Do you want to learn how to trade crypto? Look no further, as this article explains the basics of easy and profitable crypto trading.
One of the most critical aspects of web3 is undoubtedly crypto trading. Because how would crypto assets circulate without it? But with only 4.2 percent of the world owning cryptocurrencies, the question of how to trade crypto isn’t strange.
Thankfully, this guide covers the basics you need to know about trading cryptocurrencies and the best places to trade them. You’ll also find a list of factors to consider before you begin trading, so stick to the end, as we’ve specially curated this article just for you.
What is Crypto Trading?
Crypto trading is simply the act of buying or selling cryptocurrency assets to profit from rising or falling prices, which you can do either on a centralized (CEX) or decentralized exchange (DEX).
To answer the question of how to trade crypto, we must establish essential terms, including the following.
- Cryptocurrency assets: When trading, you buy or sell crypto assets like cryptocurrencies, blockchain tokens, futures, perpetual futures, or derivatives.
- Trading pairs: Trading pairs refer to the crypto assets you will trade against each other, such as BTC/USD (Bitcoin to US Dollar) or ETH/BTC (Ethereum to Bitcoin)
- Market Orders and Limit Orders: You can place a market order to trade at the market’s price at that moment or a limit order to execute your transaction at a price point of your choice.
- Technical Analysis: Technical analysis helps you determine whether the market is in the right conditions for a trade. It typically involves looking at a crypto asset’s historical price data, charts, and trading volumes to predict future prices.
- Fundamental Analysis: Fundamental analysis has the same function as technical analysis, although it is more in-depth. It involves considering underlying factors affecting the value of a cryptocurrency, such as product usecase, partnerships, and market trends, to predict how its price will move.
- Risk Management: With how risky crypto trading is, you typically have to set risk management strategies like setting stop-loss orders and position sizing to minimize losses.
As you trade crypto, you will encounter more complex terms such as crypto signals. But knowing these essentials will give you a good headstart in your trading journey.
How To Trade Crypto: Trading Styles and Strategies
When learning how to trade crypto, you will have to choose between different styles and strategies. Let’s discuss them below.
Crypto Trading Styles
Crypto trading styles differ depending on the time you are willing to spend on a trade. From our experience, here are the most popular trading styles:
- Day Trading Crypto
- Swing Trading
- Position Trading
1. Day Trading Crypto
Day trading involves capitalizing on small price fluctuations within a single trading day or 24 hours.
You can also take short-term trading positions, buying or selling a specific crypto asset and waiting until it reaches a desired price within the day before trading it. Trades are made based on technical analysis and technical indicators.
Day trading requires a lot of skill, and although it is risky, you can make a ton of profit if you set proper risk management strategies.
To help with this we invented Crypticorn’s artificial intelligence. This AI helps you with your technical analysis and knows pretty all technical indicators that are out there. Our price prediction AI predicts the next 6h in 15-minute candles. This is perfect for every crypto day trader.
When learning how to day trade crypto, you could choose to scalp trade (scalping crypto), a trading style that involves buying and selling an asset within a few minutes or hours to profit from a spontaneous change in price. You would do many trades with a small percentage gain.
2. Swing Trading
Swing trading involves trading crypto assets to close your long or short position at a predetermined exit point. It typically entails buying a cryptocurrency at a price you have analyzed to be its lowest and waiting (HODLing) until it reaches the peak price before selling.
Learning how to swing trade crypto is one thing; executing it is another. A lot of technical analysis goes into swing trading, so it’s usually done by traders with a good grasp of how the crypto market works.
It also requires a lot of patience as crypto assets often take a while to hit specific price points. That is if they hit them at all.
3. Position Trading
Position trading is a long-term trading style. It involves a lot of fundamental and on-chain analysis, entering long or short trading positions, and expecting a significant rise or fall in that cryptocurrency’s value over weeks, months, or even years.
This trading style is usually done for established cryptocurrencies with real-world applications.
You need a lot of patience and determination to position trade, as the cryptocurrency’s value can experience prolonged periods of fluctuation.
Because of how long you may have to hold, as a position trader, you should be less concerned with short-term market noise and focus on the overall market trend and project fundamentals.
Crypto Trading Strategies
There are several crypto trading strategies. However, these stand out the most. Let’s discuss them.
- Spot Trading
- Leveraged Trading: Futures/Derivatives/Perpetuals Trading
- Margin Trading
- Arbitrade Trading
- Options Trading
- Copy Trading
1. Spot Trading
In short: the most simple form of trading: buying and selling cryptocurrencies, stocks, or whatever.
Spot trading is an immediate form of crypto trading where you buy or sell actual cryptocurrencies at the current market price, settling the transaction instantly.
When spot trading, you’re not really thinking about making a profit. It’s just like using an ATM. You do it because you want to own and use cryptocurrencies for various purposes, including trading or day-to-day transactions.
Spot trading is simpler than other trading strategies, as transactions occur in real-time without the need for contracts or future obligations.
2. Leveraged Trading: Futures/Derivatives/Perpetuals Trading
People often ask how to leverage trade crypto because of how profitable it can be. Leverage trading in crypto involves borrowing funds to increase your trading position’s size way beyond your initial investment.
As a trader who knows how to leverage trade crypto, you would still use your own capital, but it is maximized by borrowing additional funds from a broker or your exchange. The borrowed funds act as leverage, allowing you to control a larger position than your initial investment would permit.
For example, with 10x leverage, you might invest 10 BNB of your own capital and borrow an additional 90 BNB to control a total position of 100 BNB.
While leverage enhances potential profits, it also magnifies losses, and you incur more significant financial risks than other trading styles. So, ensure that you have proper risk management strategies in place.
3. Margin Trading
While margin trading shares similarities with leverage trading and is often used interchangeably, it is slightly different.
Leverage trading emphasizes the ratio of borrowed funds to your capital. On the other hand, margin trading emphasizes the use of margin or borrowed funds to trade.
People who know how to margin trade crypto borrow funds from a broker, often the crypto exchange they use, to increase their trade size and potential profit.
In addition, when making margin trades, you select a leverage level you want to borrow and deposit your collateral to the tune of that leverage.
As with leverage trading, this trading style allows you to control a larger position than your capital. However, it also increases the risk, as losses can easily exceed your collateral, leading to liquidation (a situation where the exchange forcefully sells your collateral to cover losses).
Although margin trade can be very profitable, it is very risky, so you should be ready to face huge losses if things go sour.
4. Arbitrage Trading
Arbitrage trading is relatively simpler than other trading types. It involves buying cryptocurrencies from one exchange where the price is relatively lower and selling it on another CEX where it is more expensive.
Although returns from arbitrage transactions are usually low, considering that the gap between asset prices on crypto platforms is minimal, it has low risk compared to other trading types.
5. Options Trading
Crypto options are a type of derivative contract that allows investors to buy or sell a specific cryptocurrency, such as Bitcoin, at a set price and date. This novel financial instrument enables traders to profit from market fluctuations without owning the underlying asset. For in-depth education on crypto options trading check this guide.
6. Copy Trading
Copy trading has grown in popularity because it is quick and simple, and the returns appear to be fantastic! We tried it with a few traders and were very disappointed. The reason for this is straightforward. The traders who can be copied make the most money from you, often receiving more than 10% of your profits.
As a result, they devised strategies for short-term gains. They play with small amounts in order to achieve a high win rate and high returns, from which they earn 10% or more. Those strategies frequently fail after a few weeks or months, leaving you in the red while the copied trader profited from every successful trade during that time.
Where to Trade Cryptocurrencies?
As we mentioned earlier, you can trade cryptocurrencies on either a centralized exchange (CEX) or a decentralized exchange (DEX).
Centralized exchanges like Binance and Kraken are typically safer than decentralized exchanges because a central body governs them. They also tend to have more features than DEXes, so you may prefer them for leverage and margin trading crypto, futures, and perpetual futures.
Regardless, if you have issues completing KYC verifications or don’t want to go through the hassle, you might prefer decentralized exchanges like Uniswap and Camelot.
Here’s a comparison of the processes you’ll go through when trading with either
|Requires account creation and KYC verification.
|Requires connecting an external wallet (e.g., MetaMask) without mandatory KYC.
|Directly deposit funds into the exchange’s wallets.
|Transfer funds to connected external wallets
|Orders are placed through the centralized order book.
|Orders are executed through smart contracts.
|Exchanges often act as custodians of user funds.
|Users retain custody of their funds; DEXs do not hold user funds.
|Withdrawals are processed within the exchange’s infrastructure.
|Users withdraw funds directly to their external wallets.
|Trades are settled internally on the exchange.
|Transactions are settled through smart contracts on the blockchain.
Factors to Consider Before Trading Crypto
Now that you know how to trade crypto, there are certain factors you must consider before you begin.
Conduct Proper Market Research
Knowing how to leverage trade is one thing, but adequately executing it is another. The same goes for the other trading strategies: you can quickly lose funds if you enter a setup at the wrong time.
So, always ensure you properly assess the market using fundamental and technical analysis tools to make informed trading decisions. Or at least use crypto trading signals from experienced professionals if you’re not very proficient with analysis.
Enforce Risk Management Strategies
Make sure to set appropriate stop-loss levels and exit points for each trade. Because of how volatile the market is, you can quickly lose your funds when the market goes sour. So, ensure that you have measures to reduce the risks associated with trading. Understanding your trading strategy to choose whether to hold long-term or sell at a stop-loss target will help you make better trading decisions. Deciding to hold long-term, for a few weeks or longer, could be better than selling at a loss in just 24 hours of trading.
Choose a Reputable Platform
It’s best to use a centralized or decentralized exchange with a track record of integrity and stellar performance. Also, consider using a well-optimized exchange for your trading style and strategy. For instance, if you’re considering how to margin trade crypto assets, you should opt for exchanges like Binance and ByBit.
Create a Trading Plan
Choose a trading plan and strategy that matches your risk appetite and experience level. If you day trade because you know how to day trade crypto proficiently, your trades will have more day-to-day risk than if you perform swing trading because you know how to swing trade crypto.
When you begin trading for profits, start with amounts you are comfortable losing. This approach allows you to gain experience without exposing yourself to significant financial risk. Consider increasing your investment as you become more comfortable and experienced.
Conclusion on How to Trade Crypto
In this article, we have comprehensively answered the question of how to trade crypto. So, if you want to begin your crypto journey and take your portfolio, carefully consider the steps outlined here. If applied, there’s a high chance that you can make the most from crypto trading.
There’s a lot more to “How to Trade Crypto” than meets the eye. If you want to stay up to date, consider following Crypticorn.
Not financial advice. Make sure only to trade crypto assets you’re comfortable with losing, as crypto market conditions can be unpredictable sometimes. Always consider setting relatively safe stop loss levels before engaging a set-up. Crypticorn is not liable for any financial losses you incur when trading.
How to trade crypto futures?
To trade crypto futures, open an account on a futures trading platform like Binance, deposit funds, and choose a trading pair. Specify contract details, analyze the market, set entry and exit points, and execute the trade. Then, withdraw your profits when desired.
What is the minimum age to trade crypto?
There’s no age limitation to trading cryptocurrencies. However, some centralized exchanges may require you to be at least 18 before you can use them.
How to learn to trade crypto?
You can learn to trade crypto using online resources like Binance Academy and Crypticorn’s blog, which teach people how to trade cryptocurrencies for free. Furthermore, signing up to a crypto trading platform and doing some trades will give you the practical experience you need to improve.