0

How to Trade Ethereum 2021: The Ultimate Guide to ETH Trading

Comprehensive Guide to Trading Ethereum in 2021

28 Min Read
Last Updated July 23rd 2021

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

It seems like only yesterday the world saw its first-ever tradable cryptocurrency. Fast forward to 2021 and the digital currency industry sees billions of dollars trading hands each and every day. 

There are now thousands of different digital currencies in existence, with Ethereum being the second most in-demand globally. As such, the Ethereum trading scene is now growing in popularity with those seeking a combination of liquidity and volatility. 

We should make it clear that Ethereum trading is no walk in the park. Taking this into account, we have created a comprehensive guide on How to Trade Ethereum in 2021. 

We dive into everything there is to know about this crypto-asset, from the bare-bone basics and risk/reward strategies, to how to trade Ethereum from the comfort of your home.

How to trade Ethereum in 5 Easy Steps

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

This guide on how to Trade Ethereum ETC will break everything down in Layman’s terms so that you do not trade ETH blindly. But, if you don’t quite have the time to read it all of the ways through, this is what you need to do to trade Ethereum now. 

Step 1: Open an account with a regulated exchange

Step 2: Funds your account

Step 3: Choose how much Ethereum you want to trade 

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

Step 5: Confirm the trade order

 

Let’s get started learning how to trade Ethereum in 2021!

What is Ethereum Trading?

As is the case with any asset one chooses to trade - whether that’s stocks, forex, or Ethereum - the overarching objective is to correctly predict whether you believe the price of Ethereum, the digital currency, will rise above or fall below its current value.

If you happen to speculate correctly, you will make gains on your Ethereum trade. And of course - the amount you make will depend on how much you staked on the position.

It also goes without saying that the higher the value of your Ethereum position, the more you stand to make if you predict correctly. The vast majority of Ethereum traders calculate the success of trades in percentage terms.

Let’s show you a basic example of how trading Ethereum works in practice:

  • You opt to trade Ethereum against the US dollar
  • This means that you are trading the crypto pair ETH/USD
  • ETH/USD is priced at $611.46
  • Believing the price is going to see an increase - you place a buy order
  • Your stake on this order is $1,000
  • In a matter of days, the pair’s value has seen an increase of 6%
  • You speculated correctly - thus, you made $60 on this crypto trade (6% of $1,000 stake)

As is clear from our above example, the rudiments of Ethereum trading is the same as any other asset class. You were able to make a profit in our hypothetical trade - because you correctly speculated the market sentiment on Ethereum.

How Does Ethereum Trading Work?

As we touched on, Ethereum trading works in much the same way as when buying and selling any other financial instrument. Having said that, it’s not as cut and dry as it sounds.

After all, people have been actively trading stocks for over 100+ years - whereas cryptocurrencies have only been on the scene for a decade or so.

Bearing this in mind, we believe the best way to start trading Ethereum online is to first gain an understanding of how this digital coin works. 

Ethereum Trading Price Movements

The value of any tradable asset is dictated by the supply and demand for the ‘product’. As such, if the sentiment of the Ethereum project is positive, then this tends to lead to more people buying the digital currency than those selling it.

This increased interest does mean that the price of Ethereum is likely to increase as well. Should the opposite be the case, and enthusiasm for Ethereum is waning - the price will decrease. This is the nature of supply and demand and this - the same with any financial marketplace.

Many things could alter the course of supply and demand of Ethereum, such as - macroeconomic news, speculation, regulation, current affairs, and crypto wallet or exchange hacking stories.

We mentioned regulation there. To give you a specific example - let’s say that a perceivably strong and secure government, such as the US, were to regulate Ethereum. This would send out a positive message that the digital currency is here to stay, firmly rooted in modern society.

On the other hand - if the US government instead announced a plan to prohibit the use of virtual currencies - the price of Ethereum would probably fall faster than a speeding bullet. This could be catastrophic for the future of the cryptocurrency market.

It is important to note that due to the nature of supply and demand, the price of Ethereum will rise and fall throughout each and every day - on a second-by-second basis.

Whatsmore, this digital asset can be traded 24 hours a day, 7 days a week via an online broker.

Read Also: Ethereum Price Prediction 2021

Ethereum Trading Pairs

ethereum price chart

If you are a complete novice and don’t quite know how to trade Ethereum, then you may find it easier to draw a comparison to forex trading. After all, when trading foreign currencies, you are trading two different currencies against each other.

In terms of Ethereum, this will also be traded as part of a pair. There are two alternative ways in which this can be done with crypto coins.

The first option is to trade Ethereum against a major ‘fiat’ currency. A perfect example of this is Ethereum against the US dollar - shown as ETH/USD.

The US dollar is one of the most traded currencies in the world, so is often traded alongside crypto coins. Some trading platforms - such as eToro, offer Ethereum against the British pound, the Euro, and even the Japanese Yen.

Crucially, pairing Ethereum with currencies other than US dollars will result in lower liquidity, and lower trading volumes. Whilst that might not bother you, it’s something to be aware of.

The second option, in terms of Ethereum trading pairs, is to have a go at crypto-to-crypto markets. Some trading platforms refer to these pairs as crypto-cross pairs. Either way, this entails trading Ethereum against another digital currency (rather than a fiat currency).

To give you an example, we are talking about the likes of Bitcoin (ETH/BTC), Litecoin (ETH/LTC), and Ripple (ETH/XRP). All of the aforementioned pairs are popular with people who opt for crypto-crypto trading, but there are heaps more to choose from.

If the crypto-asset markets are experiencing a ‘bullish’ period, you will likely notice that the aforementioned ‘fiat’ currencies are experiencing a healthier growth rate than Ethereum.

This means that if markets are experiencing a ‘bearish’ period, the opposite occurs. Ergo, there is a time and a place for both categories of crypto pairs - be it crypto-fiat or crypto-crypto.

Ready to dive into Ethereum trading?

Owning Ethereum or Trading CFDs

When you are trading Ethereum online, there are two different routes you can take. The first route is the traditional one - simply buying the digital asset, with high hopes that the value of the coin will rise over time.

The other route you could take trading Ethereum, and one of the most popular, is via cryptocurrency CFDs (contracts for differences). Although we cover Ethereum CFD markets shortly, we should note that citizens of certain countries won’t have access - such as the US.

Trade and Own Ethereum

If you want to trade Ethereum, but would rather enjoy ownership of the underlying asset - social trading platform eToro enables this. This means that the underlying instrument is yours until of course, you decide to sell it and move on.

If you are inexperienced when it comes to trading digital currencies, then this way cuts out the need to spend months learning technical analysis and such. Not only that, but you would no longer need to be concerned with the short-term volatility of Ethereum.

Alternatively, you can trade hundreds of Ethereum pairs via a cryptocurrency exchange. Generally speaking, you won’t literally be trading ETH against USD, as US dollars are often depicted as USDT

For those unaware USDT is a cryptocurrency called ‘Tether’, and each token is pegged and representative of an underlying USD.

Ethereum Trading via CFDs

We should state that CFDs are banned in the USA according to CFTC rules. Not only that, but a recent announcement confirmed that as of January 2021, crypto CFDs will no longer be available for UK citizens - as per the FCA. 

Fortunately, if you’re based elsewhere - for example, in Europe, Australia, or New Zealand - you have unfettered access to the Ethereum CFD trading scene. 

For those unaware, when trading CFDs, you do not own the underlying asset. Instead, the CFD is tasked with monitoring the real-world price shifts of Ethereum. All you have to do as an Ethereum trader is to try and speculate on its future value in the short-term.

One of the biggest benefits of trading Ethereum via CFDs is that you are able to choose between going short or long. This means if you believe Ethereum is going to go down in value - you can still make a profit. Of course, first, you need to speculate correctly.

In addition to this, you will be able to trade on a margin via your CFD broker. The ratio offered by brokers for cryptocurrency CFDs is capped at 1:2  if you reside in Europe. This limit will also be imposed on Australians from April 2021.

Nevertheless, this ratio means that you can enter the Ethereum market at $1,000, and will only need to put in $500. As such, the broker essentially loans you the rest. 

Take note, those living outside of the aforementioned countries can often get much higher leverage limits when trading Ethereum. 

Warning: CFDs are complex instruments and come with a high risk 

How to Trade Ethereum Online - Setting up a Trade

trading ethereum

Let’s have a look at how you can set up an order when trading Ethereum online. Later on, we are going to dive into how to choose a great broker to process these orders for you.

Whilst there are a few different options when it comes to placing an order - you will invariably use the most basic buy and sell.

Buy or Sell Order

As we said, you always need to place a buy or sell order when trading Ethereum online.

Buy and sell orders indicate to your broker whether you think the price will rise or fall. So it’s simple but imperative. 

Let’s offer an example of a simple order, using Ethereum against the US dollar:

  • Let’s say that ETH/USD has been quoted at $580.00
  • Should you think the value is going to go above $580.00 - place a buy order
  • If, however, you think the price will fall below $580.00 - place a sell order

To clarify, one order will enable you to enter the market, whilst the other one allows you to exit the trade. So if you enter the position with a buy order, you must exit with a sell order - and vice versa.

Entry Price

When it comes to placing an order with your Ethereum trading platform of choice - you can opt for either a limit order or a market order.

To clear the mist:

  • If you want your Ethereum pair position to be kick-started immediately - place a market order with your online broker. It’s important to note that due to the volatile nature of the Ethereum trading arena - the price will have shifted ever so slightly from what you see on the order form. This happens within the seconds it takes to execute the order and is unavoidable.
  • Should you want to specify a price at which you would like to enter the market - elect to create a limit order with your Ethereum trading platform of choice. For instance, if ETH/USD is priced at $580.00, you might not want to enter until it reaches $599.00. If, or when that happens, the broker will execute your Ethereum trade for you.

Which order is the most appropriate will depend on various aspects. For example, if Ethereum is flying high, you might want to get a piece of the action without delay. This can be achieved by creating a market order. Your broker will then execute your trade immediately - bagging you the current, or next best Ethereum price available.

As we said, limit orders are different, in the sense that you are able to specify an exact price. This is a great way of locking in potential profits, as you are able to maintain some level of control over the price.

Exit Strategy

That’s the basics out of the way. So, when you’ve utilized your buy or sell order, as well as your market or limit order, you can close the trade when you sense the time is right.

We mentioned briefly that if you enter a position one way, you need to exit by using the opposite order. So if you enter a trade with a sell order, you must place a buy order to close it.

In terms of an exit strategy - it’s also a good idea to take full advantage of stop-loss and take-profit orders. Both stop-loss and take-profit orders will be automatically executed at the price that you specify. 

Therefore, you can take a backseat without worrying about timing the market. If you are still a little unsure on how to Trade Ethereum by using stop-loss and take-profit orders, we are going to explain further with a simple example.

So, let’s say you do not want to lose more than 3% on your trade. As such, you would create a stop-loss order at a price 3% higher or lower than your entry price - depending on whether you are long or short on Ethereum.

When it comes to take-profit orders, this is much the same process but to lock in your gains. In this example, you will create a take-profit order at 5% above/below the current price. If Ethereum reaches that price, your order is executed automatically - securing your profit and closing the position.

Let’s show you an example of how that might look in real-life:

  • Imagine ETH/USD is valued at $560
  • You elect to go long so place a buy order with your broker
  • You decide you want to lose no less than 3%
  • With this in mind, you place a stop-loss order of $543.20
  • Now, let’s say that you want a profit of 5% from your position
  • With this in mind, you place a take-profit order of $604.80

As you can see, these orders set you up nicely. As soon as the pair falls to $543.20, your stop-loss order will be actioned. Vice versa, should the pair increase to $604.80 - your take-profit order will be actioned 

All in all, not only do these orders allow you to set clear entry and exit targets - but you don’t need to manually watch the price action of Ethereum in real-time. Instead, your position will be closed automatically - irrespective of whether you make a profit or loss. 

Ready to start trading Ethereum?

How to Make Money Trading Ethereum

trading ethereum, how to trade ethereum

If you’re wondering how to make money trading Ethereum, it’s a similar story to forex and stocks. The only way to make money is to correctly hypothesize what will happen to the value of the digital currency in question. Usually, this is based on short-term trends and such.

Sure, we’ve covered the fundamentals of trading Ethereum, but there is more to learn. This is because when trading digital currencies there are some more key metrics to grasp.

How can you make money trading Ethereum ETC? 

1. Stake

Starting with the ‘stake’ makes sense - given that the size of your position will dictate the amount of potential profit you could see from an Ethereum trade.

Each trading platform will require a different minimum stake value. To give you an idea of what to expect - our How to Trade Ethereum Guide found that popular online broker eToro requires a very reasonable $25 to start trading. This is the case across each of its supported cryptocurrency pairs.

Other platforms in the space might require hundreds of dollars to get a look in, so always check those all-important terms and conditions at any brokerage worth your consideration.

It is also a good idea to have some sort of plan in place to stop you from going off track. For example, many Ethereum traders set out to never stake more than 1% of what they have in their trading account.

This means if you have $1,000 in your account - your stake should be no more than $10. If you have $5,000, you would stake no more than $50 - and so on and so forth.

This is a great way to maintain control of your finances when trading in such a volatile environment. By using a percentage, you will be able to reassess your minimum stake depending on your available trading funds at the time.

2. Gains in Percentage Terms

This brings us smoothly onto working out your potential Ethereum trading gains in percentage terms. In a nutshell, we think it’s easier to calculate any profits using percentages - as opposed to ‘pips’.

As you are now aware, aside from the size of your initial stake on Ethereum having an impact on your profit - as will the price shifts of respective pair.

  • For instance, if you placed a $1,000 buy order, and then the price of Ethereum increased by 8% - you would make gains of $80
  • Similarly, if you created a $2,000 sell order, and the price of the virtual coin fell by 10% - you would make a profit of $200

When looking at the above examples you’re probably thinking - those gains ain’t half bad! However, you can increase that profit even more by applying leverage to the trade.

3. Ethereum Trading Leverage

Before we get into the ins and outs of leverage, and how it works when trading Ethereum - we should again clarify that if you reside in the USA you cannot access CFD instruments. This means no leverage unless you use an unregulated offshore trading site - which we strongly advise against.

Don’t forget, if you are a UK resident - as of January 2021, the FCA states that cryptocurrency CFDs will no longer be available. So, this takes CFD leverage off the table for UK crypto traders too.

If you live in the European Union you can trade Ethereum via CFD instruments and apply leverage of up to 1:2. Other countries with different limits - or not limits at all. 

Nonetheless, we have put together a basic example of an Ethereum trade, using the aforementioned leverage.

  • You decide to place a $2,000 sell order on Ethereum
  • You apply leverage of 1:2
  • The value of Ethereum falls by 12%
  • Without leverage, your profit would have been $240.00
  • Because you applied 1:2 leverage - your gains from this trade are $480.00

It is very important to be mindful of the fact that, much like a loan, leverage can be a double-edged sword. This means that while it can double your stake, it can also amplify your losses - should you be incorrect in your hypothesis.

Fess to Trade Ethereum Online

No two brokers are the same, however, you can pretty much guarantee that there will be fees of some description. After all, the online Ethereum trading platform is a business, and businesses need to make money to continue offering a service.

To give you an indication of what kind of fees you might expect to see at your chosen Ethereum trading site, please see the list below.

Ethereum Trading Commission

Very few trading platforms will allow you to trade Ethereum on a commission-free basis, whereas most charge clients for both entering and exiting a trade.

Our How to Trade Ethereum 2021 Guide found that this commission fee, when charged, is usually illustrated in percentage form - and measured against your stake.

To give you an idea, platforms such as Coinbase charge clients almost 1.49% to trade Ethereum. A $1,000 trade at this site would therefore cost you $14.90.

If your trade was worth $1,500 at the time of closing, again you would pay a 1.49% commission. This time, that would amount to$22.35. All in all, entering and exiting your Ethereum position at Coinbase would have cost you $37.25.

In stark contrast, eToro enables clients to invest in and trade Ethereum with 0% commission. Instead, you are charged via the spread, which we are going to talk about next.

Ethereum Spread

Put simply, the spread quoted with your Ethereum pair is the gap between the buy price and the sell price. If you have ever traded forex, you will know that the ‘spread’ is invariably illustrated using pips.

Pips allow brokers to quote much smaller price shifts of a pair. To give you an example, you might see that EUR/USD is quoted at a buy price of 1.2050 and a sell price of 1.2052. This shows a spread of 2 pips.

When it comes to cryptocurrencies, however, the spread is best determined in percentage terms. This is because cryptocurrencies like Bitcoin and Ethereum have a much larger value and thus - pips wouldn’t be worth using. 

Nevertheless, the spread can be compared to an indirect fee, payable to your trading platform of choice.

It’s important to be mindful of the spread offered by your broker, as ultimately, the higher the spread the worse off financially you will be.

If the spread is 0.5%, you are beginning your Ethereum trade 0.5% in the red. In order to break even, you must make 0.5% on the trade. In other words, to make a real profit, you must make over 0.5%.

Other Ethereum Trading Fees

At the risk of repetitiveness - all brokers will differ somewhat. With this in mind, we have included below a couple of other commonly charged fees in the Ethereum trading space.

  • Transaction Fees: Some Ethereum trading sites may charge you for making a deposit, and/or requesting withdrawals
  • CFD Fees: When trading Ethereum CFDs - irrelevant to whether you apply leverage - there will be daily overnight financing (or swap-fees) for any positions left open overnight

For this reason, it is important that you never sign up to an Ethereum trading platform blind to potential charges, so always check the T&Cs.

Start trading Ethereum Now!

How to Trade Ethereum - Step-by-Step Walkthrough

By this point in our How to Trade Ethereum Guide, you are probably itching to get started.

Understanding the fundamentals, how to place orders, and risk/reward management are essential when it comes to giving yourself the best chance at trading Ethereum and making consistent gains.

With that said, if you’re ready to start buying and selling this hugely popular digital currency right now - follow the steps outlined below. 

Step 1: Choose an Ethereum Trading Broker

It’s irrelevant whether you want to trade Ethereum on your mobile or at home. Finding a decent and well respected online brokerage firm is an essential part of trading.

There are loads of sharks in the Ethereum trading space - so it’s important to really do your homework. You should never deposit your hard-earned cash at an unknown or unregulated platform.

Below we have listed some key metrics to consider when searching for the perfect broker for your Ethereum trades.

  • Regulation: Is the Ethereum trading platform licensed and regulated?
  • Fees: How much does the Ethereum broker charge in the way of commission and fees?
  • Payment: What payment methods does the broker site accept?
  • Account Minimums: Does the broker stipulate a minimum stake and deposit value?
  • Ethereum Pairs: What Ethereum pairs are available at the trading site?
  • Trading Platform: Is the broker’s website user-friendly?
  • Mobile App: Does the Ethereum broker have a mobile app?

It’s clear to see, there is a lot to consider before committing to an Ethereum trading site. We highly recommend sticking like glue to regulated platforms. Regulation exists to keep the space fair and safe from crooks. eToro, for example, is licensed by three well-respected bodies - the FCA, CySEC, and ASIC.

If you haven’t got a broker in mind yet - eToro is a fantastic social trading platform offering Ethereum pairs - and its 13 million customers agree. As noted above, the site is fully regulated by various jurisdictions, and contains helpful features like ‘Copy Trader’.

Copy Trader allows you to invest in and copy a pro cryptocurrency trader like-for-like - without moving a muscle. First, you have to pick a ‘Copied Trader’ with similar trading goals, and of course previous success.

On top of cryptocurrencies, eToro also offers stocks, and ETFs.

Step 2: Open an Ethereum Trading Account

Now, assuming you have chosen a broker to execute your Ethereum trades - you will need to sign up. At broker sites like eToro, this process takes less than 10 minutes from start to finish.

Simply enter the details required. Invariably, you will be prompted for your full name, address, email, and mobile number.

Depending on the trading platform, you will likely need to upload a copy of your government-issued photo ID - think along the lines of your driver’s license, or passport.

Step 3: Deposit Funds

Next, you need to deposit funds into your new broker account. If you are using an unregulated exchange, you will have to change your fiat currency into the cryptocurrency of choice first.

Whereas, if you use a broker like eToro, you can deposit in US dollars, or you can pay in your own currency and eToro will exchange it for a small fee of 0.5%.

You will usually find that trading platforms accept a range of payment types. However, if you need to pay with one in particular - it’s better to make sure it’s accepted before raising your hopes.

Whilst you are at it, check what the minimum deposit will be. $200 is about average, although that doesn’t mean you have to stake $200. As we touched on, you can trade Ethereum at eToro at just $25 a pop.

Step 4: Choose an Ethereum Trading Market

Now that you’ve funded your trading account - you need to decide on an Ethereum market. We mentioned earlier that you can trade Ethereum against crypto, or you can trade it against a fiat currency such as the US dollar.

Harking back to eToro, if you venture over to the ‘Trade Markets’ section of the website, you will see all cryptocurrency markets laid out. This might help you decide which route you want to take to begin with.

Whichever online broker company you research, always check which Ethereum pairs will be available to you.

Step 5: Place Ethereum Trade

At this point, you are signed up, your account is funded, and you can begin to trade Ethereum.

We discussed various orders earlier on, so if you feel like you need a reminder, head back up to the section titled ‘How to Trade Ethereum Online - Setting up a Trade’.

Confirm a pair inclusive of Ethereum, create your order, and enter your stake. Finally, hit confirm to solidify your first Ethereum trade! 

Hopefully, your first trade will be a successful one.

How to Trade Ethereum Guide - The Verdict

Although it can take months, if not years, to master the art of Ethereum trading - don’t let that put you off.

Many people believe cryptocurrencies are the future, so it makes sense that billions of dollars worth of digital pairs are traded every single day.

We recommend choosing a regulated online broker that can offer you a range of crypto pairs.

If you are still a little daunted by the prospect of trading digital currencies - why not try eToro’s ‘Copy Trader’ feature or the free demo account which includes $100,000 of paper funds.

Or, if you’re itching to start trading Ethereum with real money - eToro requires a minimum stake of just $25. Best of all, the broker doesn’t charge any commission or monthly fees!

eToro – The Best Platform to Trade Ethereum

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.

FAQs

Is trading in Ethereum safe?

Yes, but we recommend choosing a regulated trading platform holding a license from the likes of the FCA, CySEC, or ASIC - or all 3, as is the case with eToro.

How do I trade in Ethereum?

Simply sign up with a regulated online broker offering Ethereum. Next fund your trading account, decide whether the value of Ethereum will rise or fall - and place an order.

Can you get rich by trading Ethereum?

As with trading any asset - there is no magic bullet. Some people make a living from trading, whereas others fail to make any gains at all. We advise utilizing stop-loss orders to try and mitigate losses. And most importantly - make a point of learning the Ethereum market inside out.

Is Ethereum trading legal in the US?

Yes, Ethereum trading is legal in the US. But, if you want to trade Ethereum CFDs you are out of luck. According to the Commodity Futures Trading Commission (CTFC), CFDs are prohibited.

Can you trade Ethereum with Leverage?

Yes, you can trade Ethereum with leverage - depending on where you live. In the US leverage via CFDs is illegal. In the UK, as of January 2021, cryptocurrency CFDs are no longer allowed - meaning no leverage. If you reside in the EU, you can still apply leverage of up to 1:2, as per ESMA rules. Other countries might have access to even greater leverage limits.

Top Brokers in
    All Regulated Brokers
    67% of retail clients lose money when trading CFDs with this provider.