Cryptocurrencies trading: a step-by-step guide

Find out how to start trading cryptocurrencies in this step-by-step guide – learn some of the do’s and don’ts that every beginner needs to know

Cryptocurrencies trading                                 

The world of cryptocurrencies trading can seem intimidating at first – with the likes of Bitcoin and Ethereum appearing to surge and crash without any rhyme or reason. But by understanding how to trade crypto, and the factors that drive digital assets, you’ll be well equipped for success.

In this article, we’ve broken down the art of crypto trading into five simple steps.

How to trade cryptocurrency: a step-by step guide

1. Find an exchange

When crypto trading, it’s crucial to find a trading platform that’s dependable. Some of the biggest names in this industry can be susceptible to outages at times of peak volatility in the markets – and in the worst-case scenario, this could cause painful losses or missed opportunities. You also need to check whether an exchange has strong levels of liquidity, as this will enable you to buy and sell your digital assets without suffering two much price slippage. Be sure to compare fees between platforms, as these costs can add up if you’re making frequent trades. And lastly, don’t forget to examine the security measures that an exchange has in place – as well as its regulatory standing. Although verification procedures can seem inconvenient, they help to protect you in the event that something goes wrong.

Some of the best trading platforms ( included) offer extensive guides on how to trade cryptocurrency. You’ll also benefit from an array of news stories that help you get a feel for sentiment in the markets, and analysis that’ll help you understand what’s driving prices upwards or downwards.

There are several types of exchanges out there. Fiat-to-crypto platforms serve as a gateway for those who are looking to convert their pounds, dollars or euros into a digital asset such as Bitcoin. Crypto-to-crypto platforms often serve as a gateway for coins with a smaller market cap – assets that can be prone to much higher levels of volatility.

2. Understand what drives the markets

In order to uncover the most lucrative opportunities in cryptocurrencies trading, it’s worth taking time to appreciate the key factors that send prices up or down.

For some who engage in crypto trading, Bitcoin is regarded as a digital gold – a safe haven when the stock market is in freefall. However, others argue that BTC has close correlation to the stock market, which could throw this narrative into doubt. Another potent argument in Bitcoin’s favour lies in how it has a fixed supply of 21 million – with even less of that in circulation. As a result, the price of the coin can surge whenever new quantitative easing measures are announced by central banks. There was no shortage of this during the coronavirus pandemic.

Another common theme with cryptocurrencies trading sees Bitcoin lift up the price of smaller altcoins whenever it enjoys a substantial surge. Likewise, coins across the sector can take a tumble should BTC veer into the red.

And last but not least, don’t underestimate the significance that institutional adoption is having in crypto trading. Some major investment funds have been known to buy Bitcoin faster than it can be mined, and this lack of supply helps push up demand. PayPal’s recent announcement that it was launching a crypto service also contributed to bullish sentiment.

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3. Familiarise yourself with trading tools

Cryptocurrencies trading can involve making quick decisions and trusting your instincts. But whereas stock markets are only open during business hours, Bitcoin and Ether is bought and sold 24/7. When learning how to trade cryptocurrency, it’s important to familiarise yourself with the tools that can offer safeguards to protect profits and minimise losses – features that can prove especially useful if BTC crashes in the middle of the night, something it’s known to do.

Whereas market orders allow assets to be bought and sold at the current quoted price, limit orders allow you to enter or exit the market at a level you set in advance.

Things get a little more advanced when it comes to stop-loss orders. This risk management tool can help you take profits off the table before markets decline further, and they can also ensure that your requests make their way to order books once stubborn resistance levels are cracked.

4. Explore common trading strategies

Many people buy and hold their crypto – or “HODL” to use a term that’s popular in the digital asset markets. This form of investing is different to crypto trading, where you’ll be attempting to capitalise on short-term swings in asset prices.

One common phrase that you’ll come across when you learn how to trade cryptocurrency is “buy the dip”. This refers to the practice of increasing your position whenever Bitcoin’s price falls, meaning that you’ll have greater exposure when prices increase once again. 

Most strategies rely heavily on detecting chart patterns that have historically caused prices to spike – as well as other forms of technical analysis. Candlestick patterns such as the inverted hammer can help you identify when a downtrend is beginning to reverse, and can help you detect when sell-offs are beginning to slow down. When you learn how to trade crypto, it’s also important to learn the warning signs that can indicate when a downturn is about to commence. For example, a so-called shooting star can illustrate when a cryptocurrency is hitting resistance, with a repeated pattern helping to embolden sellers.

5. Get a wallet

Many crypto trading platforms double up as a place where you can keep your digital assets. You may also want to consider getting a hardware wallet that enables crypto to be stored in an environment away from an internet connection, meaning it’ll be firmly out of a hacker’s reach.

Trade Bitcoin to US Dollar - BTC/USD chart

Bitcoin to US Dollar
Daily change
Low: 29028.3
High: 29840.5

FURTHER READING: Crypto assets explained
FURTHER READING: Bitcoin explained simply: everything you need to know

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
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Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
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Trade the world’s top tokenised stocks, indices, commodities and currencies with the help of crypto or fiat
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