course, if you have no trading background, getting started is intimidating and, while some concepts from traditional investments apply to crypto, others do not.
To quickly get the hang of how to trade crypto, follow this quick guide.
Learn the basics of trading
Cryptocurrency trading lives on exchanges — platforms where users can buy or sell cryptocurrencies. If you keep your coins in a wallet, to start trading, you need to move a part of your funds to an exchange (we’ll touch on choosing a reliable crypto exchange a few paragraphs later).
Next, price pairs. To trade crypto, you need to buy one coin and sell it for a different one. For example, if a BTC holder wants to sell Bitcoin and buy Ethereum, she needs to choose the ETH/BTC price pair on a crypto exchange.
Most exchanges feature charts with historical data for each price pair.
Finally, as a crypto trader, you should understand how buy-and-sell orders work. Each of those has three options:
- Limit order — you set the price and the amount of token to buy or sell. As soon as someone is ready to match your price, the order goes through.
- Market orders are fulfilled at the most convenient price available at the placement time.
- Stop-limit order is a lot a standard limit order — however, it is filled only when a predefined condition (e.g. a stop price) is met.
We’ve covered the fundamental concepts of crypto trading — let’s move on to actionable tips.
Pick The Right Exchange
A preamble: there’s no universally right crypto exchange. What works for you depends on your interests and criteria.
Some look for ease of use and don’t want to bother storing public and private key pairs, others want to invest in exchange-backed tokens (think Gemini or Binance users), yet other traders want to use popular platforms because there are a lot of online tutorials covering them.
To make sure you don’t choose a shady crypto exchange, cross-check platforms against the list of criteria below:
- Accessibility — it’s better to use platforms that are available worldwide and cover a wide range of currencies.
- Security. Since crypto is not backed by a central bank-like institution, there’s no unified reserve. Each exchange is responsible for its own reserves — as a user, you want to make sure developers prioritize safety (top-tier platforms enabled 2FA and store funds offline).
- Fees. Before sticking with an exchange, do your research on its fee structure. For example, some platforms offer different fees for sellers and buyers — make sure you know the caveats before you commit.
- Liquidity — as a rule of thumb, it’s better to choose high-volume exchanges to make sure you can trade your holdings whenever you want.
Develop Your Strategy
Success in crypto trading is largely decided by research and preparation. There’s a lot of data around — some genuine, some hyped. To become a skilled crypto trader, you want to be confident in your fact-checking skills and know how to read trading data like technical analysis charts.
Here are a few helpful resources for developing a flexible and profitable crypto trading strategy:
- Understand blockchain and finance to tell promising projects apart from fads. The MIT blockchain course gives a quick beginner-friendly overview of the technology behind crypto, given non-tech-savvy investors a clear idea of what proof-of-work, double spending, and other concepts mean.
- Learn how to use technical analysis: here, The Art and Science of Technical Analysis is definitely a go-to resource for beginners.
- Pick up the habits of successful traders (not necessarily those in crypto). Investors swear by Market Wizards — a series of interviews with top-tier investors that help acquire sharp, spot-on decision-making and develop speculative thinking.
Increase the Level of Your Data Security
You might think yourself smart enough to not buy into tricks — unfortunately, sneaky scammers were able to steal over $100 million in crypto using a phishing scheme.
How to make sure your trading is secure? Here are a few helpful tips:
- Know which crypto exchanges you use and monitor account activity.
- Restrict your API keys and allow them to work only with selected IPs.
- Don’t keep all your crypto on exchanges — offline wallets are more reliable storage.
- Use a reliable VPN to not give away your digital footprint.
If crypto trading feels like uncharted waters, it’s okay to spend some time doing research and lurking on forums like Reddit or Bitcoin Talk. This way, once you enter the market, you will be aware of the gains, risks, and profit-yielding strategies.