Cryptocurrency Trading Guide - Is Trading Crypto Profitable?

What is cryptocurrency trading, and how does crypto trading work? Can you make money from trading cryptos? What are the best strategies for trading cryptocurrency, and can beginners trade cryptos?

Cryptocurrency trading is speculating on price fluctuations by buying or selling crypto via a CFD trading account. CFD is an abbreviation for contract for differences, which is an agreed contract paying the differences between the final price between an open and closed trade. A CFD allows you to trade the direction of a security short-term.

In this guide, We explain what is cryptocurrency trading for beginners guide. We tell you what cryptocurrencies are, how they work and explain how they are traded by introducing you to crypto exchanges.

We also tell you about the different trading strategies and introduce you to the different forms of cryptocurrency trading. By the end of this guide, we will also have taught you to trade your first coin.

What Are Cryptocurrencies?

A cryptocurrency refers to a digital or virtual currency that is created by algorithms that rely on cryptography. The algorithm is specially designed to award cryptocurrencies to computers that help verify transactions on a blockchain. And blockchain here refers to a highly decentralized database that uses cryptography to secure transactions and store the ownership of cryptocurrencies.

Bitcoin was the first-ever cryptocurrency created and was introduced to the public in early by the pseudonymous Satoshi Nakamoto.

But did you know that the digital and anonymous money concept had been there since the 80s? The history of cryptocurrencies, started in 1983 when a computer Scientist and cryptographer – David Chaum – created the first anonymous electronic money and referred to it as eCash. His theory would be studied and tested by numerous cryptographers and computer scientists in the 1990s and early 2000s. But it took Satoshi Nakamoto to actualize it and introduce the first functional digital currency.

Like Chaum before him, Nakamoto intended for the anonymous and cryptographically secured digital currency to be used as an alternative medium of exchange.

He was confident that Bitcoin will eventually replace the inflation-prone and government-controlled fiat currency. Today, however, the cryptocurrency is used more as a store of value ad trading instrument than it is used in facilitating payments and cross-border cash transfers.

Bitcoin’s success has also inspired the establishment of even more blockchains and cryptocurrencies. They are all referred to as alternative cryptocurrencies or alternative bitcoins – Altcoins.

What Is Cryptocurrency Trading And How Does It Work

Cryptocurrency trading refers to the act of speculating on the future price direction of Bitcoin or other cryptocurrencies. In its most basic form, crypto trading involves buying the digital asset at a low price (dip), holding on to it, and selling it when the price rises (peak) – effectively turning a profit.

When you trade cryptocurrencies - you are speculating the future value of the respective digital coin. For example, if you are trading Litecoin, you are making an attempt to predict whether the price of the asset will rise or fall in the market. 

Based on this speculation, you will place a buy order or a sell order. If your prediction is right, you will make a profit on your cryptocurrency trade. 

Here is an example to clear the mist:

• Let's say that you want to trade Ethereum against the US dollar.
• On cryptocurrency trading platforms - you will find this denoted as ETH/USD.
• The pair ETH/USD is quoted at $1,700. 
• You set up a buy order worth $5,000 on the pair. 
• After a few hours, ETH/USD has an exchange rate of $1,725. 
• This means a price increase of 1.47%. 
• On your $5,000 stake - you made a profit of $73.5. 

As you can see - since your prediction came to fruition, you are able to make money on this trade. 

With that said, you can also make money when the price of a cryptocurrency falls. In this case, you will be selling the cryptocurrency through a sell order, so that you can buy it back at a lower price - making a profit in the process. 

This is known as short-selling, which we cover in more detail later on. 

Needless to say, you are looking to make consistent profits when trading cryptocurrencies. As such - you will need to make more winning predictions than losing ones. 

In order to do this, you need to understand what drives the price of the cryptocurrencies you are trading. 

By and large, cryptocurrency trading can make you rich if you are able to predict the market correctly and place smart trades accordingly. 

But before we advance any further, let us explain how cryptocurrency pairs work. 

Cryptocurrency Trading Pairs

Cryptocurrency trading pairs are digital assets that can be exchanged during a trade. 

For instance, if you see the trading pair ETH/USD, then it means that you can exchange ETH (Ethereum) for USD (US dollars). 

In the cryptocurrency scene, you can find trading pairs classified into two categories: fiat-to-crypto pairs and crypto-to-crypto pairs. 

Let us dig deeper into each type to gain a better understanding. 

Fiat-to-Crypto Trading Pairs

In a trading pair, there is a base currency and a quote currency. As you can guess, in a fiat-to-crypto pair - you will be exchanging a cryptocurrency for a fiat currency. 

Put differently, when you see a fiat-to-crypto trading pair such as ETH/USD or ETH/EUR - it tells you the price of the digital coin quoted in terms of the fiat currency. 

For example, if ETH/USD is priced at $1,500 - it means that one Ethereum is priced at $1,500. 

Cryptocurrencies are most commonly traded against USD - as it is considered the global benchmark currency. That said, you will also be able to find trading pairs offered in other fiat currencies. 

For example, aside from ETH/USD, you will also come across ETH/EUR (euro), ETH/JPY (Japanese yen), ETH/AUD (Australian dollar), and more. 

However, when you choose a fiat-to-crypto pair, it is best to make sure that the respective market offers sufficient liquidity. 

Consider this example of fiat-to-crypto trade:

• Let's say you want to trade Cardano against USD. 
• You will see this trading pair denoted as ADA/USD on cryptocurrency platforms. 
• The currency price of ADA/USD is quoted at $1.15. 
• You predict that the pair is about to increase in value - so you place a buy order worth $100. 
• After a few days, the price of ADA/USD rises to $1.30. 
• This translates to an increase of 13.04%. 
• Wanting to cash out - you place up a sell order. 

In this case, you closed the trade with a profit of $13.04 on your $100 stake. 

A fiat-to-crypto pair is often preferred by beginners, as they allow you to tap into tight spreads and low commissions. Moreover, it is relatively easier to qualify your profits and losses when there is a fiat currency in the pair. 

Alternatively, you can also trade cryptocurrencies against other digital currencies - which brings us to the next pair category. 

Crypto-to-Crypto Trading Pairs

Cryptocurrency trading platforms also allow you to exchange one cryptocurrency for another. In this case, you will see trading pairs such as BTC/ETH or BTC/XLM. 

For instance, if you come across the pair ETH/BTC quoted at 0.034, it means that for every Ethereum coin you trade, you will get 0.034 Bitcoin in return. 

As a trader, your objective is to predict if this exchange rate of the trading pair will increase or decrease. 

And as one can imagine, it might be difficult to get your head wrapped around these price calculations at first. Consequently, as we mentioned above, many traders choose to get started with fiat-to-crypto pairs when venturing into the cryptocurrency trading scene. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

How long you hold onto the cryptocurrency is largely dependent on your preferred form of cryptocurrency trading and the trading strategy.

Different forms of cryptocurrency trading:

There most popular form of cryptocurrency trading involves buying and selling the actual virtual coins. However, considering the fact that cryptocurrencies do not have a physical form, buying and selling virtual cash involves the exchange of the private key associated with a digital currency.

The private key here refers to a particular coin’s unique identifier – much like the serial number on the dollar bill. The private key is proof of ownership of a cryptocurrency and is generated by the cryptographic algorithms associated with a particular blockchain, for instance, Bitcoin or Ethereum.

Other forms of crypto trading include:

- Contracts for difference (CFDs):

Trading crypto CFDs involves speculating on the future price movement of the digital asset without actually buying one. It is more of a bet or a contract between a trader and their broker/exchange where the buyer promises to pay the difference in value between current and a future price if it goes against their prediction, vice versa.

- Futures:

Cryptocurrency futures are binding contracts between where two parties agree to buy or sell bitcoins at an exact price and on a specific future date. If you expect the price of crypto to go up, you can then go long on a contract. If you bet that the price of the contract will fall, you can short a contract.

In most cases, crypto futures trading is facilitated by exchanges that will match your long or short futures bet with another futures trader. If the cryptocurrency price goes up by the expiry date of the contract (can be after a few days, weeks, or months), you make money if you bet it would go up, and lose if you had bet on the price to fall.

- Options:

Options work like futures contracts. They, too, are exchange-traded bets that the price of a cryptocurrency, say Bitcoins, will go down. The only difference between the two is that while you are obliged to make good on your Futures contract, you have the choice of buying/selling the contract or simply letting it lapse – in the case of options contracts.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

What Is An Exchange?

The crypto exchange refers to an online business that creates a platform that brings together cryptocurrency buyers and sellers. It is the middleman facilitating the exchange of one cryptocurrency for another or cryptocurrency for fiat cash between buyers and sellers. They then charge a transaction facilitation fee, simply known as the trading fee, in the form of either spreads or brokerage commission, or both.

In addition to facilitating crypto trade, most exchanges provide such auxiliary services as education and training on crypto trading, market research, and analysis tools, they integrate multiple payment methods, and some even provide crypto storage services – crypto wallets.

What Is The Difference Between Cryptocurrency Trading and Investing?

Cryptocurrency trading and investing both involve the act of buying and selling digital currencies. In most cases, both crypto trading and investing are informed by a need to turn a profit from the changes in the price of a cryptocurrency. The primary difference between the two forms of interacting with Bitcoin lies in how long the buyer intends to hold onto the purchased cryptocurrencies.

When you invest in cryptocurrency, the general feeling about the move is that you are buying a digital currency, say Bitcoin or Ethereum, with the intention of holding onto it for a long time. In most instances, crypto investors view digital currencies as a store of value – a digital gold – and believe that they will experience a perpetual price increase.

This, however, does not mean that they don’t take into account the asset’s wild price volatility. They are appreciative of this fact but still hold the belief that short-term price fluctuations have no impact on the digital asset’s long-term price uptrend.

Cryptocurrency traders, on the other hand, involve buying a digital asset and selling it as soon as it proves profitable. Unlike crypto investors who devote a significant amount of their time researching the fundamentals of a given coin, traders are only interested in the technical analysis that reveals the next short-term price direction of the coin.

Similarly, unlike crypto investors who will only speculate on a crypto’s price growth, traders may embrace different trade strategies that make it possible for them to long or short the price of a cryptocurrency.

So, what are the commonly used crypto trading strategies?

Cryptocurrency Trading Strategies

Cryptocurrency Day Trading

Day trading is a form of short-term trading that involves making multiple cryptocurrency purchases and sales throughout the day. It is also referred to as intraday trading and is premised on the fact that all your trades will be closed before the end of the day. In most cases, the trader will only hold on to a trade for just a few minutes or hours before reselling either to turn a profit or avoid incurring significant losses.

To and accurately predict a cryptocurrency’s next price direction, Day traders rely on technical analysis tools and indicators (we look at the below). For instance, a bitcoin day trader will decide to long or short the coin just by looking at the trader sentiment measuring tools or by studying the candlesticks making up the bitcoin price chart.

Cryptocurrency Scalping

Scalping can be viewed as the more aggressive form of day trading. Like day trading, a scalper will always strive to have all their trades closed before the end of eth business day.

But while the average day trader opens and closes a handful of trades throughout the day, a scalper trades dozens and possibly hundreds of trades within the same period. Unlike the day trader who may hold onto a trade for a few hours, scalpers hold onto trades for just a few seconds or minutes.

Here, the goal is to accumulate as many small profit margins from as many trades and possible throughout the day while keeping the trading risks at a minimum.

To maximize the number of trades made in a day, possible earnings, and the accuracy of price predictions, most scalpers have turned automated trading bots.

Others have turned to signal trading where they depend on another, possibly a more experienced crypto trader, to send them ‘trading signals.’ These signals offer directions on the crypto to buy, when to buy, and when to exit the trade.

Cryptocurrency Swing Trading

Swing trading is a speculative cryptocurrency trading strategy that involves taking advantage of market swings. A swing trader relies on both fundamental and technical analysis tools and indicators to identify the beginning of a crypto trend/swing. It can be a price uptrend (that informs a buy/long decision) or a pullback (that informs a sell/short decision).

The trader then opens a trade at the beginning of the trend and rides it to the end. In the case of an upward price movement, the trader will hold on to the trade until its prices start to decline, and in case of a decrease in price, they will hold on to the trade until its prices start to increase.

Unlike day trading, where trades all trades are closed by the end of the day, swing trading may involve riding a wave for days, weeks, or even months.

Position Trading/HODLing

HODLing is to cryptocurrency trading what position trading is to stock trading. They both are a common trading strategy that involves buying a cryptocurrency (opening a position) and holding on to that position for a long period – possibly months or years. It is a speculative form of trading that is pegged on the conviction that the price of the preferred cryptocurrency – say Bitcoin or Ripple – will rise into perpetuity.

Unlike swing traders and day traders, position traders aren’t concerned by the short-term price fluctuation of a given currency. They are confident even when bartered, the digital asset will ultimately regain its value and possibly hit above its past price record.  

HODLing is a typo for HOLDing that originated from a comment from a crypto investor who said “I AM HODLING” on Bitcoin Forum while intending to say they were holding onto Bitcoin regardless of the market conditions. It has become popular within the crypto circles, and now instead of saying that you are taking a position on Bitcoins or other cryptocurrencies, you can simply say that you are HODLing.

How To Identify The Cryptocurrency To Invest In

Cryptocurrencies though hugely popular, are by far one the riskiest and most volatile trading instruments today. It is not rare for a cryptocurrency to post significant price gain or losses within a relatively short period. But this is not the only handle you’ll have in your search for the best cryptocurrency to buy. You also have to choose the best coin from the thousands of coins available today.

So, how do you isolate a coin from this massive list and ensure that you make the best trade decision by keeping the profit prospects up and the risks low? By relying on technical and fundamental market analysis.

Technical Analysis

Technical analysis is a form of market research that seeks to help a trader identity the trading opportunities by forecasting the price direction of a cryptocurrency. It involves examining the statistical trends recorded by the instrument, especially its volume and price direction.

In studying the price movements and trade volumes, technical analysts are able to identify trade historical price patterns that they can use to predict the future price direction of a specific cryptocurrency.

In most instances, technical analysis is applied by short-term traders. These are only interested in understanding how past forces of demand and supply have affected crypto prices in the past and how it is expected to affect its future prices.

Technical analysis may also be split into chart patterns and statistical indicators the most common of the two include:

• Candlestick charting
• Moving averages
• Relative strength index
• Moving average convergence-divergence
• MYC trading indicator
• Bollinger bands
• Fibonacci retracement
• Stochastic oscillator

Fundamental Analysis

Fundamental analysis is a form of market research that traders use to determine the intrinsic value of a digital currency. It refers to a set of tools and indicators used by cryptocurrency traders and investors alike in determining the underlying value of a digital asset.

Fundamental analysis traders are confident that by determining the worth, usefulness, and practicability of a digital currency, they may be able to forecast its future direction.

Typically, fundamental analysis looks into such factors as company earnings, earnings per shares, and other factors as industry performance. But since cryptocurrencies aren’t issued by corporations. The analysis angle, therefore, shifts towards the facets of the cryptocurrency.

These are the factors you should consider when carrying fundamental analysis for a cryptocurrency:

• Its whitepaper
• Its roadmap
• The developers
• The target market
• The project developers
• The project creators
• Potential red flags, rumours, expert opinions, and market sentiments about the cryptocurrency

These should be enough to tell about the digital currency’s future performance. For instance, a highly practical asset, which seeks to solve a tangible problem, and has a reputable team of creators, will inspire optimism in the market, which in turn pushes cryptocurrency prices up.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

How To Prepare To Trade Cryptocurrencies

Stage 1: Identify the digital currency you would like to purchase

Stage 2: Decide on the trading strategy for you: long term or short term

Stage 3: Acquire a reputable cryptocurrency wallet

Stage 4: Learn how to analyze the markets, interpret analysis indicators, and read charts

Stage 5: Identify the crypto exchange you would like to use and create a user account with them

Note: Account registration involves furnishing the exchange with your personal details like your name and address. Some will also subject you to KYC and AML procedures and want to verify your identity by asking for photos of your government-issued identification documents and a selfie portrait.

The Benefits Of Cryptocurrency Trading

Traders can speculate on whether the price of a crypto asset will increase or decrease. And, they don’t have to take ownership of that asset. They can do this through CFDs, spread bets, scalping, position trading, range trading, swing trading and intra-day trading.

The benefits of cryptocurrency trading include:

1. Cryptocurrency volatility

2. Cryptocurrency market hours

3. Ability to go long or short

4. Improved liquidity

5. Leveraged exposure

6. Tax-efficient trading 

7. Faster account opening

Some of the benefits of cryptocurrency trading include transparency, volatility, security, 24-hour open market, accessibility and low trading fees.

Cryptocurrencies are volatile meaning that their price goes up and down often. Since prices often move high, then trading cryptocurrencies can be really profitable. Traders should speculate on the price of a certain cryptocurrency, without having to own it. They can do this through CFDs, spread bets, scalping, position trading, range trading, swing trading and intra-day trading.

1. Cryptocurrency volatility

Cryptocurrencies are volatile meaning that their price goes up and down often. Since prices often move high, then trading cryptocurrencies can be really profitable. Traders should speculate on the price of a certain cryptocurrency, without having to own it. Although extreme cryptocurrency volatility is seen as a weak point for cryptocurrencies by critics, traders can benefit from it as the price of a crypto asset can rise and fall often, giving opportunities for profits.

2. Cryptocurrency market hours

In contrast to trading stocks and commodities, trading cryptocurrencies doesn't happen only five days a week. Instead, you are able to trade on the market at all times as it is open 24/7 across a growing number of exchanges. This is a great opportunity, especially for part-time traders that have full-time jobs, as they can use their spare time to trade.

3. Ability to go long or short

When going long, you purchase a value at a certain price and sell it at a higher rate as its value increases. The difference between the price of your purchase and the price you sell it at is the profit you make. When going short, you borrow crypto, then you sell it first in the open market, and after that, you buy those shares at a lower price and in this way you profit from the price difference. When trading cryptocurrencies, you will be able to do both.

4. Improved liquidity

When talking about tradable assets, then liquidity is an essential element, and that includes cryptocurrencies. Liquid markets secure a more efficient, deeper and smoother experience when trading. The illiquid market can place traders in situations that are hard to exit. Although forex is considered the most liquid market, cryptocurrencies do not stand badly either, because they are liquid.

5. Leveraged exposure

Leverage is known as using a deposit, otherwise known as margin, that provides you with increased exposure to a particular asset. Simply explaining, you’re laying down a fraction of your trade value and the rest is loaned by your provider. 

In cryptocurrency, CFD trading and spread betting are leveraged products. Therefore, they allow you to open a position on ‘margin’ – a deposit worth only a portion of the trade’s complete value. So, you could gain great exposure to a crypto market, just with a tiny amount of your capital.

6. Tax-efficient trading

If we maintain highly accurate records, we’re accomplishing the most important element of executing an effective strategy regarding tax-efficient cryptocurrency trading. Regardless of how a cryptocurrency investor or trader is generating income from trading, long-term investing, or other means, keeping accurate records is very important as it makes accurate valuation possible. Cryptocurrencies are known to have some advantages when it comes to taxes. For example, spread betting is completely not taxed. There is no capital gains tax (CGT) because you never own an asset.

7. Faster account opening

When trading cryptocurrencies it’s important to save time on tedious tasks relating to your account and focusing only on your crypto trades. Crypto exchanges are known to make the signing up process easy and fast, so you can start trading as soon as possible. 

Also, now there are various tools, claiming to make it possible for you to trade, buy and sell Bitcoin automatically for profit by following the current trends on the market.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Cryptocurrency Trading: Ways To Trade Cryptocurrency

Once you’ve got a grasp of the basics of cryptocurrency, let’s see what crypto trading is and how it works. Cryptocurrency trading, as stated above, involves the buying and selling of different virtual coins and exchanging one for another. 

There are two main ways to trade cryptos. One is to buy and sell cryptocurrencies via an exchange and the other is to trade a Contract for Difference (CFD) and speculate on price movements.

• Cryptocurrency Trading via an Exchange

Cryptocurrency trading via exchanges involves the buying and selling of cryptocurrencies. Here we should note that when you purchase cryptos via an exchange, you own the assets you buy. To do that safely, you have to open an account and store your assets in a crypto wallet until you decide to trade.

When you trade on an exchange, you should have enough capital to maintain your assets and also be familiar with all the technicalities in order to place successful buy and sell orders.

• Cryptocurrency Trading and CFDs

When you trade cryptos via a CFD account, you can speculate on price movements. In this case, you’ll be trading derivative contracts, so you never own the cryptocurrencies you are trading. Note that CFDs are defined as leverage instruments, which can increase both wins and losses.

Another instrument that uses leverage is spread betting. The main difference between CFDs and spread betting is the way they are regulated and taxed around the world.

Cryptocurrency Trading & Volatility

Whether you choose a crypto CFD or an exchange, do not forget that cryptos are extremely volatile. As a result, cryptocurrencies are often traded in smaller lots.  

Here we should note that cryptocurrency volatility is driven mainly by speculation and media. As cryptos are not backed by any physical asset or regulatory bodies, price movements are determined by supply and demand, with small changes exercising enormous effects on prices. 

How Does Cryptocurrency Trading Work?

Ready to start trading cryptocurrency? After you’ve become familiar with the different ways to trade cryptocurrency, it’s time to understand how cryptocurrency trading actually works. 

Cryptocurrency Trading | Regulations and Taxes

One of the first factors to consider is regulations and taxes. Though the world of cryptocurrency and blockchain technology is developing at a rapid pace, regulations are still slow and unclear.

In the US, for instance, cryptos are treated as property. As a result, US traders (referred to investors) should follow strict regulations. In some places, on the other hand, crypto trading is completely banned. 

Such confusing regulations across the world can be detrimental, so make sure you are familiar with the legal status and tax regulations of cryptocurrency and Initial Coin Offerings (ICOs) in the country you’re based in. 

What Factors Affect Crypto Trading

To become a successful trader, you should analyse all the different aspects that affect the world of cryptocurrency. In fact, it’s not only regulations that affect crypto trading. 

Traders should understand that crypto trading is moved by supply and demand. Interestingly enough, market capitalization and media play a crucial role. Key events, such as economic drawbacks, hard forks, as well as integration, should be considered. 

The capability of some platforms to support smart contracts and decentralised apps is another attractive investment opportunity. To provide an example, if a big company announces they’ll be using a crypto, cryptocurrency trades may increase.

Even though crypto trading is relatively new compared to other forms of trading, traders should keep an eye not only on metrics and indicators but historical price charts, too.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

How Can I Start Trading Cryptocurrency?

If you think you understand what cryptocurrency trading is and how it works, it’s time to start trading. Here are some ways to help you get started: 

Understand your trading goals

To become a successful crypto trader, one has to understand their own motives. While some trade cryptos to increase their wealth, others trade to diversify their portfolios. Those who want to own actual cryptos, for instance, should consider trading via an exchange.

Focus on Cryptocurrency trading education

Whether you want to make a profit or simply find a new work opportunity, you should always focus on educating yourself. From online courses to seminars, one should know the basics of crypto trading by heart. You should be able to analyse different coins, use charts, and open deals.

Familiarise yourself with cryptos  

Crypto Traders should have a profound understanding of the different cryptocurrencies they can trade, as well as their abbreviations.

For instance, BTC is the abbreviation for Bitcoin, while BCH is for Bitcoin cash - a hard fork in Bitcoin’s blockchain. You should master crypto pairings, too. Experts claim that beginners should start with popular coins.

Bitcoin, Ethereum, Solana, Cardano and Ripple are some of the largest cryptocurrencies that can lead to successful trades. You can trade Bitcoin for Ripple, for example. Interestingly, figures show that Bitcoin makes up almost 64% of cryptocurrency’s market value.

Develop a trading strategy

Traders should understand the complexities of trading in order to test and develop a strategy. Having a trading journal is recommended. One of the main rules is to buy when the price is low and sell when it’s higher.

Here we should note that the term uptrend/bullish refers to when prices are rising, while the term downtrend/bearish to when prices are decreasing. You should learn to trade with the trend. Let’s take swing trading, for example! If you decide on swing trading, then you should pay close attention to trending prices and always place a stop to reduce risks.

Consider crypto trading risks

Many traders start with fiat currency to buy cryptos. When you decide on a coin, though, consider processing times and supply limits. Simply because cryptos are highly volatile and the longer you wait, the higher the risk that the value will change! This volatility can result in high risks, so always integrate a risk management strategy in your trading style. 

Choose a trading platform

Another important step to help you reach trading success is to choose a reliable trading platform. Factors, such as ease of use, customer support, and security are essential.

Find a regulated broker

Do your research before you choose a broker to trade crypto CFDs. Make sure you have a regulated broker! Consider exchange, trade, and deposit-withdrawal fees to make sure you have enough capital to start investing. Also, check if your broker specialises in other assets to help you diversify your portfolio.

Create a cryptocurrency wallet

If you really want to own actual cryptos, you’ll need a cryptocurrency wallet. A cryptocurrency wallet is essential to keep your money safe. Note that traders can choose from paper, mobile, software, or hardware wallets.

Consider demo accounts and trading bots

To help you get started, you can consider opening a demo account or using a trading bot. With a demo account, you can test your potential brokerage and develop a strategy.

Trading bots, on the other hand, can execute actual trades automatically. At the same time, they can be a big mistake. Find out why crypto trading bots can be the best or worst decision you’ll ever make.

Boost your self-control:

One of the most important steps to success is to boost your emotional self-control. You should learn to put intense emotions aside and become consistent. Consistency will help you win not only one trade but a series of moves.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Is Cryptocurrency Trading Safe?

While cryptocurrency trading offers numerous exciting opportunities to potentially increase your wealth like a real crypto king, crypto trading has some negative sides. One of the main concerns is safety. Though blockchain technology is almost unhackable, there are certain risks. Take 51% attacks, for example! This is an attack on a blockchain where a group of miners can execute different malicious acts.

Before you start investing in cryptocurrency, you should also be aware of different scams. As cryptocurrencies are not properly regulated yet, there are many scams and frauds (especially in the form of ICOs) that can lead to huge losses. OneCoin is one of the most notorious scams in the history of crypto trading.

On top of that, crypto trading is still ruled by negative attitudes. As cryptocurrencies have been used for illegal activities, many people still associate crypto trading with the dark web and criminal activity. 

That said, cryptocurrency trading can be a reasonable investment opportunity. Learn how to overcome crypto-related challenges and become a successful crypto trader. 

Should You Buy Or Trade Cryptocurrencies?

Before deciding to get into the world of cryptocurrencies you must know that trading and investing are two different things. If you need help to understand things more in detail in this regard, take a look at this detailed article. 

You might be interested in buying cryptocurrencies if…

• You accept to pay taxes on any gained profits
• You are able to pay for the asset upfront
• You want to be part of people who own cryptocurrencies
• You don’t get bothered by introductory limits or maximum deposits
• You are patient to wait for an exchange account before selling or buying
• You don’t mind fees for deposits or withdrawals
• You want to be part of all the HODLers around the world

You might be interested in trading cryptocurrencies if you…

• You want to speculate on their prices without owning the asset
• You are contemplating to gain exposure to multiple exchanges from the same account
• You want your position leveraged so that you put up much less than the cost upfront
• You don’t like paying deposit or withdrawal fees
• You have a burning desire to start trading right away
• You don’t want to have a maximum deposit limit

Can Beginners Trade Cryptocurrencies Profitably?

For anyone interested in cryptocurrency trading, the goal is, in most cases, to maximize earnings. However, this is often easier said than done. 

If you are yet to find a way to make the most of cryptocurrencies, this guide takes you through the most popular ways to make money with cryptocurrencies. 

In the past, due to random pumps in the market, many people have gotten lucky and made insane wealth without much skill in crypto trading. However, as the market matures and more cryptocurrencies enter the market, you need strong analytical skills to win consistently in crypto. 

You don't have to worry, though. The next section will take you through the best ways for beginners to start trading profitably . 

Anyone can make money off cryptocurrencies. However, you need to be acutely aware that it is a risky venture.

Due to the volatile nature of this market, it is easy to make a huge amount of money in a very short time. You can also lose a truckload of money in an equally short time. 

Thankfully, this article considers all this. After reading through it, you will be aware of the different ways a beginner can make money from cryptocurrencies and choose the method that best suits your needs. 

Best Ways For Beginners To Make Money From Cryptocurrencies

While there are dozens of ways to make money in the cryptocurrency market, not all of them are good for beginners. This section looks at some of the best ways that a beginner can make money from cryptocurrencies safely. 

1. You Can Opt To Trade CFDs

If you are an experienced trader, one of the best ways to trade cryptocurrency is to go for CFDs.

A CFD, short for Contract of Difference, is a popular way to trade cryptocurrencies without actually owning them. An investor signs up with the broker, who agrees that they will pay you if and when certain conditions are met. These conditions include closing out your position at least halfway through each trading day (or whatever time frame is agreed upon) as well as following all other rules outlined in their regulations regarding how this type of contract works.

Multiple advantages come with trading CFDs. The biggest one is that you can make big profits from a very small investment. For instance, you can choose a lot size as low as 0.1 BTC, then borrow multiple times the amount invested to help magnify gains. This means if the market moves in your favour, you can make more than you would from owning actual Bitcoin. 

Another advantage of trading CFDs is that you can make money regardless of the market direction. Unlike owning a cryptocurrency directly, with a CFD, you can buy (go long) when you expect the market to go up. Conversely, if you expect the market to go down, you can make money by going short (betting against the market). This flexibility guarantees a cryptocurrency CFD trader profitability regardless of the market conditions. 

CFDs also come with an element of flexibility, in that you can enter and exit the market at any time you want. For instance, since Bitcoin is a 24-hour market, you can trade Bitcoin CFDs at any time, 24/7.

You will also love CFDs for the simple fact that you can hedge physical portfolios in uncertain times. For instance, if you own physical Bitcoin but believe a correction is imminent, you can retain your BTC but take a short position on Bitcoin CFDs. This ensures that you don't incur any losses even when the market corrects since you will still be making money. 

eToro is a regulated cryptocurrency, stocks, and forex broker that serves more than 13 million customers globally. It has CFDs for multiple instruments, including cryptocurrencies like Bitcoin. 

With eToro, you can go long (BUY) or short (SELL) Bitcoin, among other cryptocurrencies. 

Pros

✅ You can magnify profits out of a small investment

✅ You can hedge your cryptocurrency portfolio

✅ You can trade at any time 24/7

Cons

❌ You can easily lose all your money if the market goes against you.

❌ Doesn't favor long-term investing. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

2. Start Mining Cryptocurrencies

Cryptocurrency mining is a complex process. It involves using computers to solve complex math problems to validate blockchain transactions in exchange for new units of the cryptocurrency in question. 

Mining is not easy and takes a sizeable investment in both time and money. For instance, Bitcoin mining is a highly specialized industry that is unsuitable for an individual investor. That is because you will compete with big corporations that have the resources to invest in the latest mining technology and do so at scale. However, if you really want to mine Bitcoin, you can always join a Bitcoin mining pool and get a share of the rewards a pool earns off its mining activities. 

That said, mining is still less risky and a better way to make money off cryptocurrencies long term than CFD trading. That's because the rewards you earn are yours, and even if the market dips in the short term, you still get to keep your mined crypto. Besides, there are many other cryptos that you can mine with an ordinary laptop, which keeps the costs low. 

You can also opt for Proof-of-Stake mining, which entails running a node by holding crypto. In return, you get rewarded with new units of that cryptocurrency for helping keep the network secure. 

For instance, since Ethereum started its shift to Proof-of-Stake in 2020, you can now earn Ethereum by staking a minimum of 32 Ethereum. It's a good way to earn a passive income by doing very little. 

Pros:

✅ The potential beats CFD trading when adjusted for risk

Cons:

❌ It is a little too complex for new investors. 

3. Buy And HODL

This is probably the best strategy for anyone who wants to reap big from cryptocurrencies. It entails buying a cryptocurrency and holding it long-term, the short-term dips in value notwithstanding.

To understand long-term investing in cryptos, you just need to look at the price of Bitcoin since it launched. Bitcoin was trading at pennies back in 2009. Since then, it has gone through multiple crashes, many of which have seen it lose more than 70% of its value. However, anyone who held onto Bitcoin over the years has become wealthy since its long-term trajectory is overall up.

Essentially, long-term investing is all about patience. You have to be willing and able to wait for your investments, even if that means missing out on some short-term gains to ensure long-term success. The premise of this strategy involves researching which cryptocurrencies will become more popular over time so you can buy them cheap when they're less costly than other coins/tokens available today. 

That said, long-term investing is not risk-free either. Many cryptocurrencies have stagnated in value over the years. This usually happens to cryptocurrencies with weak fundamentals, and as people become more aware of their weaknesses, volumes dry up.

It is always advisable to pick safe and highly liquid currencies such as Bitcoin and Ethereum when you want to HODL long-term. These are cryptocurrencies whose fundamentals are so strong that you have a high chance of value appreciation in the long run.  

For instance, anyone who bought Bitcoin in the 2010s when it was still under $1000 is in massive profit now that it is trading at $42,000. 

Pros:

✅ It is so easy that anyone can do it. 

✅ The risk of loss is low.

Cons: 

❌ You miss out on many short-term opportunities. 

4. Become A Day Trader 

Day trading is a strategy employed by those who wish to make money fast off cryptocurrencies. Day traders are always on the lookout for opportunities to make money. They do this by trading cryptocurrencies within a single day and can close out all their positions before the day ends. The idea behind day-trading is simple; you buy low and sell high using any information available throughout each trading session. 

Unlike other financial assets, day trading cryptocurrencies can be profitable. That's because the high volatility of Bitcoin and other cryptocurrencies makes the crypto market a roller coaster. For those who have the right information at their disposal, this means many profitable opportunities all through the day. 

When day trading, you do not aim to make a huge profit at once. Instead, you make tiny profits all through the day. The profit can be quite substantial when you add them together at the end of the day.

For you to become a profitable day trader, you need a lot more than just market information. You also need to master the application of different trading tools, chart patterns, and overall market behaviour. Mastering a balance between risk and returns will also go a long way in determining how profitable your day trading activities are long term. This takes time, patience, and a lot of practice.

The good news is that most trading accounts have demo accounts for beginner day traders. For instance, when using an eToro demo account, you get up to $100,000 that you can use to perfect your skills. Once you feel ready, you can move on to a real trading account and day trade your way to profitability. 

Pros:

✅ The costs of day trading are low since you can trade with pretty much any amount. 

✅ You have the potential for limitless profitability.

Cons:

❌ It takes time to learn the skills for successful day trading.

❌ Day trading can be tiring. 

5. Become An Arbitrage Trader

Arbitrage is the act of taking advantage when two markets have identical assets but different prices. The arbitrage trader buys an asset, sells it at a higher rate than what they paid for elsewhere, then goes out of their way to find another similar product and do exactly the same thing repeatedly. 

In the cryptocurrency market, this usually entails exploiting price differences between exchanges. For instance, if Bitcoin is trading lower by a few cents or dollars on one exchange, you can buy and sell it on an exchange where it is selling at a much higher price. 

Arbitrage opportunities emerge and closeout pretty quickly, and it is almost impossible to do it manually. That's because, by the time you are buying and sending crypto from one exchange to another, the opportunity will have passed. 

Successful arbitrage traders use trading bots that can identify and exploit trading opportunities in micro-seconds. The challenge comes in finding the right boots for the job. To increase the odds of winning, focus on the steps below before buying an arbitrage bot:

Its trading strategy: For best results, go for a bot to pair multiple cryptocurrencies. This way, you increase the odds of the bot finding trading opportunities all through the day.

The method of arbitrage: There are many trading strategies that an arbitrage bot can employ. Before you buy any bot, back-test its strategies and see if they have worked well in the past. 

Pros:

✅ Guaranteed and quick profits.

✅ Low cost of getting started. 

Cons:

❌ Arbitrage opportunities don't come easy. 

6. Try Cryptocurrency Faucets

Sometimes, you may want to participate in the crypto market, but you do not have enough resources. In such a situation, cryptocurrency faucets may be one of the best routes to take and get started in your journey to cryptocurrency trading. 

Crypto faucets are pretty similar to dripping faucets. They are websites that reward you with tiny amounts of cryptocurrency for completing some tasks online. Some of the tasks you can complete and be rewarded for are surveys for various crypto services, among others.  

While the payments are usually pretty small, if you work hard enough, you can make a pretty good investment off it while figuring out a way to invest much higher amounts in the cryptocurrency markets. 

It also depends on the cryptocurrency you are getting paid in to complete tasks. For instance, if you receive payments in Bitcoin, you can be sure that your holdings will gain value over time. That's because Bitcoin is a cryptocurrency that has proven itself as an asset that can gain in value over time. In essence, even a tiny amount of it can turn into a sizeable investment when you leave it in a wallet over a few years. 

To give you an idea of how big faucets are, imagine someone who did a survey or did an interview and earned just $50 before 2014. If they held onto that amount, it is probably worth a lot today. 

Pros:

✅ Earning crypto through faucets is very easy. 

✅ In most cases, it doesn't take much of your time. 

Cons: 

❌ The payoff is quite insignificant. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

7. Invest In ICOs

ICOs are a way for cryptocurrency entrepreneurs to raise capital by selling tokens. It's a method that allows them to raise capital without risking too much of their own money. ICOs were the popular route to cryptocurrency investing in 2017. However, after the cryptocurrency market crash of 2018, many ICOs were revealed to be scams. The result was a massive decline in the uptake of ICOs as a route to crypto investing.

That said, ICOs remain one of the best ways to invest in cryptocurrencies. That's because they give you an early entry into cryptocurrencies that could turn out to be gems in the long run. 

Besides, the ICO space has been evolving over the last couple of years. For instance, exchanges have been launching their own ICOs, also known as IEOs. Binance has been leading the race on this front, and investors in many of their IEOs have made investors huge amounts of money over the last couple of years. 

Whatever form they take, ICOs are an amazing way to make a low-risk investment into cryptocurrencies. That's because when you get in at launch, you are getting in at possibly the lowest price a cryptocurrency can go. By the time the cryptocurrency hits the market, and pumps, you are already in profit. Essentially, even the various crypto market dumps that follow are unlikely to affect your profitability. 

That said, it is always best to do thorough research before investing in an ICO. That's because the cryptocurrency market is unregulated, and scammers are rife in this space. Without proper due diligence, it is very easy to waste all your money on scams when pursuing ICOs as your investment strategy of choice. 

Pros:

✅ The chance to get into good projects early.

✅ The entry price is pretty low, thereby reducing the risk of loss. 

Cons:

❌ There are lots of scams in this market. 

❌ Risk of investing in worthless projects.

Is Crypto Trading Profitable? The Ultimate Guide To Profitable Crypto Trading 

The goal of every cryptocurrency trader is to generate consistent profits. However, how each trader approaches their financial goals can differ widely from one to another. 

While some traders enter the cryptocurrency market in hopes to make regular but modest gains, others look to buy and hold in the long-term. 

Regardless of the strategy you opt for, if you are looking to start a successful trading career - you need to be willing to do your fair share of work. This involves educating yourself in order to fully comprehend how the cryptocurrency market works. 

In doing so, you will be able to find lucrative opportunities that will give you the best chance possible of growing your capital. 

The internet is jam-packed with crypto experts that claim to have made millions from buying and selling cryptocurrency pairs. But, this claim is rarely the reality.

With that being said, It is entirely possible to make a full-time living by trading cryptocurrency. In order to do this, however, you need to have a firm fraps of how the crypto industry works.

In this section, we explore whether or not it is possible to get rich by trading cryptocurrency. We teach you everything you need to know to be successful in the crypto arena and what steps you need to take to ensure you are able to trade in a risk-averse manner. 

Most importantly, you will learn why it is crucial to choose the right online cryptocurrency broker and how you can find one. You will also have all the information you need to get started with your cryptocurrency trading endeavours today. 

Step 1: Learn The Basics Of Cryptocurrencies

In Layman’s Terms, cryptocurrencies are digital coins. However, what makes this asset class different is that crypto-assets are decentralized and based on blockchain technology. 

Meaning - unlike fiat currencies such as the US dollar or the British pound, no central authority manages the respective cryptocurrency. As such, this digital asset is immune to manipulation or any other governmental interference. 

In all likelihood, you might have already heard of the most popular cryptocurrencies - such as Bitcoin and Ethereum. With that said, there are over 8,000 different digital currencies available in the market today. 

Crucially, a large percentage of traditional businesses are integrating cryptocurrencies into their platforms in some capacity - or using it as a medium to initiate other endeavours. 

As cryptocurrencies are becoming more mainstream, the industry has also managed to gain more attention from larger-scale investors and seasoned traders. 

Step 2: Understand How Cryptocurrency Orders Work

Cryptocurrency trading is a fairly new concept. However, it draws many parallels to conventional trading methods - especially when it comes to trading orders. 

These are used to indicate to your chosen broker what action you want to take. 

For instance, if you expect that the price of BTC/USD is likely to go up - then you will place a buy order with your broker. This will convey that you are going long on the trading pair. 

Similarly, you will also need to place the appropriate trading order when you are looking to exit the trade. 

Here is a list of the most common orders used by traders of all levels. 

Buy/Sell Orders

Buy and sell orders are at the core of any trade you place. 

The concept is quite simple:

• If you believe that the price of a cryptocurrency pair is going to increase - then you set up a buy order.

• If you believe that the price of the cryptocurrency pair is about to drop - you will set up a sell order. 

Every trade you place will be opened with one of these orders and closed with the other. 

That is to say, if you open a position with a buy order, then to exit the market, you will use a sell order. The same works inversely as well. 

Market/Limit Orders

In the largely volatile cryptocurrency market, it is crucial that you have control over how you enter the market. In trading, this is achieved by using a market or limit order. 

When you place a market order, you are conveying to the broker that you want to carry out the trade at the next best available price. As such, your broker is supposed to carry out the order immediately. 

However, considering that the exchange rate fluctuates with every second - there could be a small difference between the price you see on screen and the price at which the order is carried out. In trading terms, this is called slippage. 

For example, you see that the pair LTC/USD is priced at $199.01, and you decide to place a market buy order. Once the order is executed, you might note that the price you got was $199.03.

On the other hand, if you want to secure a specific price - this is when you use a limit order. It allows you to mention to your broker the exact price at which you want the order to be executed. 

For instance, let's say that the pair LTC/USD is priced at $199.05. You want to open the position only when the exchange pair hits $199.97. In this case, you will use a limit order. 

Note that limit orders will be carried out only when the market matches your specified price. Until then, your order will remain pending, or you can choose to cancel it manually. 

Stop-Loss/Take-Profit Orders

Now that we know how you can enter the market as you wish, you need to consider how you can exit the trade at the right time. 

Stop-loss and take-profit orders enable you to specify at which prices you want to close your position. 

• Stop-loss orders are used to exit the crypto market to prevent any further losses. 
• Take-profit orders are the opposite, as they allow you to exit the crypto trade once you have achieved a specific profit target. 

Although these order types are not compulsory, experienced professionals make it a point to utilize these orders in order to mitigate risk. 

As such, whenever you enter a trade, it is best to have both stop-loss and take-profit orders set in place. This will ensure that no matter which direction the market moves, you have an exit strategy that will close your position automatically. 

Example of a Cryptocurrency Trade with Multiple Orders

As we discussed, you can use four different types of orders with a single trade - including a buy/sell order, a market/limit order, a take-profit order, and a stop-loss order. 

For a beginner, handling all these orders at once might seem daunting at first. As such, let us give you an example to illustrate how this works in the cryptocurrency trading market. 

• Let us say that you want to trade DASH/USD - currently quoted at $230.50. 
• Believing that the exchange rate is undervalued - you create a buy order. 
• However, you don't want to open your position until the price of DASH/USD rises to $230.55. 
• Therefore, you place a limit order at $230.55. 
• If the exchange pair hits your profit target of $231.65 - you want to cash out. Therefore,  you create a take-profit order at $231.65. 
• You also want to limit your losses - so you create a stop-loss order at $230.00. 

In a matter of minutes, the price of DASH/USD rises to $230.55 - meaning that your limit order will be activated at this price. From this point, the trade could go in two ways:

• If you predicted correctly and the price of DASH/USD increases to $231.65 - your take-profit order will be executed. Your broker will exit the trade only when the profit target is reached. 
• If your prediction is wrong and the price of DASH/USD decreases to $230.00, your stop-loss order will be activated, and the trade will be closed automatically. 

Additionally, for every trade, you will also have to calculate how much you are willing to risk in order to obtain your desired profit. In trading terms, this is called the risk-reward-ratio. 

In this example, you are willing to take the risk of losing $0.55 (£230.55- $230.00) to achieve a reward of $1.65 ($231.65-$230.55) - for each unit traded. 

In more simple terms, your risk-reward on this trade comes works out at 1:3 (since you are risking $0.55 to gain $1.65), which is a sensible ratio often utilized by experienced investors. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Step 3: Learn How To Calculate Profit And Loss When Trading Cryptocurrency

The aforementioned orders can help you take on the market without having to manually watch over every trade. 

However, if you want to make consistent profits, you should also be armed with other resources. 

One of the most important aspects is to be able to calculate how much you want to make from a crypto trade and what you can afford to risk. These figures are crucial when planning your trading strategies. 

Here is a list of what you need to look for when trying to make money by trading cryptocurrency. 

Stakes

In a nutshell, your stake is how much you are willing to put forth on the respective crypto trade. 

Traders have different approaches to decide the amount of stake they should put up on each position. That said, generally, traders prefer not to risk more than 1% of their available trading capital. 

To explain better - if you have £1,000 in your trading balance, you will not risk more than £10 on a single trade. Many newbie traders tend to look over this aspect when it comes to calculating their risks. 

That said, it is almost practically impossible to make viable profits when you are trading cryptocurrencies with such small stakes. In other words, you will have to place tons of successful trades in order to make cryptocurrency trading worthwhile. 

However, by applying the concepts of leverage and margin, you can exponentially increase your profits without having to stake large sums. We will discuss this in detail briefly. 

Profit and Loss in Percentage Terms

For beginners, one of the most effective ways to calculate the profit and risk of a trade is in terms of percentages. 

For instance, say that the LTC/GBP trading pair increases in value from £140.92 to £142.00 This translates to a percentage increase of 0.76%. 

If you had staked £1,000 on LTC/GBP, this translates to a profit of £7.60.

The good news is that the best cryptocurrency brokers will display the rise and fall of cryptocurrency prices in percentage terms anyway. 

Here is one more example:

• You place a buy order on LTC/GBP at £190. 
• After a few hours, the pair is priced at £190.50. 
• This shows an increase in price by 0.26%. 
• If you staked £1,000 - this means a profit of £2.60.

As evident, it is relatively easier for you to qualify how much you are likely to profit and how much you are risking in terms of percentages. 

Leverage and Margin

As we briefly mentioned earlier, leverage and margin is a popular way for cryptocurrency traders use to enhance their profits. 

In short, leveraging allows you to stake more money than you have - by essentially borrowing the rest from your broker. 

To give you an example, suppose that you have £100 in your trading account. By applying leverage of 1:10, you can amplify your stake to £1,000 - 10 times more than the amount you hold. 

In other words, you can use leverage to magnify your stake on a trade by a predefined factor. 

As evident, leverage can provide you with a number of benefits. The most obvious aspect is that you can boost your profits from successful trades. Having said that, it is also important to note that leverage can magnify your losses too. 

Here we have an example to demonstrate the case of trading digital currencies with leverage. 

• Consider that you want to trade LTC/GBP. 
• The pair is currently priced at £250. 
• Thinking that the price is about to rise, you place a buy order at a stake of £1,000. 
• As you are confident about your speculation, you decide to apply leverage of 1:10. 
• A few hours later, the value of LTC/GBP increases to £255 - showing a profit percentage of 2%. 
• On your £1,000 stake - you thus made gains of £20. 
• However, since you applied leverage of 1:10 - your profit will be amplified to £200. 

As you can gather from this example, a single highly leveraged trade can bring you considerable profits - given that it is successful. However, if your speculation is wrong, your profits will be replaced with magnified losses. 

This could lead to 'liquidation' of your leveraged position - meaning you to lose your entire 'margin.' 

Let us explore what these two terms mean. 

Margin and Liquidation

When you choose to trade crypto with leverage, your online broker will require you to put forth a margin. 

Look at it this way. Leveraging means you are taking money on credit from your broker. As such, you will need to offer a security deposit in case the trade goes against you - this amount is called margin. 

In a trade, the amount you stake is what is considered as the margin. 

For example, if you have £500 in your trading account, and you applied leverage of 1:10 - your position is now worth  £5,000. Hence, the margin on this trade is considered the initial £500 you staked. In this trade, it comes to 10% of your position. 

So what role does margin play in your crypto trade?

Simply put, if the cryptocurrency trade went against your speculation by 10%, your broker will be forced to automatically close your position - and your margin amount will be automatically consumed. In other words, your position would be liquidated.' 

One way to tackle getting liquidated is to have a stop-loss order in place. For instance, in the above example, if you have a stop-loss of 5% - then you will not have to worry about the 10% liquidation point. 

Leverage Limits

As evident by now, leveraging can be extremely risky - especially if you are not fully aware of the repercussions. 

Consequently, some regulatory authorities have implemented a set of rules that determines the amount of leverage you can apply to cryptocurrency trading. 

These guidelines are determined by a number of elements, such as:

• Your country of residence.
• The online broker you choose.
• And whether you are a retail or a professional-client. 

As cryptocurrencies still hold the reputation of being a relatively new asset class - there are strict regulations over applying leverage. 

For instance, in the UK, it is possible to obtain leverage on all tradable assets - but not for cryptocurrencies. 

Therefore, if you are trading with any regulated broker, you will not be able to access leverage legally in the country. 

On the contrary, if you like outside of the UK, then you will be able to get your hands on leverage when trading cryptocurrencies. We are talking about leverage as high as 1:100 on this digital asset. 

However, bear in mind that such large leverage limits will also invite higher chances of liquidation. 

Step 4: Learn How To Research Cryptocurrency Prices

If you have come this far in our guide, you now have a firm grasp on what cryptocurrency trading is and how you can place the appropriate orders. 

However, this is only one aspect of the trading process. 

The challenge is to understand which cryptocurrencies are worth your attention. As you know by now, trading is all about placing the right orders at the right time. 

However, you cannot base these decisions on hunches. You need to have data-driven insights so that you can make informed choices on your trading moves. For instance, do you think that Bitcoin will sustain its momentum, or will the price go down in the future? 

As with anything else - you cannot arrive at an answer to such concerns unless you have sufficient knowledge of the cryptocurrency markets. Therefore, before you even think of making money by trading digital assets, you first need to know how to perform research. 

In trading jargon, this analysis can be done in two ways: fundamental and technical research. 

Fundamental Research

The concept of fundamental analysis applies to all tradable assets. No matter which trading strategy you choose, fundamental research can help you in figuring out whether a crypto exchange pair is undervalued or overvalued. 

Traditionally, fundamental research focuses on the financial and economic aspects that influence the price of a digital asset. 

In other words, it evaluates how a piece of news will impact the price of the currency. 

• For instance, the announcement of the ICO ban by China led to a decline in the price of Bitcoin. 
• On the other hand, Japan announcing that it considers cryptocurrencies a legal tender resulted in the spike of the value of Bitcoin. 

These are only a couple of examples of how real-world news can alter the performance of a cryptocurrency in the trading market. 

As such, it is crucial that you keep up with the news to know how real-world events can have a consequence on the world of digital assets. 

In addition, for cryptocurrencies - you will also have to keep an eye out for technological developments. As this asset class is heavily reliant on blockchain systems, any innovation in the related fields can have implications for the popularity of cryptocurrencies. 

Alongside keeping abreast with the news, you should also know how to interpret it. This is a skill you attain only through experience. However, you can expedite the process by educating yourself. 

If you are willing to make a bit of effort on this front, here are some books that can offer you valuable insights:

• The Intelligent Investor by Benjamin Graham.
• Getting Started in Fundamental Analysis by Michael C.Thomsett. 

Technical Analysis

For many traders, fundamental analysis is not the best way to achieve consistent gains. The argument is that the cryptocurrency market is more driven by speculation and narrative - therefore, you need more data to formulate your trading strategy. 

This is where technical analysis can be of advantage. However, if you want to be well-versed in this method - there is a steep learning curve to conquer.  That is because you need to be looking at multiple price charts and analyzing them to arrive at your trading conclusion. 

The basic idea is for you to spot potential trends and figure out how you can capitalize on the future price movement of a cryptocurrency pair. 

Moreover, technical analysis plays a significant role in short-term trading strategies - which are popular in the cryptocurrency scene. For instance, if you are engaging in day trading, you will need to almost exclusively focus on technical analysis to find trading possibilities. 

In such cases, technical indicators and charts can help to give you a better overview of what the price action is looking like in the short term - even in the coming seconds or minutes. 

Moreover, although fundamental analysis can be useful, it is unlikely that there will be price-shifting news every day. As such, if you want to place trades more frequently, you will have to master the tactics of technical analysis. 

So that brings us to the question - how long will it take for a beginner trader to learn the ropes of technical analysis?

The straightforward answer is that it can take several months to know how to work with technical indicators. These are tools used to make sense of pricing charts and identify trading opportunities.

Today, there are dozens of trading indicators available in the market. Each technical indicator will help you point out specific trends or price movements. 

It is not possible to give you an account of the different indicators and their purposes in this article. Hence, we suggest that you take a look at other guides on the Trading Education website. 

We have an extensive section of newbie-friendly guides and explanations that will help you conquer the world of technical analysis. 

Regardless, to give you a taste of the action - here we have listed some of the most popular technical indicators used by cryptocurrency traders. 

Relative Strength Index (RSI)

This technical indicator is a common tool used to understand the speed and momentum of price movements. 

To elaborate, the RSI computes the price changes of an asset and the speed at which the movements happen. The oscillations, shifting from the two extremes of price action - run between 0 to 100. 

Any value over 70 indicates that the trading pair is overbought. And if it is below 30 - you can assume the opposite.

If the pair is overbought - it means that more traders are interested in buying the pair rather than selling it. In other words, the indicator is pointing out that a reversal in trend is likely to take place soon. 

As such, you can infer that you should place a sell order soon - to capitalize on the declining prices of the respective coin. 

If the RSI is below 30 - it points to a reverse trend. Meaning, there are more sellers than buyers. And thus, if there is a trend reversal - you could benefit by placing a buy order. 

Moving Average Convergence Divergence (MACD)

The MACD is a popular trend-following indicator that gives you an idea of current market momentum. You can use this to identify in which direction a cryptocurrency trading pair will move in the future. 

On the chart, the MACD indicator will appear as two lines that oscillate - however, without any boundaries. The tool then looks at the crossover of the two lines to spot moving averages. 

Depending on the trading strategy, you can use a 50-day, 100-day, or even a 200-day moving period - which will tell you the averages corresponding to the timeline. 

For example, if the MACD indicates that the 50-day moving average of EOS/USD is 3.5023 - this is the average exchange rate of the pair over the past 50 days. 

Most traders use the MACD combined with the RSI to arrive at trading judgments. Both indicators assess the market sentiment - however, they evaluate different variables giving you a better outlook. 

Bollinger Bands

In cryptocurrency markets, volatility plays a crucial role in influencing the price action of a trading pair. Bollinger Bands is one of the tools that can help tell how higher or lower the price of an asset is in relation to its previous price. 

In other words, Bollinger Bands can be invaluable in understanding which pairs are the most volatile, and what entry and exit prices you need to target. 

Moreover, Bollinger Bands are also used to calculate the potential risk when placing trades. This works with the concept that high volatility also translates to a higher risk-reward ratio. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

Step 5: Determine Which Cryptocurrency Trading Strategy You Wish To Use

A trading strategy is a plan you adopt when placing your cryptocurrency orders. There is no single approach that will be effective for every scenario. 

As such, traders will switch between multiple strategies that work best for the current market and their financial goals. That said, if you are an amateur, it is best to stick to one strategy. 

It will help you clearly outline your objectives and stay on track without letting emotions influence your decisions. You can then focus on one method before you try your hand with another one. 

In the following sections, we discuss some of the most commonly used cryptocurrency trading strategies. 

Crypto Day Trading

As you can gather from the name - day trading is a strategy that involves you opening and closing trades within a single day. 

If you didn't know, cryptocurrency markets do not have any specific opening or closing times. As such, day trading in this context refers a system where traders enter and exit the market within 24 hours. 

In this strategy, each trade will last only for a few hours or minutes. In effect, day traders target smaller but frequent profits. However, there is only so much that a currency can move within a few minutes.

As such, day traders will be placing multiple orders throughout the day - hoping to achieve smaller gains in terms of profit percentages.

Moreover, day trading positions are often leveraged so that the smaller margins can be used to generate bigger gains.  

Crypto Swing Trading

In swing trading, you are looking to profit from the price trends of the asset. 

When day traders limit each of their positions to a few minutes or hours, swing traders have the flexibility to keep their trades open from days to weeks - but not more than two to three months. 

The duration of swing trading positions will depend on the price trend you are targeting. 

As long as the trend continues, you will keep the position open. For instance, if your analysis suggests that BTC/USD is likely to hold an upward trend for the next two weeks, your trade will remain open for the same duration. You will close the position when the trend is about to reverse. 

Compared to day trading, swing trading is relatively easier to master. You are only to follow trends, which you can do by performing fundamental analysis. 

Crypto Scalping Trading

Of the three strategies mentioned here, scalping is the most advanced. It takes place across the smallest of time frames - meaning you have to be swift in identifying trading opportunities and taking action right away. 

Hence, it can take a considerable amount of time for beginners to master how to balance the risk-reward while scalping. 

In simple terms, scalp traders open hundreds of positions a day, aiming to capitalize on the minute price shifts found in the market. Consequently, you will be opening and closing positions in a matter of minutes (if not seconds).

In the end, if you have placed more profitable trades than losing ones, you will finish the day in profit. 

The most advantageous market conditions for scalpers happen when a cryptocurrency trading pair continues within a consolidation period. This means that the pair is trading within a close range for a prolonged period. The longer this duration, the better it is for scalping. 

For instance:

• Let us assume that DASH/USD is trading between $230.10 to $231.50 for two days. 
• Meaning, the exchange rate of the pair has never gone lower than $230.10 or higher than $231.50. 
• This represents a consolidation period for a scalper within a tight range of 0.60%. 

For a scalper, this is a highly conducive time frame that allows them to place trades with low-risk and frequent profits. 

Step 6: Consider Help From A Third-Party

At this point, you might be feeling overwhelmed by the extent of knowledge required as well as the amount of work you need to do to make money trading cryptocurrencies. 

However, thanks to the internet - today, you have multiple resources at your disposal to make this process easier. 

If you are only just starting your crypto trading journey, there are a few options that will help you along the way. 

Cryptocurrency Signals

Trading signals are suggestions that you will receive in real-time. Meaning, your chosen crypto signal service provider will do the research, assess the market, and send you tips on what trades can be most lucrative at the time. 

Depending on the platform, you will be able to get these signals through email, SMS, or apps such as Telegram. 

In effect, there is no need to do any of the legwork. Instead, you will be notified of trading opportunities so that you only need to place the relevant orders. 

So how do the providers create these signals? They use a pre-programmed algorithm and expert traders to devise strategies. The best trading signal services will offer you the following data:

• Which cryptocurrency pair to trade?
• Which trading order to place - buy order or sell order?
• What is the entry price required to enter the market? 
• The price target for via a take-profit order.
• The price at which you should place the stop-loss order. 

Some services also offer you market news and analysis for the cryptocurrency pairs in question. 

Although cryptocurrency trading signals can cut off the need for you to do your own homework - you should also be cautious about which service you choose. 

This is primarily because many providers tend to make false promises on how much money you can make using the signals. However, in reality, this might not be the reality, and you could end up losing money. 

Therefore, if you are resorting to the services of a signal provider, make sure that you verify the authenticity of their results by using a demo account first. 

Cryptocurrency EAs

Cryptocurrency EAs are Expert Advisors that will handle trades on your behalf. You can download these EAs via a software file - which you can then install into a third-party trading platform such as MT4. 

The best cryptocurrency EAs will execute orders based on the conditions that have been programmed into them. Once you have installed this tool into your trading platform, it will handle everything for you. 

However, that doesn't mean that EAs will only make profitable trades. You will have to do your homework and read reviews to find out whether the software is consistent. 

If you are able to find one that can help you make consistent gains, you will be able to trade passively without even lifting a finger. 

In addition, there are a few other benefits that come with top-rated cryptocurrency EAs. 

• The EA can place trades 24/7.
• It can trade any number of cryptocurrency pairs simultaneously. 
• It can follow any strategy you set it to use. 
• EAs take out the emotional factor in making trading decisions. 
• EAs are automated and will not tire out from continuous trading. 

That said, you should also take steps to make sure that the EA does not clean out your trading balance. As such, you will have to set up stop-loss conditions so that every trade only risks what you can afford. 

Moreover, similar to trading signals, you might want to start using cryptocurrency EAs on a demo account before you risk real money. 

Step 7: Choose A Cryptocurrency Broker To Trade With

Cryptocurrency trades are carried out almost entirely online. This makes it possible for you to tap into this lucrative trading industry right from the comfort of your home. 

However, in order to place successful trades, you need to choose a regulated cryptocurrency broker. There are hundreds of platforms offering you their services, but as you can guess - every platform will have different features to offer. 

As such, before you start thinking about trading cryptocurrencies - you first have to find a broker that can help you achieve your financial goals. 

Licensing and Safety

When you are trading online, you are entrusting your hard-earned capital to your online broker. As such, it is crucial that the broker you choose follows strict regulations to guarantee the safety and security of your funds. 

In the financial market, you can assess the credibility of an online broker by finding out if they hold any licenses from well-respected regulatory bodies. 

An example of reputable brokerage authorities around the world includes the FCA in the UK, ASIC in Australia, CySEC in Cyprus, FSA in Japan, and CFFC in the US. 

However, you will also find regulated platforms with licenses issued by less reputable agencies. Most likely, these are based on offshore locations such as the Cayman Islands, Panama, Seychelles, and others. 

Trading Fees and Commissions

One of the most important factors to consider in your online broker is what fees they charge you for their services. Although at first glance, commission percentages might seem small, but these fees will easily eat away at your profits. 

Take a look at the most common types of fees you will come across on online crypto trading platforms. 

Commission 

Trading commissions are charged for all orders you place with your crypto broker. That is, you will have to pay a commission once when you enter the trade and again when you close it. This can be stipulated as a flat fee or a percentage against your stake. 

Fortunately, you will have no trouble finding online brokers that offer zero-commission on cryptocurrency trades - such as the likes of eToro. 

Spreads

Spreads are calculated as the difference between the buy price and sell price of a cryptocurrency trading pair. Tighter spreads mean that you are trading at lower fees. 

For instance, if your broker offers EOS/USD at a buy price of $3.84 and a sell price of $3.86 - your spread will amount to 2 pips. 

As such, you should gain a profit of 2 pips to reach the break-even point on your trade. Anything beyond this will be accounted for as profit. 

Overnight Financing

Depending on your trading strategy, you might decide on keeping a leverage crypto position open for more than one day. 

If so, many brokers will charge you an overnight fee for every day you keep the trade open - often called overnight or swap fees. 

Trading Tools and Features

Online brokers today offer many more features in addition to their basic services. These vary from access to demo accounts, copy trading features, market updates, chart drawing tools, technical indicators, and more. 

Some brokers also come integrated with third-party platforms such as MT4 or have their own native trading interfaces. 

Depending on whether you are a beginner trader or a seasoned professional, you can assess these functionalities based on your preferences. 

Payments and Account Minimums

In order to process your crypto trades, you will need to constantly move capital in and out of the brokerage platform. Therefore, you should make sure that your chosen broker offers support for your preferred payment method. 

The best brokers allow you to process transactions through debit/credit cards, e-wallets, and bank transfers. You should also verify what additional charges are applicable for each method. 

In addition, most cryptocurrency brokers will ask you to meet a minimum deposit in order to start trading. The lower this account minimum, the easier it will be for you to avoid risking too much of your money. 

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

The Verdict - What Is Crypto Trading

Cryptocurrency trading has never been hard. The hardest challenge lies in identifying the best crypto exchange for you, the best crypto to trade or invest in, deciding on the strategy that works for you, and taming your emotions when trading.

In this cryptocurrency trading guide for beginners, we have explained what cryptocurrencies are and how they work, gave you crypto trading tips, and provided you with directions on how to place your first crypto trade.

It now is up to you to dig deeper and discover the trading strategy that fits your crypto trading goals, come up with a crypto portfolio, and register with one of the best crypto exchanges.

As we have covered the many different aspects of cryptocurrencies - it is obvious that making money by trading these digital assets is not an easy feat. Many traders fail to understand the work required to accomplish consistent profits and expect to make instant riches. 

In reality, if you want to make consistent returns, you should be willing to build your cryptocurrency knowledge and work relentlessly to improve your strategies. 

In doing so, you can elevate your chances of regular earnings through crypto trading. 

Additionally, whichever method you choose, be it short-term trading or a long-term buy and hold strategy, make sure that you have a well-reputed online broker. 

eToro – Best Platform To Trade Cryptocurrencies 

eToro have proven themselves trustworthy within the Crypto industry over many years – we recommend you try them out.

Crypto asset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.

 

Read More:

• Next Cryptocurrency To Explode
• Best AI Crypto Coins And Projects To Invest In
• Top Cryptocurrencies To Buy During Inflation
• Best Altcoins To Trade
• Best Web 3.0 Crypto Coins
• Best Beginner Crypto To Invest In
• Top 10 Most Promising Cryptocurrencies