In this guide, you will learn how to trade cryptocurrency.
As you know by now, trading cryptocurrency is challenging due to the high volatility of cryptocurrencies.
In this cryptocurrency trading guide we show you the best exchanges to trade crypto, some powerful crypto trading strategies, and more!
Let’s dive right into it.
How To Trade Cryptocurrency
Although many cryptocurrency owners simply hold their cryptocurrencies for the long-term or use them daily transactions, it can be far more profitable to trade these on cryptocurrency exchanges.
Thankfully, most exchange platforms have done a great job in reducing barriers to entry, allowing even those with little trading experience to begin executing trades.
To help learn how to trade cryptocurrency, we will cover three of the most popular exchange platforms at three different experience levels: beginner (Coinbase), beginner-intermediate (Binance) and advanced (BitMEX).
How to trade on Coinbase
As one of the most popular cryptocurrency trading platforms in operation, Coinbase has gathered quite the reputation in the cryptocurrency space and is enjoyed by more than 25 million customers worldwide.
- Very simple to use
- Supports many payment options
- Fully regulated and highly secure
- Strict identity verification requirements
- Only 10 coins available
Commonly described as one of the major on-ramps for new cryptocurrency investors, Coinbase has done an excellent job improving awareness about cryptocurrencies and growing the industry.
Coinbase is popular for several reasons, the first is its ease-of-use, being designed for the absolute beginner. Beyond this, Coinbase allows users to buy a dozen different digital assets using wire transfer, and debit or credit card among other options.
Trading on Coinbase
As a beginner’s trading platform, Coinbase is often one first platforms investors learning how to trade cryptocurrencies. To get started, you will first need to create your Coinbase account, providing your name, email, and password in the process.
After registering for your account, you will need to click your verification email and complete the know-your-customer (KYC) steps which will be presented to you after logging in for the first time
After providing your ID and address verification documents, it will take a few hours before your account gets reviewed and verified — Coinbase will email you to notify you when this completes.
Once verified, simply login to Coinbase, head over to the buy/sell page, and select the cryptocurrency you are looking to purchase.
After selecting your desired cryptocurrency, enter the amount you are looking to purchase, select or enter a payment method, and click the buy button.
After clicking buy, you will be prompted to confirm your transaction, following which your transaction will then be processed and your balance should be visible in your wallet in as little as 1 day.
How to trade on Binance
Despite being one of the newer exchange platforms, launching in just 2017, Binance has quickly risen to become easily the most popular cryptocurrency exchange around.
- 100+ coins available
- Identity verification not required
- Very low trading fees
- Not as simple to use as Coinbase
- Only supports crypto or debit/credit card deposits
In its two short years of operation, Binance has already listed hundreds of prominent digital assets, most of which are tradable against Bitcoin (BTC) and one or more of several stablecoins, including Tether (USDT), True USD (TUSD) and USD Coin (USDC).
Besides its wide range of trading pairs, Binance is also renowned for the excellent liquidity it offers its users, with major trading pairs frequently racking up well over $100 million in daily trade volume.
Trading on Binance
One of the reasons Binance is so popular is its accessibility. Featuring both basic and advanced trading modes, Binance is suitable for all experience levels.
To get started purchasing cryptocurrency on Binance you will first need to create an account by providing your email address and a secure password. After registering you will need to click the verification link you receive by email.
After verifying, log in to your account and head over the ‘Deposits’ section of the site. Here, search for the cryptocurrency you want to fund your account with, and you will be provided your deposit address.
Deposit your cryptocurrency to your personal address, and wait until it reached the minimum number of confirmations. After this, your balance will be reflected in your account, and you will be free to trade.
Finally, head on over to the exchange tab and search for your desired trading pair on the right.
You will then be presented with the trading interface for this trading pair, allowing you to place a limit, market or stop-limit order for your desired cryptocurrency.
The final step is to select the amount and price you want to buy the cryptocurrency at. Then, all you have to do is click “BUY” and wait for your order to get filled!
How to trade on BitMEX
Bitcoin Mercantile Exchange, otherwise known as BitMEX is a popular cryptocurrency derivative trading platform with a major focus on Bitcoin margin trading.
- Highly liquid exchange
- Up to 100x leverage
- No identity verification requirement
- Not available for US Citizens
- No fiat currency deposits supported
BitMEX is a rarity among cryptocurrency trading platforms since it allows its users to leverage both long and short positions, enabling users to profit whether the market is up or down.
The platform offers up to 100x leverage on its Perpetual Bitcoin/USD contract, and up to 50x leverage on its Ethereum contracts.
As a more advanced trading platform, BitMEX is best suited to those with experience trading cryptocurrency derivatives such as futures contracts. With this in mind, BitMEX does provide documentation on how to trade cryptocurrency on margin, making it ideal for improvers.
Despite being ideal for more experienced traders, actually registering at and using the exchange is an extremely simple process, thanks to BitMEX’s relaxed KYC requirements.
Trading on BitMEX
To begin trading on BitMEX, create an account by providing your email address and a secure password. You will be sent a verification link that you will need to click to complete the registration process.
After verifying your account, you will be automatically logged in and taken to the BitMEX dashboard.
Select the account tab in the top navigation bar to load your wallet, where you will be able to deposit Bitcoin (XBT) to your account.
In your wallet, select ‘Deposit’ on the left to obtain your Bitcoin deposit address. Send your funds here and wait until it is confirmed before attempting to place your orders.
Once your funds are credited to your account, head over to the ‘Trade’ section and select the asset, contract type and expiry you want to trade on the bottom of the page.
This contract should then be selected in place your order panel on the left.
To open your position, simply enter the amount you want to buy, select your leverage and click Buy / Long or Sell / Short depending on your needs.
Other Cryptocurrency Trading Platforms
Although Coinbase, Binance, and BitMEX will cover the great majority of people’s needs, they aren’t the only platforms worth looking into.
As it stands, there are well in excess of 300 different cryptocurrency trading platforms available — many of which have unique features that are difficult to find elsewhere.
With that in mind, if you are looking for an alternative cryptocurrency exchange with a great range of features available, we have selected a handful of the most promising options below:
Founded in 2006, eToro is one of the world’s leading multi-asset brokerage platforms and allows its users to trade or invest in cryptocurrencies, stocks, ETFs, fiat currencies, indices, and commodities.
eToro is famous for its social trading network where users can copy the trades of other users, taking the guesswork out of successful trading.
As a multinational company, eToro has headquarters in three countries and its European arm is regulated by the Cyprus Securities & Exchange Commission (CySEC).
To start trading on eToro, you will need to provide a valid email address and phone number and complete KYC verification. You will then be able to deposit funds using a variety of country-specific payment methods.
After depositing funds, you can then switch to a real account, and head over to ‘Trade markets’ to begin opening orders.
Coinmama is an Israeli Bitcoin brokerage company that was first launched back in 2013. The platform is renowned for being one of the first sites to allow easy fiat to crypto purchases.
The exchange is well known in the crypto-community as one of the fastest platforms to acquire Bitcoin, Ethereum and other popular cryptos. The user-friendly UI, easy account creation process and extremely quick verification times make Coinmama the ideal on-ramp for new investors.
To purchase any cryptocurrency supported on Coinmama, You will first need to register an account and complete KYC verification. On Coinmama, there are several account verification tiers, with different ID requirements and spending limits.
Once verified, you will be able to purchase cryptocurrencies using credit and debit cards, and SEPA transfer among other methods.
UpHold, previously known as BitReserve, is a cloud-based financial service platform that acts as a virtual wallet for both cryptocurrencies and fiat while allowing users to deposit using Bitcoin (BTC), credit cards and bank deposit.
Part of the reason why UpHold is popular is because of its reliability, transparency, and usability, much of which is due to it being built on Bitcoin’s codebase.
UpHold also allows users to convert fiat into cryptocurrencies, precious metals, and other fiat currencies with the click of a button, though this requires verification.
To trade on UpHold, simply register with a valid email ID, provide the correct personal information, and complete KYC verification after logging in.
Once verified, you can then load your account using a variety of options, and purchase, exchange or store money in virtual Mastercard cards, which can be used anywhere that accepts Mastercard.
Kraken is one of the largest cryptocurrency exchanges in operation and has thoroughly earned the trust of its users since its 2011 launch — by being one of the few exchanges to have never been compromised.
Beyond this, Kraken is known as one of the leading exchanges for fiat to crypto trading, with its BTC/USD and BTC/EUR trading pairs clocking in $40+ million in daily trade volume.
Although Kraken is not as user-friendly as some exchanges, its extremely low trading fees, and high-quality asset selection make it one of the most in-demand crypto trading platforms.
To trade on Kraken, you will need to register an account, and complete Starter verification for crypto to crypto trading or Intermediate verification to enable fiat to crypto trading.
Once verified, you can deposit cryptocurrencies, or fiat currencies by bank/wire transfer, and head over to the ‘Trade’ tab to begin trading. Here, you will be able to find all available trade pairs and open your market/limit orders.
Top Cryptocurrency Trading Strategies
In order to trade cryptocurrency successfully, it helps to know some basic trading strategies. It is a well-known fact that a cryptocurrency can outperform the masses with just some basic technical analysis skills.
To help you on your journey of trading cryptocurrency, below are some of the strongest strategies that can be applied to crypto trading.
The first cryptocurrency trading strategy we’ll look into is the “Ichimoku Cloud System”.
The Ichimoku indicator aims to help traders find trends in the price of an asset which can then be exploited through swing trading.
Professional traders can develop very advanced trading systems based on Ichimoku.
However, if you only know the basics you’ll already be better off than most other cryptocurrency investors.
The key concept that you need to understand is that if the price is above the cloud and the current cloud is green, then the asset is in a bull trend. If, on the other hand, the price is below the cloud and the current cloud is red, then the asset is in a bear trend.
You can learn more about the Ichimoku indicator here.
Just like Ichimoku clouds, moving averages are also used for identifying trends. They act by smoothing the price over your time period of choice, which makes it simple to detect price trends.
To leverage the true power of moving averages, traders combine at least 2 moving averages to get buy or sell signals. The most popular combination is combining the 200 Day Moving Average and the 50 Day Moving Average.
Green line: 50 Day Moving Average
Red line: 200 Day Moving Average
When the 50 Day Moving Average moves above the 200 Day Moving Average, this is a very bullish signal that is referred to as the “Golden Cross”. Major investors often use this as a buy signal.
On the other hand, if the 50 Day Moving Average breaks below the 200 Day Moving Average, that is a sell signal referred to as the “Death Cross”.
Knowing these two signals alone, you will already be miles ahead from most regular investors.
When trading cryptocurrency with this strategy, you would simply buy crypto assets that print a golden cross, and short assets that print a death cross.
Many traders chose to use “candlesticks” for keeping track of the price of an asset instead of just a regular line.
The reason being that some of the patterns that these candlesticks form can be used to predict future price development with reasonable probability.
Let’s now analyze some of the most powerful candlestick patterns and what they mean for cryptocurrency traders.
Engulfing candles occur when a candle is significantly larger than the previous one but in the opposite direction. They usually signal a strong shift in the trend.
Example of a bullish engulfing candle:
Example of a bearish engulfing candle:
If the candle engulfs more than just the previous candle (for example the last 2 or even 3 candles), then the trend shift is expected to be stronger.
Hammer and inverted hammer candles signal strong rejection of the price from a key level.
If a regular hammer candle occurs, that means that the price was rejected from the bottom and that a rally is likely to follow.
On the other hand, in an inverted hammer candle the price was rejected from the top and a correction is likely to follow.
As a general rule of thumb, the larger the wick in the hammer or inverted hammer candle, the stronger the trend shift will be.
Morning / Evening stars
The final candlestick pattern that we cover are morning stars and evening stars. Both are characterized by being a very small candlestick that signals the end of a trend with high accuracy.
Morning stars signal the end of a bear trend:
And evening stars signal the end of a bull trend:
For more accuracy, it helps to wait for confirmation from another indicator like Ichimoku or Moving Averages to be sure that the trend is actually shifting and that it’s not a false signal.
“The trend is your friend” is decade old trading wisdom, and drawing trend lines is just another tool that can be used to identify strong trends and trade on them.
To draw a trend line, simply draw a line beneath or above the price that the price has tested on more than 2 occasions and has so far respected.
Once the line is drawn, you can clearly see if the price is trending up or down and trade accordingly.
If a trend line is broken with volume, that may be the first sign of a major trend shift.
Relative Strength Index
The Relative Strength Index (RSI) is a technical indicator that helps to identify momentum shifts in price. It works by quantifying the speed and change of price movements.
The RSI oscillates between zero and 100.
Traders consider the RSI to be overbought when it is above 70 and oversold when it is below 30. Hence, when it is above 70 a trader would start looking for shorts while if it is below 30 the trader would start looking for longs.
Although the RSI is rarely used as the only indicator in a trading strategy, it can regardless give solid long and short signals if the trader looks at “RSI Divergences”.
An RSI Divergence happens when the RSI moves in the opposite direction of the price.
Here’s an example of a bearish divergence, which then results in a price drop:
And here’s an example of a bullish divergence, which resulted in a price rally:
That said, again, RSI divergences should not be used as a standalone indicator for buy and sell signals and should ideally be used in combination with a trend following system like Ichimoku.
Different Ways To Trade Cryptocurrency
There are three main ways to trade cryptocurrencies: fiat to crypto, crypto to crypto and margin trading. Although each of these types of trades can have a place in any effective trading strategy, there are some pros and cons associated with each.
Most new traders begin with purchasing cryptocurrency using fiat, and then process to crypto to crypto trades, before dabbling with margin trading once they have built up some experience:
Fiat to Crypto
When investors first make their foray into the world of cryptocurrencies, they usually do so by exchanging their fiat currency, e.g. US Dollars (USD), British Pound Sterling (GBP) or Japanese Yen (JPY) for a cryptocurrency such as Bitcoin (BTC) or Ripple (XRP).
Fiat to crypto trades are typically performed by registering at one of the dozens of fiat to cryptocurrency exchange platforms available.
Here, users will be able to either fund their account by credit card, debit card or wire transfer or will be able to directly purchase crypto directly using their VISA or Mastercard.
For the most part, fiat to crypto exchanges will typically place limits on how much fiat currency can be exchanged at any one time, and will usually require KYC verification for anything more than a nominal amount.
As the first point of entry for a large proportion of cryptocurrency investors, Coinbase has solidified its reputation as the best fiat to crypto exchange, and currently allows users from over 100 countries to invest in the growing crypto industry.
Crypto to Crypto
When exchanging crypto to crypto, this means you are exchanging one cryptocurrency for another, such as trading your Bitcoin (BTC) for Ethereum (ETH).
This has the benefit of being much faster than simply buying ETH over the counter (OTC) with cash, while also having greatly reduced fees, typically in the range of 0.01-0.2% depending on the platform.
Like fiat to crypto trades, most exchanges will require you to complete KYC verification when trading over a certain volume. With that said, verification requirements are typically more relaxed at crypto only exchanges since no fiat is changing hands.
Ever since the introduction of stablecoins such as Tether (USDT) and True USD (TUSD), crypto to crypto exchanges have become extremely popular since no personal financial information needs to be provided to complete the trade.
Although there are hundreds of crypto to crypto exchange platforms, it is widely agreed that Binance stands head and shoulders above the competition for two main reasons: first, it’s impressive liquidity; and second, its relaxed KYC requirements.
Crypto Margin Trading
Considered to be a more advanced trading technique, crypto margin trading essentially allows users to trade with more money than they actually have by trading on margin. This allows traders to open larger positions by taking a margin loan, leading to a greatly improved return on investment.
To get started with margin trading, traders simply need to register at a margin trading exchange platform, deposit funds and choose a contract to purchase — while setting the leverage to a level they feel comfortable with.
Although there isn’t a huge number of variety of crypto margin trading exchanges to choose from, the few that are available do an excellent job of catering to user demand.
Arguably, the most prominent among these is BitMEX, which allows users to open a large range of derivatives contracts with up to 100x leverage.
For a more in-depth discussion of crypto margin trading and its benefits, check out our recent article on the topic: 7 Best Bitcoin and Crypto Margin Trading Exchanges
Why Trade Cryptocurrency
Being based on a potentially disruptive technology, cryptocurrencies have been pegged as a potentially lucrative financial instrument, and many early investors have already seen extraordinary returns on their investment.
However, besides being potentially revolutionary, there are several other reasons to trade the cryptocurrency markets in 2019 and beyond.
Cryptocurrencies are volatile
Depending on your perspective, one benefit of cryptocurrencies is their volatility, with many digital assets experiencing significant price fluctuations over short periods of time.
This makes cryptocurrencies an excellent choice for scalpers, looking to take advantage of transient price movements, by buying and selling volatile cryptocurrencies.
Compared to other volatile asset classes such as pink sheet stocks, major cryptocurrencies tend to help excellent liquidity, allowing traders to quickly exit their positions should the markets turn sour.
Besides cryptocurrencies, where else can you potentially score upwards of 10% profit per day on your trades?
“Dumb” money still dominates
Because the cryptocurrency markets are still relatively new, there is still an abundance of “dumb money” in the system, which means much of the market movements seen are driven by emotion, and hasty decisions based on recent news and rumors.
This makes cryptocurrency trading much more appealing to the casual investor since there is little “smart money” consisting of algorithmic trading bots, machine learning algorithms, and quantitative analysis influencing the market.
Beyond this, the market is not yet dominated by hedge funds and career traders, meaning anybody entering the market with a well-thought-out strategy will already be leaps and bounds more successful than the casual trader.
Well developed infrastructure
Despite the entire cryptocurrency market being just over a decade old, things have already moved at blazing speed. Now, the infrastructure around cryptocurrency trading is already complete enough for most people’s needs.
Today, investors can simply trade cryptocurrencies using standard limit and market orders, or they can go one step further, and trade crypto derivatives such as futures, options, and swaps.
All-in-all, the crypto markets are easily diverse enough to allow traders to see a healthy return on their investment, allowing traders to both long or short, with or without leveraged exposure if they choose to do so.
In addition to this, several Bitcoin exchange-traded funds (ETFs) are currently being reviewed by the U.S. securities and exchange commission (SEC), which could enable institutions to easily get involved in crypto trading without actually holding crypto.
If, or when this happens, it is widely expected that a large influx of new money will occur, potentially leading to another crypto boom.
How To Store Your Cryptocurrency Safely
Hardware wallets (Cold storage)
As you may well be aware, cryptocurrency hardware wallets are built to provide the ultimate protection for your cryptocurrencies.
To achieve such robust security, hardware wallets physically isolate your funds from the internet, ensuring that your assets cannot be hacked or stolen thanks to malware.
- Unparalleled security over funds.
- Private keys are never exposed to the internet.
- Compatible with most major cryptocurrencies.
- Not all cryptocurrencies are supported by hardware wallets.
- Typically cost upwards of $70.
- Additional hurdles to access and spend funds.
Beyond being the gold-standard in secure cryptocurrency storage, hardware wallets have also begun to offer additional features.
One major additional function offered by most hardware wallets is security key functionality, allowing users to securely log into websites using hardware-based two-factor authentication.
While this might seem unrelated to cryptocurrencies, this essentially gives cryptocurrency web wallet users an additional layer of security, protecting their funds with hardware-grade protection.
As a trader, you may be painfully aware that cryptocurrency exchange wallets are not the most secure of wallet options. In fact, with the great majority of hacks targeting cryptocurrency exchanges, it is wise to avoid storing a large amount of funds on an exchange wallet.
Instead, a safer solution is to store only the funds you need on your exchange or software wallet, and keep the bulk of your portfolio secured using a hardware wallet such as the Ledger Nano S or Trezor.
Hardware wallets also allow you to retain control over your private keys, which are essentially the cryptographic keys used to prove ownership over the wallet contents.
By controlling your private keys, you will be able to benefit from any airdrops and forks related to your public keys (addresses).
Cryptocurrency software wallets (Hot storage)
Like cryptocurrency hardware wallets, software wallets allow you to safely store your cryptocurrency private keys and allow you to easily access, spend and manage your cryptocurrencies from your computer or mobile device.
- Reduced barrier to entry, ideal for newer traders.
- Many full node software wallets available (helps to keep the network alive).
- Often support multiple cryptocurrencies.
- Less secure than cryptocurrency hardware wallets.
- Some cryptocurrencies have limited wallet options.
- Not ideal for long-term storage.
Rather than aiming for absolute security, software wallets strike a happy balance of good security, usability, and functionality, and as such, are the most common wallet for new cryptocurrency users.
Beyond simply storing your funds, many cryptocurrency software wallets also provide easy access to a variety of other useful tools, such as a blockchain explorer, portfolio manager, and dApp browser.
While software wallets tend to lack the impressive security of a hardware wallet, most are by no means insecure. Instead, software wallets protect funds using a combination of software level encryption, passwords and mnemonic phrases, which is good enough for most users.
Since software wallets are almost always directly connected to the internet, these can be considered ‘hot wallets’.
While using a hot wallet is slightly less secure than cold storage, it does allow funds to be mobilized very quickly, which is particularly important for those who transact regularly.
In addition to this, an increasing number of software wallets have begun integrating exchange functionality directly within the app, allowing users to easily swap their coins and tokens without leaving their wallet.
In an ideal scenario, users would keep a small portion of their funds in a software wallet, using this to cover daily or regular expenses and transactions. Any remaining funds should be kept in cold storage, and only moved into hot storage as and when needed.
Getting Started Trading Cryptocurrency (Next Steps)
So, you read this entire guide and know most of what you need to know about cryptocurrency trading.
What are the next steps?
Next, create a free account at TradingView to analyze price charts.
And finally… start trading! Please keep in mind to manage your risk responsibly.