The following article is a comprehensive guide that will help you to understand the fundamental elements of cryptocurrency trading, make your experience with crypto exchanges amazing, provide you with useful information for your new opportunities in trading strategies, and teach you how to buy/sell currency using every trading app. Below, you will find all about the basic notions concerning Bitcoin and other digital currency, crypto trading, and investment. You will also learn how to make a plan on Cryptocurrency exchanges.
The First Thing to Know
The point of cryptocurrency trading is to purchase crypto at the lowest price and to sell it at the highest one. Investment differs from the crypto exchange and trade crypto greatly, mostly because of how long-lasting these things are. Crypto trading means that you purchase cryptocurrencies anywhere and keep them for rather a long time period. Whereas when trading cryptocurrencies, you have to understand the trends and tendencies of the market to predict the price. To do that, you should be able to read graphs.
What Should You Do to Trade Bitcoin?
There are four main steps you should follow to start a successful cryptocurrencies trading:
- You should have an account on a Bitcoin exchange (eToro, Bitstamp, or CEX.io);
- After registration, you will be asked to verify your identity;
- Put a particular sum on your account;
- Open the first position concerning short selling, buying, or exchanging cryptocurrencies.
Obviously, there is much more to know. If you want to become a real expert in digital currency such as Bitcoin and Kraken, crypto exchanges on crypto trading platforms like Coinbase or Binance, then go through the whole article.
Table of Contents
- Cryptocurrency trading basic notions;
- What is the difference between cryptocurrency trading and cryptocurrencies investment;
- Why you need to understand price charts;
- Two main analyzing methods;
- Types of cryptocurrency exchanges and crypto trading;
- A list of mistakes you should avoid;
Cryptocurrency Trading Basic Notions
When you are new to the cryptocurrency exchange sphere, it will be frustrating to become familiar with all terms connected to cryptocurrency that crypto traders might use. So we will explain the most important ones for you in the following paragraphs.
- Trading platforms
A cryptocurrency trading platform is a website or an app that was created to find a perfect match between a seller and a buyer of cryptocurrencies such as Bitcoin or Kraken automatically. Unlike Bitcoin brokers (Coinmama, for instance, brokers do not sell cryptocurrency direct on a crypto trading platform. Moreover, the price might be higher when you buy from brokers and cannot agree on a sum. However, on a crypto trading platform, buyers and sellers do not communicate in the same ways that are common for trades on a marketplace like LocalBitcoins.
- Bitcoin price
In fact, there is no such thing as a Bitcoin price. When an investor or just a person interested in crypto exchange and investment talks about this notion, they mean the sum that occurred in the last trade on a particular crypto trading platform or app. What is more, one global price that would be similar for different countries does not exist. It can differ from time to time depending on a region and a platform. It happens because some particular trades that influence important crypto exchange are not similar everywhere. When studying the latest price of Bitcoin or Kraken, you may also see words “high” and “low.” These figures show the minimum and the maximum sum of the completed trades in the last 24 hours.
- The order book
The order book is a page where all trades are shown. Every user can see buy/sell trades on the trading platform. The sell orders are usually presented on the right, and buy ones are on the left. When traders sell cryptocurrencies, it is called “asks” because the price shown is the one that a seller asks for. When someone buys Bitcoin, it is in the “bids” section.
It is easy to guess that volume refers to the total number of cryptocurrencies trades in a particular time period. Volume is a crucial indicator since it evaluates how major a trend is. For instance, if a trend has a huge volume, it will be important and long-lasting. A fast minor trend is characterized by low volumes. In addition, traders are looking at the changes in volumes when controlling the price. When the price is rising, the volumes will increase, too. The situation is the opposite when the price is declining. If you as a user are interested in a trend, but you see the situation changing dramatically all of a sudden, it is highly recommended to look at the volume to know in advance if the trend is changing or it is just some short-term circumstances.
- Market order
Traders call an order market or an instant when a user sets it on a platform for it to be fulfilled instantly. In this case, users do not set a particular price. Instead, traders mark the numbers of bitcoins that they are willing to buy at any price. Because a platform connects users who want to buy/sell crypto automatically, they do not have to do anything else. Since it happens really fast, it is likely that your order will be interesting for many users who suggest different prices. A platform will automatically compose a list of opportunities to buy as many bitcoins as you have written, starting from the lowest price. Usually, it can happen that you are interested in seven bitcoins (or another cryptocurrency). Still, it will be reasonable to buy three bitcoins from one seller and the other four from somebody else. Be ready that even when you like the offer and the price, a seller might not have enough bitcoins to offer you. Because you are looking for trad, you were planning to buy at a smaller price,e but all offers are much more expensive. However, you will still need to purchase the amount that you have indicated.
- Limit order
The limit refers to a particular price that you set for purchasing or selling Bitcoin or Kraken. In this case, the main thing is the sum, so the order will not be fulfilled if there will be not many people willing to buy at this price. If your prerequisites were to buy five Bitcoins and to pay $7,000 for each one, but there were fewer people or Bitcoins that each of them offered to purchase, then your order will stay on the platform for a while until there is another person who wants to make a deal at this price.
- Stop-loss order
Not to take risks, you can set an order for the future. For instance, you can set the sum to sell some Bitcoins if the price will fall at some point. This kind of order is useful to protect yourself in the face of a dramatic price change. You make a request on a platform. After that, the algorithms will check the current price for you. You can set the circumstances in which you would like to sell a certain amount of currency. For example, you can fill in a particular price or the percent by which the price can fall. If this low point is reached one day, your bitcoins will be sold automatically at any price until other traders will buy all of them.
- Maker and taker fees
When trading, you might also be confused by maker and taker fees. The market maker is anyone trading and selling above the regular price or make an order to buy at a low price that is not typical for the market. In contrast, if you usually make orders that are instantly fulfilled, you will be a market taker. This classification is based on the behavior of cryptocurrency investors. It is important whether they create new untypical trades on the market or not. Takers tend to have higher fees than makers.
What is the Difference Between Cryptocurrency Trading and Cryptocurrencies Investment
Even when users understand the basic notions and know how to earn money effectively for some of them, it will still be complicated to differentiate between Bitcoin margin trading and investing. Therefore, we will bring up this topic from the beginning.
We bet you have heard about investing in Bitcoin. Usually, people are keen on crypto investing because they believe that Investors do not take into account some minor changes in the digital currency price that takes place every year. For investors, the future of Bitcoin is much more important. Crypto investing is giving money now and waiting for years to come to get benefits because of the major difference between the current and future price. Investors HODL the currency for a long time (HODL) refers to the verb hold written with a typo in an old 2013 post in the BitcoinTalk forum).
Of course, there is no point in investing if you do not believe that the price of cryptocurrency will constantly be rising in the future. In addition, investing might not be suitable for you if you do not have enough money to give them away and not be sure when you will earn something. If you want to start getting money from crypto exchanges right now, it is better to trade Bitcoins.
The opposite goals are typical for crypto traders. Unlike an investor, a trader aims to buy Bitcoin and altcoins and sell bitcoins as soon as possible and get some profits fast. An advantage of crypto trade is that you can make money from a short-term perspective. However, it takes more effort. You should take time to learn how to trade and get some experience. The brokerage platforms require users to go through the onboarding process to make themselves familiar with all essential features and basic rules of exchanges. You do not have to worry, though. Firstly, you can find all the needed instructions on the Net in the articles just like this one. Secondly, now each app and platform, such as Binance and Coinbase, has a friendly and understandable user interface.
Some people are so interested in a cryptocurrency exchange that they are eager to both trade and invest. In the past few years, margin trading and crypto exchange have become extremely popular. The main purpose is that the crypto market is accessible for not experienced users. Anyone who has an interest in the sphere can own a brokerage account. Bitcoin is volatile. It is also easy to track the stocks and trends and become familiar with each popular app or platform (Coinbase, Binance, and many more). The bitcoin exchanges’ sphere does not require some special skills or knowledge. Knowing all the features covered in this article is enough to make the first steps in the crypto exchanges field and get yourself a hardware wallet. Last but not least, trading can be done in any place and time. There are no limitations for users concerning stocks of the crypto exchange market.
Why you need to understand price charts
The next step into a crypto exchange and digital assets is acquiring the skill of reading price charts. Probably the most popular type of graph that you can see on platforms like Binance and Coinbase is the so-called Japanese candlesticks. This way of visualizing the data was first invented in Japan four centuries ago. That is why it might be complicated to find out how to read the graph when seeing it for the first time. A candle consists of four parts giving information on the opening, lowest, highest, and closing prices. The color of the candle has a meaning, too. If it is red, it means that the opening price was higher than the closing one. In other words, the sum has decreased. On the contrary, if the candle is green, the current price is higher than the original one. This candle represents a positive trend.
Moreover, there are two more notions in the crypto exchanges sphere that you should take into account: bull and bear markets. This classification comes from two animals’ behavior. A bull lifts his horns when attacking, whereas a bear moves his paws down. It is a metaphor for the market. The bull market is characterized by an upward trend, and there is a downward trend in the bear market. On the bull market, the majority of the candles will be green. On the bear market, most of the candles might be red.
Another crucial point to take into consideration is resistance and support levels. To analyze the price changes and make your prediction about the following development, you users need to understand what Bitcoin pricing depends on. When looking at some graphs, you may notice that there are the highest and the lowest points that limit the price to stay in a certain frame. A rapid rise can be seen, and Bitcoin can go up to $10,000 but then stuck there for quite a long period of time. Why does it happen? The highest price that has been reached is called the resistance level. The price can stay at this level as a result of too many sell orders being done with the same amount of money.
A support level is an opposite thing. It is the lowest point that price usually does not go below. This level is influenced by buy orders which are set at this level’s price. Do not be surprised that support and resistance levels’ numbers are usually round numbers. It happens like that because the majority of the traders do not bother to think of the price precisely and set an approximate one. Since there are a lot of such trades, they become popular and influence the price limits. The longer the price stays in this frame between two parameters, the harder it becomes to go over them.
Two main analyzing methods
The most important thing in the crypto exchanges and digital currency sphere is the ability to understand and even predict how the price for Bitcoin changes. In fact, no one can truly predict what will happen in the future. But one thing that a good trader can do is to analyze trends to understand which actions will bring more profits. There some patterns which are recommended to follow to minimize some possible losses. The majority of traders prefer to follow one of two strategies: fundamental or technical analysis.
Technical analysis is a strategy of predicting the future price based on past trends. To conduct this analysis, you have to study the statistics and graphs showing tendencies of the previous months and even years. Traders who use this method believe that development is cyclical and all trends come back and repeat themselves. It is enough to look at the statistics and precise numbers to understand the logic of the market. Any trading platform users are convinced that there is no power in the world that can influence the exchange progress dramatically. You just have to be prepared for the changes. And changes in crypto exchanges can be predicted even though they might seem complicated in the beginning.
Unlike technical analysis, fundamental analysis takes into account not only the numbers themselves but the whole picture and a situation of current interest in the world, even if it seems that some events do not correlate with the crypto exchange issues and assets directly. Traders and investors who prefer to use this method take into account social, political causes, and technical developments like the lightning network that might influence the Bitcoin exchanges. For instance, the government’s decisions have great power over the global economic situation in general, let alone the crypto exchange sphere. Therefore, analytics specialists must be aware of the news and current regulations around the world.
It is hard to say which one of these two methods works better than another. The one thing that must be mentioned is that you should trust both strategies carefully. Do not believe the data of every company or experts’ opinion blindly. We would hardly recommend you to have your own opinion and combine both methods wisely. Always keep in mind that no one knows what the future will bring, so do not believe in someone’s predictions and do not think that anyone will give you the keys for managing every situation. Try to maintain your savings account independently. Luckily, nowadays, there is a wide range of charting tools and guides about digital assets and crypto wallets, so it becomes only easier to understand the sphere day by day. You have already been given the keys to the digital asset classes and wallets just by reading this article. Anyway, new users have to spend some time going through Bitcoin exchange platforms and apps themselves. It does not matter which company you will choose, Coinbase or Binance, the essential part stays the same. Choose any app you like a start practicing today!
Types of Cryptocurrency Exchanges and Crypto Trading
If you have an interest in digital assets, exchange strategies, and using an app like Coinbase or Binance, you should also take into account that there are various methods to earn money when trading.
- Day trading
Ady trading includes conducting various trades during the whole day. Day traders prefer to profit from small price movements and trades. It is common for them to close the trades by the end of the day. They do not have any interest in overthinking about their actions and do not leave them open for long time periods.
- Swing trading
Swing traders are people who see the global picture. They have an interest for a moment when a trade will be the most profitable. To do swing trading, you should be patient. Swing traders can open a trade and wait for weeks or even months until the situation will be just perfect. They are studying the price cycles and know when the price movement will begin. At this particular moment, the circumstances will be suitable to get maximum money.
This type of trading is focused on short-term trades. People who interest themselves in this method are not expecting to earn a lot during one trade. The idea is that when you get small profits, you minimize the risk of loose all at once. On the contrary, this way you can plan to get some money every day. Experienced scalpers manage to finish hundreds of trades every day.
A List of Mistakes You Should Avoid
To become a successful trader, you need to take into account some mistakes often made by inexperienced users. We have made up a list of things you should avoid.
- Giving up and being impatient
When being interested in crypto trade, you can be influenced by disturbing news about the economic situation, experts’ opinions, or your personal insecurities. Being worried about how your trade is going to turn out and the price for cryptocurrencies not to fall dramatically is normal, but do not let your fears and sadness because of mistakes made before stop you from future success. Being confident is very important in this sphere.
- Having no strategy
Many people who only start trading do not understand how everything works and which particular profits and, at the same time, risks they might face. They are entering many trades and exiting them with no clear vision of what is going on. Try to make a detailed plan of what you are going to achieve before starting to trade.
- Not learning from your previous mistakes.
Do not forget that everyone makes mistakes. Even the most successful traders have failed a couple of times. It is crucial to learn from your mistakes. Analyze the situation and try to avoid the same one in the future. Do not give up when losing some money. It is impossible to reach high results without a few fails on your way.
- Leaving money on an exchange
The most practical rule is not to leave money on an exchange when you do not plan to trade with it now. When your money is on an exchange, you do not have full control over it. A trade can be hacked or go offline. In that case, you will simply lose your money, so be careful and think in advance.
- Trading when you do not have enough money
Always trade with the money that will be okay to lose. There is no point in taking major risks. When investing more money than you have saved exactly for trading, you risk losing everything. It is better to get small profits than to leave your money in one trade.
Which way of trading is the best for making money?
There are many methods of trading like day, swing, or scalping. No way is better than others. Think about your goals, the amount of money you are ready to spend on trading every day, and choose one method that suits you personally. For example, the day method might be a good and safe way to earn money, but it is rather exhausting, so 90% of people quit it during the first three months.
Is trading crypto legal?
In general, trading cryptocurrencies is legal. The majority of the governments have not banned Cryptocurrency from being sold and bought. However, it is impossible to say that this statement is true for every country.
The laws concerning Bitcoin can differ dramatically from one country to another. For instance, it is illegal to exchange cryptocurrency in places like China, Nepal, Bolivia, and some others (they have an absolute ban). Countries of Northern Africa are known for not allowing any commercial operations with cryptocurrency. It is illegal to do in Algeria, Morocco, and Egypt. On the contrary, crypto trading is 100 percent legal in the European Union, countries of Southern Africa, the United States, and so on. There is also someplace where it is legal to sell and buy Bitcoins, but there are still some limitations. For example, it is legal in Canada, but at the same time, a banking ban exists there. The same thing is true for Russia, where it is only legal to mine. Find out about the legal status of Bitcoins’ trading here.
How do you trade Crypto?
Long story short, you can start trading cryptocurrency by using services we have to recommend to you as a new user. It might be a little bit confusing in the beginning, but with the help of our articles and guides, you might get used to selling and purchasing Bitcoins really fast and will learn how to make the biggest profit.
Is crypto trading profitable?
The purpose of crypto trading is to get some profits. There are many people who have already earned a lot of money doing this. It is not even a problem if you start from a small amount of money and cannot invest a lot in purchasing Bitcoins for further deals. What matters more is your ability to understand the market and its tendencies. If you are keen on this topic, you will be happy to find out more about how to trade in the right way to make more money than you have previously invested. There is also no guarantee that you will avoid risks. Even professionals and experienced traders make mistakes. So you need to be ready not only to earn some money but also to lose it.
What is Crypto trade?
Crypto trade is a process of buying and selling cryptocurrency to make the biggest profit possible. A goal is to purchase at the lowest price and then to sell at the highest. There are different types of trading, so it can take different periods of time. Some people finish hundreds of deals every day, while others buy Bitcoins and wait for months for the price to rise dramatically. You can read about crypto trading in more detail in the article above. In a nutshell, you will need to use a Bitcoin exchange and open an account on one of the websites available in your country and suitable for your goals. After adding some money to your account.
Find a comprehensive list of the websites that might be useful for bitcoin exchanges:
- Bitstamp & Review
- BitMex & Review
- Gemini & Review
- Coinbase Pro & Review
- Bitpanda & Review
- Cex.io & Review
- Kraken & Review
- Binance & Review
- eToro & Review
- Bitfinex & Review
And some sites to study more about cryptocurrencies:
Algorithmic trading and technical analysis