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

Comprehensive Guide to Trading Uniswap in 2021

Last Updated July 23rd 2021
24 Min Read

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

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

Uniswap is one of the world's leading Ethereum-based decentralized crypto projects. Following its influencing success on the cryptocurrency market, Uniswap introduced its governance token, the UNI coin, in September 2020. 

This ERC-20 token is designed to contribute to the usage and development of the Uniswap ecosystem. Since the beginning of 2021, the UNI token has been performing exceedingly well - gaining over 500% in value. 

If you are interested in learning how to trade Uniswap, we have created a comprehensive guide for you. We cover the basics of this digital coin along with what you need to know about the Uniswap trading markets in order to capitalize on its volatility. 

Contents:

Trading this new digital currency is no easy feat - which is why we have put together an in-depth guide on How to Trade Uniswap in 2021. 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 Uniswap today. 

How to Trade Uniswap in 5 Steps

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

Step 1: Open an account with a regulated exchange 

Step 2: Funds your account with a debit/credit card, e-wallet, or bank transfer

Step 3: Choose how much Uniswap you want to trade 

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

Step 5: Confirm the trade

What is Uniswap Trading? 

Today, the majority of cryptocurrency trading occurs through centralized exchanges that are controlled by a single company.  

Uniswap was designed as an alternative to this set up. This DeFi protocol uses non-custodial methods to eliminate the need for a middleman to facilitate cryptocurrency trades. 

The platform was built on top of Ethereum blockchain, making it compatible with all ERC-20 tokens. In addition, the ecosystem also uses an innovative trading model called Automated Liquidity Protocol, which incentivizes traders on the exchange to drive up liquidity levels. 

The native token of Uniswap, UNI, was created as a means to reward users of the protocol. In the past few months, the coin has gained a lot of attention from the cryptocurrency market, which has resulted in ever-growing trading volumes. 

As of April 2021 - according to CoinMarketCap, the UNI token is one of the top 10 cryptocurrencies in the world, with a market cap of over $16 billion. That said, the prices of all cryptocurrencies are driven by volatility. In other words, if the market sentiment changes - so will the price of the coin. 

For instance, when Uniswap was launched in September 2020, its value stood at $3.51. After a few ups and downs, the cryptocurrency entered 2021 with a trading price of $4.78. It soon entered an upward trend, reaching an all-time high in April 2021 - at $38.01. 

Put otherwise, the price of cryptocurrencies such as Uniswap is determined by the supply and demand in the market. If there is a rising demand for this digital currency - this will lead in an increase in its price and vice versa. 

As such, when thinking of how to trade Uniswap, you are speculating on the future price of the coin. If you are successful in making the right speculation, you stand the best chance to make a profit. 

Before getting into the specifics, let us offer you a basic example of how a Uniswap trade will look like in practice: 

  • Suppose that the current price of UNI is $35.00. 
  • On your chosen cryptocurrency exchange, this will be denoted as UNI/USD. 
  • Let's say that you expect Uniswap to rise in value over the next few months. 
  • Therefore, you stake $500 on a buy order. 
  • After one month, the value of UNI increases to $40.00. 
  • This translates to a rise of over 14% in price. 
  • You decide to close the trade - making a profit of $70 (14% of $500) in the process. 

As you can see from the above example, you were able to make a tidy profit of $70 because you speculated correctly. 

On the contrary, if you had made the wrong prediction, you would have lost money. 

How Does Uniswap Trading Work?

In many ways, the fundamentals of cryptocurrency trading are similar to that of other tradable assets - such as the likes of stocks or commodities. If you have a basic understanding of how these financial markets work, you will have no difficulty learning how to trade Uniswap. 

With that in mind, we will take a look at some of the basic principles behind trading cryptocurrencies like Uniswap. 

Uniswap Trading Price Movements

As we briefly mentioned above, the underlying value of an asset is derived from its supply and demand in the market. In plain terms, if there are more traders buying Uniswap, then it will drive up the demand - and the price will rise. 

Conversely, if the market sentiment turns against Uniswap, more traders will want to sell their coins - and the price will fall. 

As you know by now, cryptocurrency trading is facilitated through exchanges or online brokers. When you are looking to trade Uniswap, you might notice that the price of this digital coin varies marginally from one platform to another. 

For instance, one online broker might have Uniswap priced at $35.11, whilst another might quote you for $35.15. 

This slight variation is common due to the volatile nature of the cryptocurrency market. However, such small differences in prices will not affect your ability to make profitable trades. 

Uniswap Trading Pairs

Similar to forex, cryptocurrencies are also traded in the form of trading pairs. However, the main difference is that you have the option to trade a cryptocurrency against another digital coin or a fiat currency. 

In a crypto-fiat pair, you are trading Uniswap against another digital currency. A perfect example of this is the UNI/USD pair - where UNI is traded against the US dollar. 

The second option is crypto-crypto pairs - which means that you will be trading Uniswap against another digital currency. This might include pairs such as UNI/BTC or UNI/ETC. 

That said, if you are looking for liquidity, it is best to trade Uniswap against a major fiat currency such as the US dollar. This is primarily because the USD is the global benchmark currency - which will give you access to higher trading volumes. 

Additionally, a crypto-fiat pair will also make it easier for you to quantify the profit and loss on a trade. As such, many newbies opt to trade Uniswap against fiat currencies until they gain a firm understanding of the cryptocurrency markets. 

That said, online brokers such as eToro also allow you to trade crypto-assets against other major fiat currencies such as the euro, Japanese yen, British pound, and the Australian dollar. 

Long or Short-Term Trading

In terms of how to trade Uniswap online, you have two different options available at your disposal. The first one is to take a traditional approach - by buying the digital coin with the hopes that its price will increase over time. 

For instance, if you want to trade Uniswap because you believe in the future potential of this protocol, you might want to buy the digital coin and store it in a crypto wallet. 

Long-term cryptocurrency traders tend to hold their assets for weeks, months, or even years. When it is the right time for you to cash out, you will sell your holdings - making a profit in the process. 

Alternatively, you can also trade Uniswap in the short term with the goal to make modest but frequent profits. If this is the case, you will be placing trades regularly in a short period of time - as in swing trading or day trading

However, if you are a complete beginner at trading, then it will be a challenging undertaking for you to follow a short-term strategy. This is because you will need to constantly watch the market and take swift action in order to capitalize on profitable price movements. 

As such, the long-term 'buy and hold' strategy might be better suited for new traders. After all, this means that you do not have to burden yourself with the need to constantly check the markets. 

With this in mind, let us take a closer look at both of these strategies below. 

Trade and Own Uniswap 

As we mentioned earlier, you can adopt a 'buy and hold' strategy by purchasing Uniswap and holding it over a longer period of time. If you want to choose this route, it might be in your best interest to buy the digital asset directly from an online broker. 

However, finding a suitable online broker for your Uniswap trades can be a time-consuming process. If you are searching for one, we suggest that you consider eToro. This regulated brokerage is one of the world's leading social trading platforms - with millions of users from across the globe. 

Most importantly, eToro is regulated in several countries - meaning you can safely store your Uniswap coins on the platform. Additionally, the broker also gives you access to cryptocurrencies at 0% commission rates. 

Uniswap Trading

For those who prefer to trade Uniswap in the short term - then it is important that you learn about Uniswap CFDs. 

A CFD (Contract for Difference) allows you to trade the underlying asset without having to take ownership. Instead, these financial instruments merely track the price of your chosen security - in this case, Uniswap. 

Before we go ahead, we should state that cryptocurrency CFD instruments are prohibited in many countries - including the US and UK. On the other hand, if you are residing elsewhere, for instance in Australia, or Europe - you will have no difficulty in finding online brokers that can give you access to Uniswap CFD trading. 

Here is a closer look at what CFDs are:

  • CFDs track the real-world price of a digital coin like Uniswap. 
  • When trading CFDs, you can benefit from leverage and competitive fees. 
  • You also have the option to capitalize on bullish and bearish market movements - by going 'long' or 'short' on Uniswap. 

If you are able to access CFDs where you live, make sure that you trade Uniswap CFDs only through regulated platforms such as eToro. 

That being said, CFD trading is not entirely inaccessible in countries where it is prohibited. In fact, you might be able to find third-party crypto exchanges that allow you to trade Uniswap CFDs. 

However, these will certainly be unregulated - meaning that they might be operating without a license. In other words, you might be trading in a potentially unsecure space where your capital will always be at risk. 

Moreover, you might not have the convenience to trade Uniswap against major fiat currencies such as US dollar or euros. 

Instead, you will be limited to the option of trading crypto-crypto pairs such as UNI/USDT. For those unaware, USDT is a digital currency with its exchange rate fixed to the value of the US dollar. 

Read Also: Is Uniswap A Good Investment?

How to Trade Uniswap Online - Setting up a Trade

Uniswap trading order

In this section of our How to Trade Uniswap Guide, we will discuss the different orders you can use when trading cryptocurrencies

In simple terms, trading orders are used to convey your position to your broker - so that it can execute trades accurately on your behalf. 

Here we have compiled a list of the most commonly used orders to be aware of when trading Uniswap. 

Buy or Sell Order

Regardless of which strategy you follow, you will always have to use a buy order and a sell order when trading Uniswap. 

In short:

  • You will place a buy order when you expect the price of Uniswap to increase. 
  • You will place a sell order when you expect the price of Uniswap to decrease. 

All cryptocurrency brokers will require you to place both a buy order and a sell order. 

To elaborate:

  • If you are going long on Uniswap, you will open your position with a buy order and close it using a sell order
  • On the contrary, if you are going short on Uniswap, you will open your position with a sell order and close using a buy order

Entry Price

Buy and sell orders allow you to convey which position you are taking. Apart from this, you can also choose at what price you want to open your Uniswap trade. 

This is where you use a market order and a limit order. 

In a nutshell:

  • When placing a 'market order', you are indicating to the broker to immediately execute your trade - at the closest price available. 

However, since the financial markets are volatile, there might be a slight difference between the price at which you placed the order and the price at which it is executed. 

  • When placing a 'limit order', you can specify at what price you want to enter the market. 

For instance, let us say that Uniswap is trading at $35.00. But you want to open your position only when the price of the coin hits $35.10. Hence, you place a limit order at $35.10 - meaning that the broker will execute your trade only when the value of Uniswap rises to this predetermined price level. 

Market order and limit order are particularly crucial in the fast-moving cryptocurrency markets. With the prices fluctuating every second, traders prefer to stick with limit orders when trading digital coins like Uniswap.

Exit Strategy

Once you have entered the market using a market order or a limit order, you can choose to exit your position when you see fit. 

However, today, online brokers allow you to automate this process - by using take-profit and stop-loss orders. 

  • Take-profit order: As the name suggests, a take-profit order is used to close a trade after it has reached a specific profit level. 

For instance, let us say you are targeting a profit of 5% on your Uniswap trade. Therefore, you will create a take-profit order at 5% above or below your entry price (depending on whether you are going long or short). 

Your broker will close your position only when the value of Uniswap hits your specified take-profit price point. 

  • Stop-Loss order: A stop-loss order is intended to limit your losses. For example, let's suppose that you are not willing to risk losing more than 2% of your money on a Uniswap trade.

    As such, you will place a stop-loss order at 2% - indicating to the broker to automatically close the trade if the value of UNI coins reaches your stop-loss price level. 

Cryptocurrency traders always set take-profit and stop-loss orders on the two sides of the same trade. 

Here is an example that can give you a better idea of how you can use different orders on a single trade. 

  • Let us suppose that the current price of Unisap is $34.50. 
  • You believe that the value of the coin is about to go up in the next few hours. 
  • Consequently, you set up a buy order on Uniswap. 
  • You are looking to make a profit of 2% - so you place a take-profit order at $35.19. 
  • Simultaneously, you want to mitigate your losses to a maximum of 1.5%. Hence you will place a stop-loss order at 1.5% below your entry price - at $33.98. 

Once you open your position, this trade could go two ways: 

  • The price of Uniswap increases, and your broker will execute the take-profit order at $35.19 automatically. 
  • The price of Uniswap decreases, and your broker will execute your stop-loss order at $33.98. 

Regardless of which direction Uniswap moves, your trade will be closed automatically at the predetermined price levels you have set. 

Don't Miss: Uniswap Price Prediction

How to Make Money Trading Uniswap

Although trading orders can help you gain better control over your positions, it does not guarantee profitability. To achieve that, you will need to know how to make the right trading decisions. 

Here we have listed a few points for your consideration when thinking of how to trade Uniswap. 

1. Stake

In the trading space, a stake is the amount you are willing to risk on your chosen asset. For instance, if you are placing a buy order of $1,000 on Uniswap, your stake in this trade is $1,000. 

As it goes, the higher you stake, the higher your returns will be. To give an example - if you make a profit of 2% on your $1,000 stake - this translates to $20. If you increase your stake to $2,000 - you will make a profit of $40. 

That said, a higher stake also means more risk. As such, traders often employ a bankroll management strategy when trading cryptocurrencies. 

For instance, a trader might decide to stake no more than 2% of their available funds on a single trade. Put simply, if there is $5,000 in your trading account, you will not risk over $100 on a Uniswap trade. 

With brokers such as eToro, you can trade Uniswap with as little as $25 - making it easier for you to stick to such a strategy.

2. Uniswap Trading Leverage

As we discussed earlier, Uniswap CFDs are not accessible everywhere. If you happen to live in a country where CFD trading is legal, then you have the option to benefit from leverage. 

Put simply, leverage allows you to trade with more funds than what you have in your trading account. 

For example: 

  • Let's suppose you are looking to place a $5,000 buy order on UNI/USD. 
  • However, you only have $1,000 in your account. 
  • So you decide to apply leverage of 1:5 - which allows you to stake $5,000 ($1,000 x 5) on the trade.  
  • In a few hours, the value of UNI/USD increases by 5%. 
  • Without applying leverage - you would make a profit of $50 on this trade.
  • However, since you applied leverage - your profit now amounts to $250. 

As you can see, using leverage allows you to amplify your gains substantially. However, it will also add more risk to your trades. 

Therefore, if you decide to apply leverage, it will be best to stick with regulated brokers such as eToro. This way, you will be able to access modest leverage caps that match your risk tolerance. 

Read Also: The Top 7 Crypto Trading Tools You Should Use

3. Fees to Trade Uniswap Online

When trading Uniswap online, you will be liable to pay a certain amount of fees to your chosen online broker. 

Afterall, brokerage platforms are businesses, and charging you trading fees is how they fund their operations. 

However, as with any financial service - it is crucial that you are wary of the fees involved before you commit to a Uniswap broker. 

Uniswap Trading Commission

Trading commissions is the most common type of fees charged by online brokers. This is worked out as a fixed-rate - measured against the value of your stake. 

For example, let's say that your broker charges you 1.5% on Uniswap trades. This implies that you will have to pay 1.5% on all trades you place. This is also chargeable at either end of the trade - once when you open your position and again when you close it. 

In comparison, online broker eToro charges you absolutely no commission to trade cryptocurrencies at all. 

Uniswap Spread

In trading terms, the spread is considered an indirect fee you pay to the online broker. This will be calculated as the gap between the buy price and sell price of Uniswap. 

Ideally, you want to look for brokers that offer tighter spreads - which is better for your potential gains. 

To give you a better idea, let us say that your preferred broker charges you 2% as the spread. This means that you are starting your Uniswap trade with 2% in the red. You will have to make a profit of 2% just to break even. What you earn over this 2% level will only be counted as the profit. 

Other Uniswap Trading Fees

Apart from commissions and spreads, you will also have to keep an eye out for a number of other commonly charged fees that are listed below: 

  • Deposit/Withdrawals: Some brokers will charge you a fee to process your deposits and withdrawals on the site. Over at Coinbase, you will have to pay 3.99% on all debit card transactions. At the other end of the spectrum, eToro charges you just 0.5%, applicable only if you are funding your account in a currency other than US dollars. 
  • Inactivity Fee: On many brokerage platforms, you will be liable to pay an inactivity fee if you are not actively trading on your account for a specific duration - usually 12 months. 
  • Overnight Fees: Also known as a 'swap-fee,' this is applicable for positions you keep open overnight. You are most likely to come across this fee while trading Uniswap CFDs. 

Considering all these factors, it appears that eToro is one of the best online brokers in the market today. The platform is regulated, offers you plenty of liquidity, and allows you to trade Uniswap in a cost-effective manner. 

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

If you have read our How to Trade Uniswap Guide this far, you are now armed with all the necessary information regarding this digital asset.

In the final section, we will give you a step-by-step walkthrough of how you can start trading Uniswap today. 

Step 1: Choose a Uniswap Trading Exchange

The very first step on your list is to find an online broker that supports Uniswap. However, this is easier said than done. With dozens of platforms available today, it can be a daunting process to find one that matches your needs. 

Therefore, we have put together a set of metrics that you can consider when looking for a platform to trade Uniswap online:

  • Regulation: Does the platform hold any licenses issued by well-known regulatory bodies such as the FCA, ASIC, or CySEC?
  • Fees: What trading fees and commissions are you liable to pay on the platform?
  • Payments: Which payment methods are supported by the broker?
  • Minimum Deposits: Is there a minimum deposit required to start trading cryptocurrencies?
  • Uniswap Pairs: What Uniswap trading pairs are accessible on the brokerage platform?
  • Trading Platform: How easy is it to place trading orders on the platform?
  • Mobile App: Does the broker have a mobile application that allows you to access your trading account on the go?

As is clear, selecting the right online broker is no easy feat. 

To help you along the way, we have conducted our own research and reviewed the best online crypto platforms available today. From what we found, eToro has ticked off all the right boxes on our checklist. 

Here is an overview of what makes the platform one of the most reputable online brokers in the Uniswap trading space:

  • eToro is regulated by not one but three regulatory bodies - namely the FCA, ASIC, and CySEC. 
  • You get access to trade thousands of assets on a zero-commission basis. 
  • Cryptocurrency traders can also access its secure digital wallet to store their crypto assets for free. 
  • You have a wide selection of payment methods at your disposal - such as credit/debit cards, bank transfers, and e-wallets. 
  • The minimum Uniswap trade value is just $25

Step 2: Open a Uniswap Trading Account

Head over to the website of your chosen broker, and open your trading account. To start, you will need to fill in some basic personal details - such as your full name, email, home address, and mobile number. 

On regulated brokerage sites, you will also have to complete a KYC process by providing a copy of your photo ID - such as your passport or driver's license. 

However, on eToro, you do not need to attend to this step right away. You can come back to it later when you want to deposit more than $2,250 or make a withdrawal request. 

Step 3: Deposit Funds

The next step is to fund your trading account. The best online brokers support more than one payment method. 

On eToro, you can choose between a bank transfer, credit/debit card, or deposit funds through an e-wallet such as PayPal or Neteller. 

Step 4: Choose Uniswap Trading Market

Once there is sufficient money in your trading account, you can select a Uniswap market. You can do this by searching for the pair you want to trade on the platform - such as UNI/USD or UNI/EUR. 

Remember that if you are trading via eToro, you will be able to access all Uniswap markets on a commission-free basis. 

Step 5: Place Uniswap Trade

When you have found the Uniswap pair you want to trade, you can open your trading position. 

This is when you use all the trading orders we previously discussed. If you need a quick recap, you can revisit our 'Setting up a Trade' section further up on this guide.

Depending on your speculation, you can place a buy order or sell order, and hit the 'Open Trade' button when you are ready to execute the trade. 

How to Trade Uniswap Guide - The Verdict

If you are looking to trade Uniswap, it is crucial that you do your due diligence by learning about the intricacies of the cryptocurrency trading markets. 

When you are ready to take the plunge, it is best to trade Uniswap via a regulated online broker such as eToro. This will allow you to have access to the digital coin through a secure and commission-free trading interface.

eToro – Best Exchange to Trade Uniswap

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 it safe to trade Uniswap online?

Yes, cryptocurrency trading is safe as long as you stick with a regulated broker such as eToro.

How to trade Uniswap to make a profit?

When trading Uniswap, your aim is to predict the future direction of its price. If you happen to speculate correctly and place the right trading orders, you can make a profit in the process.

Can I get rich by trading Uniswap?

Your ability to get high returns will depend on how accurately you are able to predict the future value of Uniswap. If your predictions are incorrect, you will end up with losses rather than profits.

Is it possible to trade Uniswap in the US?

Yes, cryptocurrency trading is legally allowed in the US. Therefore, you can access Uniswap on regulated platforms like eToro. However, it is not possible to trade Uniswap CFDs legally in the US.

How to trade Uniswap with leverage?

The easiest way to access leverage is by trading Uniswap CFDs. That said, residents of the UK, US, and Hong Kong cannot access leverage on cryptocurrency CFDs through a regulated broker. Instead, you will have to opt for unlicensed trading platforms - which is not recommended due to the risks involved.

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