How to Trade AAVE: A Step-by-Step Guide

Comprehensive Guide to Trading AAVE in 2021

Last Updated July 23rd 2021
23 Min Read

Looking for an entry point into the exciting world of AAVE trading? We'll help you through it.

AAVE trading is pretty straightforward once you get the hang of it. 

Launched in 2017, AAVE is a decentralized lending ecosystem, made of smart contracts built on the Ethereum blockchain. 

Over the past few years, the AAVE protocol has surfaced as one of the leading DeFi platforms. And consequently, its governing token AAVE has also emerged as one of the most valuable cryptocurrencies by market cap. 

In this guide, we will provide you with an in-depth analysis of how to trade AAVE tokens. We will begin with the fundamentals of the AAVE trading markets, some of the strategies you can use, and how you can get started via an online broker from the comfort of your home. 

Contents:

Trading AAVE digital currency is no easy feat - which is why we have put together an in-depth guide on How to Trade AAVE. Within it, we explain the ins and outs of how this investment scene works, what risks and rewards you need to consider, and how you can start trading AAVE today. 

How to Trade AAVE in 5 Steps

To trade AAVE, the first step is to open an accout with a regulated exchange, depost funds, select AAVE from the platform list, and lastly Buy AAVE (go Long) or sell AAVE (go short).

Step 1: Open an account with a regulated exchange 

Step 2: Funds your account

Step 3: Choose how much AAVE you want to trade 

Step 4Buy AAVE (go long) or sell AAVE (go short)

Step 5: Confirm the trade

trade aave

What is AAVE Trading?

AAVE was initially launched as ETHLend in 2017. In 2020, following its success in the DeFi industry, the project released its governing token AAVE. This digital asset allowed its owners to vote on the proposals and policies that affect the future of the AAVE project. 

Unlike alternative crypto assets like Bitcoin and Ethereum, you cannot mine AAVE tokens. Instead, if you want to trade this digital asset, you will have to buy it from an online crypto provider. 

Consequently, the price of AAVE will be determined by the different market forces at play. For instance, if the AAVE lending protocol gains popularity among crypto lenders and borrowers, more traders will be interested in purchasing this coin. This can strengthen the value of this digital asset. 

On the contrary, if more traders are looking to sell their AAVE coins - then the market will respond with falling prices. 

Ultimately, as you can see - the price of AAVE tokens will be dictated by the balance of supply and demand in the market. 

When trading AAVE tokens, you will be trying to predict in which direction the coin is likely to move in the near future. For instance, if you expect the price of AAVE coins to rise - you will buy the digital asset so that you can sell it at a profit. 

On the other hand, if you believe that the value of AAVE tokens is about to drop - you will want to sell the coins first and buy them at a lower price - thus making a profit. For those unaware - this is called 'short selling’ in the financial market. We will explain this in more detail further down. 

For now, let us give you a practical example of how a simple AAVE trade will work in practice:

  • Let us suppose that the current price of AAVE is $270. 
  • This denotes the value of a single AAVE token in US dollars - represented as AAVE/USD. 
  • As per your prediction, you expect the value of AAVE to go up in the next few days. 
  • Therefore - you buy AAVE tokens at a total stake of $2,000. 
  • After two days have passed, the price of the coin increases to $300.
  • This converts to an increase of over 11% in the value of AAVE. 
  • Pleased by this increase - you decide to sell your AAVE coins. 

On this particular trade, your total profit comes to $220 (11% of $2,000). 

In the past, the price of AAVE tokens has shifted in the range of double digits within a single day - making it possible for traders to make significant profits in the short term. 

However, you should also pay heed to the fact that cryptocurrencies are inherently volatile. That means it is also possible for the market to move against your prediction. In case that happens - you will be dealing with losses. 

Therefore, when thinking of how to trade AAVE - you should always study the market well and be aware of the risks you are taking. 

trade aave

How Does AAVE Trading Work?

If you are completely new to the financial markets - then the concept of cryptocurrency trading might be overwhelming at first. 

However, with a thorough basic foundation, it will become easier for you to tackle this learning curve. 

In this section, we will introduce you to some of the key aspects of cryptocurrency trading that you need to be aware of before you put your money into AAVE. 

AAVE Trading Price Movements

We have already established that the price of AAVE tokens will ultimately be dictated by the supply and demand in the market.  However, as a financial asset - there are a few other aspects that can have an impact on the price of this digital coin. 

For instance, if another decentralized lending protocol gains more popularity in the market, then it might affect the popularity of AAVE - and consequently its native token. Similarly, aspects such as cryptocurrency regulations, geopolitical issues, and the DeFi market itself can all influence the price of AAVE tokens. 

Additionally, the value of AAVE also fluctuates from second to second. This means that the prices quoted by different crypto providers might be marginally different from one to another. However, this will have no effect on the profitability of your trades. 

Don't Miss: Aave Price Predictions

AAVE Trading Pairs

When thinking of how to trade AAVE - you will first have to decide on a trading pair.  In the cryptocurrency space, a 'trading pair' refers to two assets that can be exchanged for one another. 

There are two main types of trading pairs you can choose from - a 'crypto-fiat' pair and a 'crypto-crypto’ pair. 

As you can imagine, in a 'crypto-fiat' pair - you will be exchanging AAVE for a fiat currency - such as the US dollar or British pound. 

Alternatively, you can also trade AAVE against another cryptocurrency - such as Litecoin or Ethereum. However, speculating on the exchange value for such pairs might be a bit complex for many traders, especially beginners. 

In comparison, trading a 'crypto-fiat pair' can be a relatively easier undertaking and will also give you access to higher levels of liquidity. This results in less volatility and tighter spreads.   

Long or Short-Term Trading

Along with deciding on the trading pair, you should also consider how you want to generate profits from your AAVE trades. 

Are you looking to make long-term capital gains or try to profit from the short-term volatility of AAVE?

For instance, in a long-term strategy, you will be seeking to generate a return over a long period of time - think in terms of years. Due to this larger time horizon - your target returns on each trade will also be higher. 

Take the case of AAVE - when the coin was released in October 2020, a single token was priced at $54.55. At the time of writing, in June 2021, the value of the asset has since increased to $241.71. 

If you had invested in AAVE when it was launched with a long-term strategy in mind - you would be looking at a profit of nearly 350%.

Short-term traders, on the contrary, try to capitalize on the market fluctuations of AAVE. This means that they will be seeking smaller returns with each trade. More importantly, they will be entering and exiting positions more frequently. 

The answer to which strategy is more suitable for you will depend entirely on your financial goals and trading style.

Trade and Own AAVE 

When you are looking to trade AAVE for the long-term, you will be buying this digital asset and taking direct ownership. This means that you need a reputable crypto broker that can give you easy access to this digital asset. 

For a beginner, finding the right online broker can be a strenuous task. There are dozens of cryptocurrency platforms that are eager to land your business. 

However, the most important factor differentiating the best crypto brokers from the rest is a valid license from a reputable financial authority. For example, eToro is a well-established online brokerage platform with over 20 million registered worldwide users. 

But most importantly, the trading platform is regulated by not one but three financial governing bodies - namely the FCA, CySEC, and ASIC. This extensive list of licenses is a clear indicator that eToro is both trustworthy and transparent. 

In addition, there are a few other advantages that come with this regulation. For one, you will be able to store your AAVE tokens for free on eToro. Secondly, there will be no need for you to pay any commission to buy this digital asset on the platform. 

Moreover, eToro also has set up a treasure trove of educational resources that can be immensely helpful for traders across all levels. 

Read Also: Is Aave A Good Investment And Should I Invest In AAVE?

AAVE Trading 

When it comes to short-term trading strategies - instead of buying AAVE coins outright, traders commonly tend to use CFDs (Contracts for Differences).

This is primarily because short-term positions are kept open for only a small period of time - running anywhere from days to minutes. Especially if you are following a strategy such as 'day trading' or 'swing trading' - you will be looking to place multiple trades throughout a single day. 

Therefore, CFDs are preferred by short-term traders - as they can give you more flexibility. 

This is because CFDs allow you to trade without taking ownership of the underlying asset. Instead, these financial instruments only track the price of the digital token. 

This means you can benefit from both a bullish and bearish market on your chosen asset - in this case, AAVE. Additionally, you will also be able to apply leverage on your trades. 

However, CFDs are deemed to be highly risky in many parts of the world. In fact, countries such as the US and UK do not allow you to engage in cryptocurrency CFD trading. 

With that said, most other countries permit CFD trading - which is a great way to speculate on AAVE in a low-cost and highly regulated manner. 

On the other hand, if you do live in a country that does not allow leveraged CFD instruments, you might still be able to gain access at an unregulated exchange that lacks any valid licenses. However, for the security of your funds - it will be best to stay away from such providers. 

How to Trade AAVE Online - Setting up a Trade

For the successful execution of your AAVE strategy, you will know how to use the right trading orders. These are instructions that you leave with your broker so that the platform can buy or sell on your behalf. 

There are a number of different orders you can use when trading AAVE. Sometimes, the type of orders available to you will differ between brokers. 

However, there are some basic orders that will be accessible across all platforms, which can be commonly used when trading AAVE. 

Buy or Sell Order

A buy/sell order will indicate to your broker what your speculation on this digital asset is. 

For instance, when you want to go long on AAVE, you will be opening your trade with a buy order. Once the price of the coin increases, you will close your position with a sell order and make a profit. 

Alternatively, you can also 'short-sell' this digital token - when you expect the price of AAVE to drop in the near future. This means that you will enter the market using a sell order first. 

When the value of the coin falls, you will place a buy order and close your position in profit. 

As you can see, every single trade will require you to use a combination of both buy and sell orders

Entry Price

Once you know whether you want to buy or sell AAVE, the next aspect to consider is at what price you want to execute the trade. 

You can always choose to open a trade at the current market price available. This is when you utilize a 'market order.' This will indicate to your broker that you want your order to be carried out right away. 

However, by now, you know that AAVE is a volatile asset. As such, once the trade is complete - you might notice that the price you received is slightly different. This slippage is quite common in cryptocurrency markets and is virtually impossible to avoid. 

That said, if your trading strategy demands that you buy or sell AAVE at a specific price - it is best to use a 'limit order.' This way, your trade will only be executed when the value of AAVE hits your predefined price level. 

More importantly, your trade will remain pending until AAVE meets this price level or until you manually cancel it. 

As you can see, market orders are suitable when you want to enter the market instantaneously, whereas limit orders are best used if you want to gain more control over your AAVE position. 

Exit Strategy

Similar to having a clear plan for entering the market, you will also need to have a proper exit strategy when trading AAVE. 

There are two commonly used trading orders that will help you secure your profits as well as limit your losses. 

  • A 'take-profit' order allows you to exit your trade when your profit target has been achieved. For example, you might be looking to make a gain of 3% on your AAVE trade. 

In this case, you will set a take-profit order at 3% above or below your entry price - based on whether you are going long or short on this digital asset. When the value of AAVE matches your specified level, your broker will automatically close this trade - locking in your profits. 

  • A 'stop-loss' order will be used to restrain your losses in case the market moves against your prediction. As with the take-profit order, you can set a stop-loss price, and the broker will carry out your order automatically if the value of AAVE hits this level. 

If you are thinking about how to trade AAVE successfully - you will need to use a combination of all the aforementioned orders. 

Let us illustrate with an example:

  • Let's say you want to go long on AAVE - which is currently trading at $250.00. 
  • Meaning, you will be creating a buy order on this digital asset. 
  • However, you want to enter the market only when the price of AAVE rises to $260.00. 
  • As such, you issue a limit order at $260.00. 
  • Your profit target on this trade is 3%, and you want to prevent losing more than 1%. 
  • Therefore - you set your take-profit order at $267.80 (3% above $260.00).
  • Alongside, you also place a stop-loss order at $257.40 (1% below $260.00).

In this trade, no matter how the market moves - your broker will carry out the trading orders as per your instructions. But, only when the respective price is triggered by the market.

Read More: Should You Buy AAVE?

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How to Make Money Trading AAVE

When considering how to trade AAVE - your most important concern should be how you can maximize your profits in a risk-averse manner. 

This will ultimately be determined by the amount of money you are willing to risk on this digital asset. In this section, let us discuss the two most important factors that will dictate the amount of gains you can make from trading AAVE. 

Stake 

Your 'stake' when trading AAVE is the amount of money you are risking on this asset. 

Your stake amount will vary depending on several factors - such as your financial standing and trading strategy. And as you can deduce, the higher your stake amount, the better your profits will be. However - so will be your losses.  

Therefore, you should only put up an amount that you are ready to risk losing. 

In order to make this decision easier, traders often come up with a bankroll management strategy. This will be a self-imposed limit on how much you will be risking on a trade. 

For instance, you might have a rule to never risk more than 1% of your total trading funds on a single AAVE trade. So, if you have $5,000 in your account - your stake on an AAVE position will be limited to $50. 

This approach will work best with online crypto brokers that have a lower minimum investment amount policy. For example, on eToro, you can trade AAVE from $25 - allowing you to gain exposure to the market without having to risk large amounts. 

AAVE Trading Leverage

When we discussed short-term strategies - we mentioned that it is possible to apply leverage on your AAVE trade. As you might remember, this is particularly relevant when trading CFDs. 

Leveraging enables you to increase the potential profit of your AAVE trades. For instance, you can apply leverage of 1:5 - which will increase your stake by x5, and consequently, also your profits. 

Let us offer an example:

  • Suppose you are staking $100 on AAVE.
  • You choose to apply leverage of 1:10 on this trade. 
  • Meaning - your stake now amounts to $1,000. 
  • Now, let's say you make a profit of 10% on this trade. 
  • Since you applied leverage - your gains on this trade will be $100. 
  • However, if you hadn't applied leverage - your profit would have been limited to $10. 

Now, it is critical to remember that if you had encountered losses in this trade - this will also be magnified. 

This is why it is always important to be aware of the risks when trading with leverage. 

It is not unusual for unregulated brokers to entice traders with up to 100x and even 500x leverage. However, needless to say - it is best to stay away from such platforms.  

Fees to Trade AAVE Online

When thinking of how to trade AAVE - many beginners are unaware of the importance of fees. However, this is a crucial factor that can ultimately decide how much profit you will be able to keep for yourself. 

In terms of fees, no two crypto brokers are the same. Therefore, you should carefully consider the charges involved before you decide on a brokerage platform. 

To help clear the mist, here we discuss some of the most commonly listed fees across online AAVE brokers. 

AAVE Trading Commission

A majority of online brokers will require you to pay a trading commission when buying or selling AAVE. 

You will find this fee denoted in percentage terms - which will change depending on your stake. 

  • For instance, let's suppose that your AAVE broker has a commission rate of 1.99%.
  • This means - if your stake on AAVE is $1,000, you will end up paying a $19.90 commission fee. 
  • This is charged when you are buying, and then again when you are selling. 

One way to avoid this fee is to choose a commission-free broker such as eToro. 

AAVE Spread

Another trading fee that you need to be informed of is the 'spread.' This is often considered an indirect fee, as the spread is calculated as the difference between the buy and sell price of an asset - in this case, AAVE. The wider this is, the more you will have to pay. 

The profits you receive will be what is left after deducting the spread amount. 

Therefore, if the spread on AAVE is 1% - you will have to make a profit of at least 1% to reach the profitability threshold. 

Other AAVE Trading Fees

While the spread and commission are trading fees, your broker might also charge you other administrative fees to cover the cost of your trades. 

  • Deposits/Withdrawals: This will be applicable every time you make a deposit or withdrawal from the platform. 
  • Inactivity Fee: You might be required to pay an inactivity fee if you do not meet the minimum trading level set by your chosen broker for a duration of six months. 
  • Overnight Fee: This fee is most commonly applicable for CFD positions that you keep open overnight. On some brokers, this might be called a 'swap fee.' 

Check Out: Could Aave Be A Millionaire-Maker Coin?

How to Trade AAVE 2021 - Step-by-Step Walkthrough

Up until this point, our How to Trade AAVE Guide has discussed everything you need to do before you start trading this digital asset. 

Finally, we are going to explain how you can start trading using an online broker today!

Here we have a step-by-step walkthrough of what you need to do in order to successfully place AAVE trades.

Step 1: Choose an AAVE Trading Site

Throughout this guide, we have mentioned how important it is for you to choose a reputable online broker. Nonetheless, it can be a challenge for many newcomers. 

To simplify the process, you can analyze each AAVE broker based on the following parameters:

  • Regulation: Is the platform licensed by any notable financial authority?
  • Fees: What types of trading fees are you liable to pay?
  • Payments: Is your preferred payment method integrated on the platform?
  • Minimum Deposits: Should you deposit the minimum amount required to start trading AAVE?
  • AAVE Pairs: How many AAVE trading pairs are offered by the broker?
  • Trading Platform: Is it easy to use the platform?
  • Mobile Application: Does the broker support mobile trading?

In view of all these factors - we suggest that you consider eToro for your AAVE trades. 

This highly regulated trading platform can give you access to thousands of digital assets, including AAVE, on a commission-free basis. 

Step 2: Open an AAVE Trading Account

After choosing your AAVE broker, you can go ahead and create a trading account with the platform. 

This will require you to provide some personal information - like your full name, date of birth, country of residence, and contact details. 

Furthermore, on regulated brokers like eToro - it is mandatory that you complete a KYC verification process. Meaning - you will have to provide a valid government-issued ID and proof of address to gain access to the full features of the platform. 

This process is automated and can be completed within a few minutes. 

Step 3: Deposit Funds

Once you have signed up with your brokerage platform, you will need to make a deposit to start trading AAVE. Most online brokers offer funding through multiple payment methods - such as debit cards, credit cards, and e-wallets like PayPal. 

You will also be able to deposit funds via a wire transfer - but this will involve a waiting period of up to seven business days. 

Step 4: Choose an AAVE Trading Market

If you already know which AAVE pair you want to trade - you can search for it on the platform. 

Alternatively, you can also start by exploring which AAVE trading pairs are available on your chosen brokerage site and decide which pair you want to trade based on your strategy. 

Step 5: Place AAVE Trade

Once you are on the trading page of your chosen AAVE pair - you can start placing orders. 

This is where you use the trading orders we discussed earlier. 

You should also specify the amount you wish to stake on AAVE. When ready, you can confirm the trade - and your broker will execute your orders as per your instructions. 

On eToro, the entire process of placing a commission-free AAVE trade can be completed within a few minutes. 

How to Trade AAVE Guide - The Verdict

Our How to Trade AAVE Guide has aimed to give you a comprehensive account of what you need to consider before trading this digital token. 

This includes factors that affect the price movements, your trading strategies, the order types, and how you can maximize your profits. 

Most important of all, make sure that you choose a regulated broker like eToro for placing secure AAVE trades. The platform is not only commission-free but will also allow you to start trading AAVE from a minimum stake of just $25. 

eToro – The Best Platform to Buy Aave

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

Virtual currencies are highly volatile. Your capital is at risk.

Read More:

Is It Worth Investing in Aave?

AAVE Price Prediction for 2025 and 2030

17 Reasons Why You Should Invest in AAVE Today

FAQs

How safe is AAVE trading?

If you choose a regulated crypto broker like eToro, all your AAVE trades can be placed in a completely safe and secure manner.

Where can I trade AAVE?

AAVE can be traded on several popular cryptocurrency platforms. However, it will be in your best interest to choose a regulated crypto broker to ensure the security of your funds and assets.

Can you make money by trading AAVE?

Yes, if you are able to predict the market correctly - then you can make profitable trades on AAVE.

How can I trade AAVE CFDs legally in the US?

You cannot trade AAVE CFDs legally if you are based in the US. You might be able to find unregulated platforms providing you access - but these are best avoided.

How much leverage can I apply to AAVE trades?

This will depend on your chosen broker. However, if you are in the US or UK - you will not be able to access leveraged CFDs on AAVE. 

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