The Ultimate Beginner’s Guide To Cryptocurrency Trading

Ever since the global financial crisis of 2008, cryptocurrencies have emerged and taken a significant place in the market. With cryptocurrencies becoming more popular, cryptocurrency trading is booming along with it as profit-seekers flock to the new industry.

One of the best parts about crypto is that they’re decentralized, which means no specific organization or government entity controls their operations. Instead, they run across networks of computers that hold the blockchain together. Without the blockchain, there would be no digital record of its users, and decentralized currencies wouldn’t exist.

Cryptocurrencies reside in a digital form and can be stored in wallets. We have an entire guide dedicated to crypto wallets, so check it out before chugging along.

Now, along with the list of questions you may have, you’re probably wondering: how do transactions work with cryptocurrencies?

Let’s say Billy wants to send crypto to Joelle. In this case, he would transfer the crypto of his choosing into the other party’s wallet. The transaction is verified under the mining process, where miners compete to be the first verifiers of a transaction for free crypto rewards. 

Mining is also how fresh cryptocurrencies are released to the market⁠—think of it as minting new US dollar bills. It’s a similar concept yet different in its execution.

Man exchanging Ethereum cow for Bitcoin cash, from a Coinbase dealer

With the rise of crypto, various crypto exchanges emerged to encourage stock market traders to make the switch into this exciting new digital realm. Now, anyone can purchase coins and trade them for profit.

This article will look at some of the most effective ways to trade crypto online and even look at the best trading platforms for cryptocurrencies. But before we continue, let’s get a better picture of cryptocurrency trading and decipher if there’s anything in it for beginners.

What is cryptocurrency trading?

Cryptocurrency trading refers to the techniques used to predict the future price of the crypto market, then buying or selling crypto through an online exchange to profit off of the price difference. 

To trade on an exchange, you need to set up an exchange account and fund you wallet with crypto. So before you get into cryptocurrency trading, make sure you arm yourself with adequate knowledge about crypto exchanges and wallets.

Trading on an exchange requires skills and an understanding of price charts—something people dedicate their entire lives to. However, this is something that you can build on over time with research and practice. 

There’s no dancing around the issue here—you need to be able to predict the next movement of a price curve. Simply put: you’ll make money if the price goes up at a particular point in time and you sell your asset for a profit. But, on the other hand, you’ll lose money if you sell it below the price you purchased it. 

Man holding DogeCoin

Really, it’s all common sense. Buying in and selling at the right time will ensure constant profits, and this is something you can determine by observing charts and keeping an eye on trends. Luckily, you can set stop losses to ensure you pull out of the trade at the right time without having to monitor the price day-in and day-out.

Unless you are a trader by profession, there is always a learning curve where you need to understand price charts and the various patterns or terminologies involved in this industry. 

For example, there are support and resistance levels for any cryptocurrency market that decide if there will be more buyers than sellers or vice versa. Support levels indicate the price won’t go down further, and resistance levels show the price won’t go beyond the current value. 

What is a cryptocurrency exchange?

A cryptocurrency exchange is a business (conveniently in the form of a digital platform) that lets people trade cryptocurrencies and other assets. Although there are hundreds of different assets, the biggest players are digital currencies and conventional fiat money.

Crypto exchange platforms generally charge a fee on every transaction. Some of the most popular cryptocurrency trading platforms include Binance, Coinbase, and Gemini.

How does cryptocurrency trading work?

Stack of coins in the background with a stack of cash inside of a magnifying glass

Crypto trading can be done via exchange accounts or contract for difference (CFD) accounts. CFD accounts are leveraged products in which you open a position for a fraction of a trade’s total amount. Be wary though: your losses are magnified if the market moves against you.

So if Billy thinks Ethereum will rise in a couple of days’ time, he can open a CFD account and bet $100 of his hard-earned cash on this trade. If he’s correct, and it does move above a specific price, Billy will see a 10x return on his original $100 position. 

But if he’s wrong… well, he’ll lose 10x his position. That’s right; he’ll be indebted.

With CFD accounts, you need to speculate whether the market will move up or down, then you’ll have to make a risky bet to experience returns. It’s not easy to be right all the time.

Also read: Investing in a Pandemic: Top Cryptos for Investment in COVID Times

When you open a position, you are provided with two different prices: one for long positions and another for short positions⁠—the former at a higher buying price than the market value and the latter for a selling price below market value.

Cryptocurrency is traded in lots because the crypto market is highly volatile. So, a batch of crypto tokens is exchanged to standardize the size of trades with larger, more prominent cryptocurrencies. 

As previously mentioned, by using leveraged products like CFDs, you can gain exposure to life-changing profits without paying the total value of a trade. With leverage, you can deposit a small amount of your funds as margin, which can lead to exponential profits or losses, depending on the scope of your trade.

Can beginners earn from crypto trading?

Cryptocurrency trading gone wrong

The short answer? Yeah, beginners can earn money from cryptocurrency trading, but it will take some time to get used to it. Get ready to lose money initially, as in this business, making mistakes costs you digits. 

As mentioned earlier, there is a substantial learning curve for cryptocurrency trading. Add on the crypto market’s volatility, and you have a recipe for high-level risk.

At one moment, the price may be at an all-time high, but at the next, the price may reach a new low. If you’re deep in crypto, you’re probably used to it by now… but if you’re new, get ready to experience gains and drops like you’ve never seen before.

Cryptocurrency trading can yield a good amount of profit if done correctly. But, on the contrary, a wrong prediction or misjudgment can also lead to a massive loss. So, to predict the price, you need to learn how to perform accurate analyses of current price charts and peep their trends.

As a beginner, you can access basic tutorials from exchanges, YouTube videos, courses, and articles, thanks to the World Wide Web. A word of advice: Look for tips and tricks from professional and world-renowned traders, and try to avoid beginners like yourself. Your target here is to learn from the very best.

Trading the cheapest currencies

Just starting out with crypto? Check out the best cryptos if you have a low trading budget.

Professionals earn a living by putting all their time and effort into cryptocurrency trading, which a beginner may not do upon entering the industry. They also have tried-and-true trading strategies that help them gauge charts to maximize their profits and reduce losses.

So, to start, we recommend you copy the strategy of established traders.

Once you start getting a grasp on cryptocurrency trading and feel more confident with the various indicators, charts, and data on crypto assets, you can begin to iterate the copied strategy.

You also need to avoid making the mistake of investing all of your savings. Pro tip: start small, then once you get familiar with trading tools, price charts, the exchange, and your selected trading strategy, build up your investment incrementally.

As a beginner, you will make mistakes—there’s no debating this. However, if you want to become a crypto trader, you’ll need to learn how to live with losses. Once you start trying to recover from your failures by re-entering the same positions, you’ll be kicking yourself in the foot.

It’s like if a gambling junkie hits up the casino, trades $100k for chips, loses all the chips at the poker table, then goes back to exchange another $100k for chips. It’s pointless, as you’re more likely to lose all your money again.

So just remember, cryptocurrency trading is high-risk, high-reward.

Reasons to start crypto trading

Cryptocurrency became popular ever since Bitcoin launched in 2009, right after the global financial crisis. Unfortunately, many people lost a considerable amount of money in the stock market, which led to widespread skepticism of our governments’ financial systems.

Also read: Should You Invest in Bitcoin in 2020?

People also lost faith in the currencies backed by our federal governments. Essentially, the government regulates the population’s fiat currency, and they can do whatever they want with it (as long as it follows the law, of course).

Professor pointing at a graph of demand and supply

But if you look at cryptocurrencies, the market decides the price of an asset, based on the basic economic rules of supply and demand. This is one of the reasons why crypto is inherently decentralized.

Now, cryptocurrency trading is one of the best ways to make a hefty bag, but, as stated before, it is a precarious profession. The downside of being decentralized is the high market volatility due to the unregulated nature of crypto and the people’s sentiment toward cryptocurrencies as a whole. 

But, as more investors and coin holders emerge, the market increases in size, thus leading to bullish patterns. 

Again, the principles of supply and demand speak volumes here—as there’s an increase in demand for crypto and more people buy into the asset class, the price of crypto will maintain an uptrend across the board. 

That’s not the only reason why cryptocurrency trading is on the come-up; The main benefit of a decentralized currency is that it can be a haven to conserve the value of your beloved money. Cue the (now) famous saying, “Bitcoin is a hedge against inflation.”

The reasoning goes like this: with any cryptocurrency that has a fixed supply (e.g. Bitcoin), the total reserve of said currency will become deflationary.

What does this mean? Well, the value of Bitcoin shouldn’t decrease over a long period of time, as it’s impossible to mint new Bitcoin after the 21 million locked supply. Therefore, the value of Bitcoin will still be the same or rise over time, depending on demand.

If you compare this to the US dollar bill, you’ll see the difference. It doesn’t have a locked total supply, and the fed can print out money whenever they please. Since the supply will constantly increase and demand will stay relatively the same, the value of a single US dollar bill will fall. 

Industry overview: what’s happening with the top 5 cryptocurrencies?

Ready to start crypto trading? Get in the loop!

Cryptocurrency trading has other benefits aside from growing retail demand and alternatives to traditional currency. 

In recent years, we’ve experienced a growth in the prices of all cryptocurrencies. And that’s not the end of it⁠—not only has the number of cryptocurrencies also increased, but the number of countries adopting cryptocurrencies has followed suit.

Nigeria flag speaking at a podium

Just take a look at these statistics. 28% of Nigerian respondents said they owned or used cryptocurrencies in 2019. But by 2021, that percentage jumped up to 42%. The adoption rate is alarming, and you can bet your bottom dollar that even global leaders will ponder about using crypto as an official national currency.

Ecuador was one of the first countries to launch an electronic currency after the government banned Bitcoin. China had the most extensive Bitcoin-mining base, with around 72% of the crypto’s total mining power. 

Some countries such as Ecuador, China, Singapore, Senegal, and Tunisia have already launched their very-own nationwide cryptocurrency. Countries like Japan, Estonia, Palestine, Sweden, and Russia are looking to do the same.

We could keep putting down numbers to show you how crypto adoption is widespread, but by this point, we think you get the picture. 

Cryptocurrency trading benefits from the global adoption of crypto—and no, we’re not only talking about your average Joe. We’re talking about governmental and institutional support.

Want to get into cryptocurrency mining?

Read our comprehensive guide on cryptocurrency mining.

How to start cryptocurrency trading and earn money

We hope you understand the risks, rewards, and future of cryptocurrency trading after reading up to this point. It’s a relatively new field, and it’s often frightening exploring something new that isn’t mainstream.

But now we can get into the fun part: getting started with cryptocurrency trading.

There are two main ways to make money from cryptocurrency trading: quantity and value. The higher the number of coins you hold, the higher potential you have to receive more profits. Furthermore, trading will yield more significant profits if the cryptocurrency is worth a couple of thousand (higher value).

The ultimate guide to crypto wallets

Need a place to store your cryptocurrencies? Take a peek at our wallet guide!

Purchasing cryptocurrency with your fiat currency remains the easiest and safest way to fund your crypto wallet. Although other methods may yield bigger returns, they are also unnecessarily risky. So let’s avoid those for now.

We’d like to briefly mention that some cryptocurrencies can’t be purchased with fiat currency; instead, they have to be exchanged with popular coins such as Bitcoin or Ethereum. Therefore, there will be an additional step if you choose to go down this route.

Best exchanges for cryptocurrency trading

You’re probably wondering: where do I exchange my fiat currency for crypto?

An exchange of course! Here are some popular exchanges where you can buy and store your coins. 

1. Poloniex

Poloniex homepage

Background

Poloniex launched in January of 2014, quickly rising to fame and becoming one of the largest American cryptocurrency trading platforms. In 2018, it was acquired by Circle Internet Financial LTD, and since then, the exchange has been geared towards global expansion and meeting the needs of overseas traders. 

The online platform announced that by the end of 2019, US operations would shut down to focus on the global market. However, if you live in a country other than the US, we highly recommend Poloniex, as it’s been ranked one of the top trading platforms worldwide.

Ease of Use

The Poloniex website is relatively easy to navigate, both on desktop and mobile. The mobile app is on iOS and Android, facilitating trading on the go. Also, credit and debit card transactions are integrated within the platform, which is excellent for first-time cryptocurrency traders.

Privacy

Poloniex set forth “ground-breaking regulatory initiatives and security measures” that other exchanges replicate to this day. For example, before Poloniex, users would have to verify their identity to access their accounts and transactions on other platforms. Poloniex eliminated this need, and users aren’t required to verify their identity if they administer transactions below a certain threshold. 

Speed

In terms of speed, Poloniex is one of the fastest exchanges in the market. In 2019, the exchange powered an upgrade that resulted in a significant increase in the rate of transactions—a 5x increase, to be exact. As a result, deposits and withdrawals are typically completed in a few minutes, whereas trades are completed in 225 milliseconds. Pretty quick, huh?

Fees

Poloniex is incredibly affordable, and it remains one of the cheapest exchanges globally. The platform charges 0.0005 BTC for Bitcoin withdrawals, with industry-leading withdrawal rates for tokens such as EOS and NEO. 

Poloniex works under a maker/taker fee schedule… all you have to know about this is that it factors in your 30-day volume to calculate your transaction fees. 

Reputation

Since Poloniex was one of the first exchanges globally while leading the industry with revolutionary initiatives for DeFi, it is one of the industry’s most respected and trusted platforms.

This isn’t saying much though. The exchange suffered from a hack back in 2014, resulting in millions being sucked out of the platform’s ecosystem. Luckily, all stolen funds were repaid to customers.

To summarize:

Pros
  • Polished UI
  • Desktop and mobile apps
  • A wide selection of altcoins
  • Favorable transaction fees
  • Speedy transactions, deposits, and withdrawals
  • Top-of-the-line privacy for small transactions
  • Reputable
  • Over 100 trading pairs
Cons
  • Unavailable in the US
  • Prone to hacks

2. Gemini

Gemini homepage

Background

Gemini is well-known in the space for one specific reason: It was founded by the Winklevoss twins, known for their early involvement in Facebook. The brothers bought up 1% of the Bitcoin supply in 2011 and launched the cutting-edge exchange in 2015

Initially, the exchange only carried Bitcoin, but the roster expanded into 40 altcoins as time went on.

Ease of use

Gemini has one of the best User Interfaces on the market for desktop and mobile. The main dashboard and the optimized features are considered easy to use, with top-notch customer service to help with any of your crypto problems. 

Features

Not only is the UI friendly, but the User Experience is suited for beginners and advanced traders alike. You can buy and sell under multiple options, and you also have the ability to earn interest on stored crypto. Who doesn’t like a bit of passive income?

Also, for a beginner like yourself, Gemini provides a comprehensive FAQ knowledge base and several webinars to help you get started on your cryptocurrency trading career.

Privacy

Gemini is very particular about sticking to regulations, so don’t think about opening an account without providing valid government identification. If you’re big on privacy, this platform may not suit you.

Speed

Speed isn’t a differential advantage for Gemini, but it sure doesn’t fail to surprise us. Deposits and withdrawals through bank transfers can be instantaneous, depending on the time of the day. 

Transaction speeds depend on the cryptocurrency you’re trading, but it takes around 1-3 hours on average. Not bad if you ask us.

Fees

It’s clear the platform isn’t the best when it comes to fees. Gemini charges two types: a trading fee on each trade executed on the platform and a transfer fee for each transfer of funds from one account to another.

Also, the taker and maker fees are substantially higher than other platforms—no bueno for those starting off with a couple of dollars to spare. 

Reputation

Although the platform does not make as many headlines as their counterparts, Gemini is one of the most professional exchanges in the business. In 2016, New York governor Andrew Cuomo stated Gemini was the only exchange in America fully licensed and regulated to deal in ETH.

Limits

Unfortunately, Gemini is only available in the following countries:

  • United States
  • United Kingdom
  • Australia
  • Canada
  • Hong Kong
  • Korea
  • Puerto Rico
  • And Guernsey

Also, Gemini does not allow for the purchase of cryptocurrency using debit or credit cards. 

Pros
  • Secure
  • Great UI
  • Over 40 tokens
  • Easy to use
  • Reputable
  • Extensive knowledge base
Cons
  • Decent withdrawals and deposit times
  • Decent transaction speeds
  • Must provide a government ID
  • Confusing fee structure
  • High fees
  • Cannot purchase crypto with debit/credit

3. Bittrex

Bittrex homepage

Overview

Founded in 2014 by three former Microsoft employees, Bittrex is by far one of the most prominent cryptocurrency exchanges globally. Thanks to its Instant Buy and Sell feature, the exchange is a good start for beginners, as users can purchase cryptos using a linked bank account or debit card. 

Albeit, Bittrex may be better suited for advanced cryptocurrency traders. Transaction fees can be high for beginners, and traders often find they must surpass the $100k a month mark to reach low fees. 

Ease of use

Like the other platforms mentioned above, Bittrex has a somewhat straightforward website with easy navigation and registration. Furthermore, the Bittrex app is on both iOS and Android, facilitating trading on the go. 

With over 440 cryptocurrencies and stablecoins on the platform, Bittrex is perfect if you’re into lesser-known altcoins. Moreover, customer support is available through several channels, though most users have reported slow responses. So if you have an issue on the platform, get ready to wait for more than a day.

Privacy

If you have privacy in mind, Bittrex may not be for you. You’re required to register government-issued identification upon opening an account.

Speed

Bittrex uses an automated monitoring system, which means that withdrawals and deposits are completed very quickly. However, transaction speeds are dependent on the crypto purchased or sold.

Fees

This is where Bittrex falls short of its rivals—the base maker/taker fee is 0.35%, which is almost 0.10% higher than direct competitors like Kraken. The thing is, your monthly trading volume determines your fees on the platform; The higher your trading volume, the more discounts you are given. 

Reputation

Bittrex is the gold standard for security. First, it stores the majority of crypto on the platform in a cold wallet, thus avoiding devasting cyber-attacks. Second, Bittrex pledges to repay customers up to $300 million if something goes wrong.

Last but not least, Bittrex uses two-factor authentication and IP address whitelisting to decrease the chances that someone will hack into your account and run away will all your crypto goodies. 

Limits

Although most of this information doesn’t apply to you, Bittrex is unavailable in all 50 states. It also doesn’t offer advanced trading features like margin trading and complex order types.

Pros
  • Easy-to-use UI
  • Easy fiat-to-crypto purchases
  • Extensive security
  • Over 440 cryptocurrencies and stablecoins
  • Low fees for high monthly trading volumes
Cons
  • Limited fiat-to-crypto trading pairs
  • No margin trading
  • Lack of advanced order types
  • Unavailable in all 50 states
  • High fees for low monthly trading volumes
  • Average customer support

4. Coinbase

Coinbase homepage

Overview

If you haven’t heard of Coinbase by now, you must be living under a rock. It’s one of the biggest exchanges in the world, with over 89 million users and $278 billion in assets. It operates in over 190 countries and offers an extensive list of tokens and wallet services. 

Ease of use

We’d opt to say Coinbase is the bridge between stocks, mobile investing, and cryptocurrency trading. It has by far the most effective and easy-to-use UI on the market, especially on mobile. You’re just a couple taps away from buying crypto upon entering the app. 

Privacy

Like any other centralized exchange, Coinbase isn’t where you want to go if you want to remain anonymous. Your name and bank account are linked to your account, so don’t bother with this platform if you’re afraid to lose your personal information during a hack.

Speed

The speed of withdrawals and deposits depends if you carry out your transactions with a debit/credit card or your bank account. If it is the latter, it can take up to five days to clear depending on the institution, and with the former, it is transacted instantaneously.

Trade speeds, however, are relatively fast on the platform.

Fees

Quite frankly, Coinbase’s fees are outright confusing. For example, trades under $200 have a flat fee, whereas transactions over the limit have a percentage fee. Also, some transactions are subject to a spread-based fee of 0.50%. 

That’s not all though—depending on the payment method, you’ll either be charged 1.49% or 3.99% above the $200 mark. 

Sigh… it’s fees on fees on fees.

Reputation

Coinbase has a reputation for being one of the safest exchanges available. 98% of their customer funds are stored offline, so they are less likely to be stolen. In 2019, they were the target of a hacking scheme, but the trusted team thwarted the attempt, and no funds were stolen. 

Pros
  • Widespread adoption
  • Easy-to-use UI
  • Easy fiat-to-crypto purchases
  • Extensive security
Cons
  • Slow bank deposits and withdrawals
  • Confusing fee structure
  • High fees
  • Only ~100 cryptocurrencies and stablecoins
  • Lack of privacy

5. Binance

Binance homepage

Overview

Binance: The largest cryptocurrency exchange globally regarding daily trading volume and market capitalization. It holds a place in everyone’s heart, no matter its late entry into the industry. 

The exchange was initially based in China, but since has moved overseas due to the Chinese government’s strict regulation on cryptocurrencies. Unfortunately, there isn’t a fixed list of countries Binance can operate in, but you can sure bet it’s international.

Ease of use

Although Binance has desktop and mobile dashboards, its wide array of trading features, including the impressive selection of market charts and various cryptocurrencies, don’t make it user-friendly. 

That being said, the user interface is noticeably simple to use, though the advanced features can be discombobulating.

Privacy

Binance is a decent option for those seeking privacy, as you can open an account with an email address. However, it isn’t without its limitations⁠—if you select this option, your trades are limited in daily volume. Therefore, if you intend to trade only a small amount of cryptocurrency, Binance is a no-brainer. 

Speed

Binance is arguably one of the fastest exchanges in the business, processing over 1.4 million transactions per second. 

Fees

The fee structure at Binance is notably low. According to their official fee schedule, the amount paid is determined by transaction volume. Still, most transaction fees for regular users are below 0.1%. 

Reputation

Being the largest cryptocurrency exchange is a double-edged sword. On the one hand, its user base trusts Binance with all of its crypto-needs. But, on the other hand, Binance’s security is just about average; It follows all of the standards for centralized exchanges. 

Pros
  • Low fees
  • Widespread adoption
  • Easy-to-use UI
  • Easy fiat-to-crypto purchases
  • Easy crypto-to-crypto purchases
  • Privacy for smaller trades
  • Over 600 cryptocurrencies and stablecoins
Cons
  • Not user-friendly
  • Only ~65 cryptocurrencies and stablecoins
  • Mediocre security
  • Lack of privacy for larger trades

Conclusion

After reading this article, we hope you’re ready to hop on board the cryptocurrency trading train. Although it can be an arduous learning process, we hope you learn as much as possible before making your first trade.

We’ll leave you off with a couple of pointers:

  • Be careful with your personal information. Don’t enter your information if you receive a sketchy email or if you enter an unverified website. Crypto is full of scams.
  • Don’t connect your wallet to random websites.
  • Only sign up to legitimate, popular, and regulated exchanges at first. All mentioned exchanges are centralized, which means you have an added layer of support if something were to happen.
  • Start off small; You’re bound to make mistakes. 
  • Do your own research before making a trade or investment. With the sheer influx of crypto influencers, you never know when people are promoting cryptocurrencies to pump their bags.

It might take a few more years for cryptocurrency trading to become a flourishing profession, but for now, remember that the markets will remain volatile until we see a higher adoption rate.