Over the past two years, I ’ ve had several friends ask me “ Should I invest in Dogecoin ? ” or “ Should I buy Shiba Inu ? ” Interestingly, most of them had never asked me any questions about stock market investing. gradually, it became clear to me that crypto deal and investing international relations and security network ’ t equitable hot within an insular community…it ’ s gone mainstream .
But unlike investors in early “ mainstream ” asset classes, like stocks and bonds, many of the newcomers to the cryptocurrency diligence aren ’ deoxythymidine monophosphate just looking to invest for the long catch. They ’ re looking to trade cryptocurrency — possibly holding onto coins for lone a few days, hours, or minutes.
Without the day trade rules that keep many novitiate stock traders away, about anyone can trade cryptocurrency. But is it a good mind ? And how do you get started ? Below, we break down how to trade cryptocurrency in six steps .
1. Gain a Basic Understanding of How Cryptocurrency Works
If you ’ ve already moved to the point of wanting to learn how to trade cryptocurrency, it ’ s likely that you already understand the basics. But if you don ’ thyroxine, we highly recommend that you do far research on Investor Junkie and early reputable sites ( such as cryptocurrency exchanges ) before beginning to trade coins. In the interim, here ‘s a immediate overview .
Cryptocurrencies are digital currencies that are built on decentralized networks of peer-to-peer computers. Bitcoin was the first, and is inactive by far the most popular, cryptocurrency. however, there are hundreds of “ altcoins ” ( any coin other than Bitcoin ). And, as of publish, over 90 coins have marketplace caps in excess of $ 1 billion according to CoinMarketCap .
Unlike currencies that are issued and controlled by governments, cryptocurrencies don’t require middle-men ( such as banks or payment processors ). This means your coins can be transferred immediately to another party quickly and securely .
A cryptocurrency’s blockchain is its record of transactions, akin to a financial institution’s ledger. Again, this ledger is split amongst many computers, so there ’ s no central server to hack. This makes blockchains incredibly difficult ( many would say closely impossible ) to hack .
To receive cryptocurrency, you need both a public and private key. The public key is the address where the sender will direct the funds. however, you won ’ metric ton be able to authenticate that you own them without your individual identify .
importantly, this means that if person gets entree to your individual keys, they could withdraw or transfer all of your cryptocurrency assets. This makes their security overriding .
Private keys can be stored in either hot (connected to the internet) or cold (not connected to the internet) wallets. cold wallets are more secure, but they can be more awkward for traders as keys must be transferred to an rally before they can be sold or traded .
Related : Best Cryptocurrency Wallets for 2022
2. Decide if You Want to be a Crypto trader or investor
There are two major camps within the cryptocurrency global. Some are all in on trying to buy and sell assets for quick gains. Others are resolved to hold on to their coins over the long haul no count how far the grocery store moves up or polish in the short-run .
“…When markets dip and traders say “Sell!” crypto investors say “HODL!”
Those who belong to the second gear category often refer to themselves as HODLers. The term HODL originates back to 2013 when person by chance spelled HODL rather of “ hold. ” Since then, many have used HODL as an acronym for “ hold on for dearly life. ” so when markets dip and traders say “ Sell ! ” crypto investors say “ HODL ! ”
While stocks are frequently used for both invest and trade, cryptocurrency tends to lend itself better to the latter. As a solid, the crypto market is far more explosive than the banal marketplace. That ’ s broadly considered a negative for investors, but can actually be a convinced for traders. There are also no pattern day trading regulations for cryptocurrencies like there are for stocks.
There are advantages to taking a buy-and-hold approach to cryptocurrency induct, however. First, it helps you avoid panic sell during periods of senior high school volatility ( which, again, is just about every day in the crypto earth ). Plus, HODLers may be able to take advantage of loaning out their crypto to earn interest. many platforms now offer crypto interest accounts that pay army for the liberation of rwanda more than the distinctive high-yield savings account .
If you decide that trading is right for you, any cryptocurrency with high fluidity becomes fair game. however, if you ’ re looking to actually invest in crypto, you may want to stick with more lay down coins that already have hardheaded consumption cases like Bitcoin ( BTC ), Ethereum ( ETH ), Ripple ( XRP ), and Litecoin ( LTC ). If you think crypto induct is more your style, check out this lead for more tips and best practices .
3. Focus on Cryptocurrencies That Have High Liquidity
If you ’ re specifically looking to trade cryptocurrency rather than invest, you ’ ll want to zero in the coins that are traded most often. While billions of dollars of Bitcoin may change hands in a 24-hour period, other less popular altcoins may have a daily bulk of less than $ 1 million .
Trading illiquid coins can lead to two major problems:
- You may not be able to immediately close a position when you want to. This could cause you to miss out on locking in profits or, worse, suffer steeper losses.
- Trying to trade illiquid coins can also lead to “slippage,” which results in you receiving a lower price for your assets than expected.
CoinMarketCap is a great invest to start if you ’ re wanting to find coins that offer high fluidity. It allows traders to compare currencies by market capitalization, 24-hour trading volume, circulating supply, and more
It should besides be noted that flush if you ’ rhenium trade a liquid mint, you might struggle with fast trade execution if you ’ re trying to buy or sell it on a low-volume change. Again, CoinMarketCap can be helpful in this regard as it makes it easy to rank each switch over by 24-hour deal volume, average fluidity, weekly visits, and more .
4. Choose a Cryptocurrency Exchange
Exchanges are to cryptocurrency trading what brokerages are to lineage trade. And equitable like with brokers, exchanges can vary wide in their features and costs .
At the goal of this article, we list five of our favorite cryptocurrency exchanges for trade. But for now, here are a few factors that you ’ ll want to consider as you compare platforms .
long-run investors may not be as worry about the fees that they pay for trades. But if you ’ ll be trading frequently, trade costs become a bigger deal that can make a big difference in how much you make ( or lose ) .
To find the lowest fees, you ’ ll by and large want to look for exchanges that utilize a maker/taker price structure. With Coinbase, this means you ’ ll want to sign up for a Coinbase Pro account which targets active voice traders as its standard accounts come with a more complicated and higher cost fee structure .
“ Maker ” orders are trades that don ’ metric ton receive an immediate match, which means that they are providing fluidity to the market. “ Taker ” orders, meanwhile, are those that are matched immediately and therefore take away fluidity. typically, exchanges charge lower fees for maker orders .
In most cases, godhead and taker fees will both be less than 0.60 %. This is much less than platforms like Coinbase or Gemini cathexis on their standard accounts. besides, most exchanges will reduce your maker/taker fees as your 30-day trade volume increases .
It ’ sulfur not uncommon for crypto HODLers to store their private keys on their own hardware or software wallets. But if you ’ re looking to actively trade cryptocurrency, you ’ ll credibly need to keep your keys stored on your exchange ’ randomness servers .
This makes it essential to choose an change that takes security badly. At the least, you ’ ll want to make certain that the exchange you choose keeps the majority of its clients ’ assets in cold storehouse. But even better if you can find a platform that besides provides cryptocurrency policy .
Tools & Resources
Crypto trading is a completely different animal than investing. With investing, you ’ ll want to buy coins that you believe will gradually rise over the long haul. But the dispute between achiever or failure with trading much depends on other factors, like your ability to examine charts or utilize boost decree types .
For these reasons, high-volume crypto traders will want to look for an substitution that offers a professional-level trade feel. Some of the popular deal platforms provide real-time order books and make it slowly to execute trades with minimal clicks. And if you ’ rhenium hoping to trade on the run, you ’ ll want to make certain that the fluid UI international relations and security network ’ t markedly subscript to the background experience .
Are you alone looking to trade Bitcoin ? If so, you ’ re in luck ! You ’ ll be distressed to find an exchange that doesn ’ deoxythymidine monophosphate support it .
But once you move beyond BTC, you ’ ll begin to notice wide disparities in the number of currencies that are supported on the assorted exchanges. If you ’ re good looking for the exchanges that offer the most coins, you can well compare options here .
however, if there ’ s a specific coin that you know you want to trade, you should credibly visit the actual web site for each substitute to make certain that it ’ second available in your area. For exercise, Binance offers hundreds of coins globally but barely under 80 in the United States .
Related : Binance vs. Coinbase: Which Exchange is Better for Traders?
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Most cryptocurrency platforms allow users to withdraw or transfer their assets to an off-exchange wallet at any prison term. Some exchanges, however, don’t allow cryptocurrency to be transferred in or out.
With the exchanges that belong to the latter class, your crypto assets can ’ deoxythymidine monophosphate be withdrawn until they ’ ve been converted into a decree currency such as USD. This might not be a problem if you ’ re a trader who doesn ’ triiodothyronine design to hold onto coins for a long period of time anyhow .
however, some traders may plan to do a bit of investing vitamin a well. If that sounds like you, it may be prudent to pick a platform that won ’ metric ton ask you to liquidate your positions before you can move your crypto to a different wallet or exchange .
5. Learn How to Leverage Technical Analysis
When it comes to stocks, investors much care more about fundamental analysis while traders tend to rely more heavily on technical foul analysis .
The same is true for cryptocurrency. To improve your chances of achiever with crypto trade, you ’ ll want to at least learn how to read candlestick charts and identify basic technical indicators like defend and resistance levels .
But technical analysis can go much, much deeper. other democratic tools of the trade ( pun intended ) include moving averages, average directional indexes, Bollinger bands, the Relative Strength Index ( RSI ), and a lot more .
thankfully, many of the same technical foul strategies that are useful to stock traders can be applied to crypto trade equally well. For an introduction to technical analysis and chart-reading, check out our guide .
6. Take Proactive Steps to Mitigate Risk
trade, even for traditional assets like stocks, is inherently riskier than investing. But trading crypto can be even more hazardous due to the higher ( on average ) excitability .
But merely as with day trading or swing trade stocks, there are ways to reduce your risk if you decide to trade crypto. These include taking belittled position sizes, limiting the sum of margin that you use or avoiding allowance trades wholly, and setting stop loss limits .
You ’ ll besides want to be realistic about your profit expectations. For model, it might be fair to set a goal to earn 5 % on a profitable deal before you ’ ll exit your position. But with a 30 % target return per trade, you ’ re more likely to miss out on opportunities to lock in profits .
Best Exchanges for Trading Cryptocurrency
here are five of the best exchanges available today if you ’ re looking to actively trade cryptocurrency .
Coinbase Pro: Ease of Use
Coinbase is by far the most popular U.S.-based cryptocurrency exchange and for good reason. It ‘s built a strong repute for security and it ‘s exploiter interface is fabulously easy to use on both desktop and mobile, flush for complete beginners .
But while Coinbase often wins the “ best for newbies ” awards on lists of exchanges, Coinbase Pro actually competes well on both price and features for experienced traders. presently, it ’ mho maker/taker fees start at 0.60 % and go down from there. It besides offers real-time data and a popular API for creating deal bots .
At 150+ support coins, Coinbase doesn ’ thyroxine volunteer as many currencies as a few of the most popular ball-shaped exchanges. But, for a U.S. exchange, that ’ s still an impressive total of coins that includes virtually all of the ones that are most commonly-traded. And Coinbase has systematically added to its list over time .
Check out our head-to-head comparison of Coinbase vs. Coinbase Pro >>>
Gemini ActiveTrader™: Tools and Charts
If you ’ ra looking for a professional-level trade platform, it ’ sulfur hard to beat Gemini ActiveTrader™. In addition to trades executing in microseconds, its order books offer deep visibility. ActiveTrader™ besides offers multiple order types including barricade trading and it hosts daily auctions for certain deal pairs .
however, what truly sets Gemini ActiveTrader™ apart from the crowd is its abstruse integration with TradingView. TradingView ’ randomness advanced chart and screen tools have been respected by traders for years. And Gemini clients can execute crypto trades directly from the TradingView interface.
deal fees for ActiveTrader™ depart at 0.20 % for manufacturer orders and auctions and 0.40 % for taker orders. It should be noted that there international relations and security network ’ t presently a Gemini ActiveTrader™ mobile app. however, the network chopine is optimized for mobile browsers .
Read our full review of Gemini >>>
Crypto.com: High Security
Crypto.com goes to great lengths to protect the assets of its clients. It ’ s one of the merely exchanges that keeps 100 % of its users ‘ private keys in cold memory. But it doesn ’ t break there. It besides provides up to $ 750 million of policy on its cold repositing servers .
Fiat currencies that are on deposit with Crypto.com are protected by FDIC insurance up to $ 250,000. history logins are protected by multi-factor authentication ( password, biometric, e-mail, call, and appraiser confirmation ). Whitelisting for external addresses is required. And Crypto.com tied runs a tease bounty plan !
In addition to all these guard features, Crypto.com besides charges reasonable fees. Its volume-based maker and taker fees start at 0.40 %. You can besides earn discounts on trade fees if you venture and pay for your fees in CRO ( Crypto.com ’ s native token ) .
Robinhood: All-in-One Crypto and Stock Trading
Robinhood is worth considering for those who want to trade stocks, ETFs, options, and crypto in one single report. It besides has an easy-to-use chopine that beginners may find less intimidating than other platforms .
Robinhood does n’t charge any direct commissions on crypto trades, but you ’ ll still be incurring indirect fees through the spread. unfortunately, Robinhood doesn ’ metric ton provide an estimate of what users can expect to pay on average in outspread fees .
There are two major downsides to using Robinhood that are deserving mentioning. First, it supports very few cryptocurrencies ( presently just seven ). moment, users aren ’ deoxythymidine monophosphate able to transfer cryptocurrency into or out of their accounts. indeed to get crypto on or off the Robinhood chopine, you ’ ll have to convert it to a decree currentness first .
See our full Robinhood review >>>
Binance: Low Fees
Binance is the most popular crypto exchange in the world by market volume. And while Binance.US is n’t a fully-featured as the international platform ( Binance.com ), its reduced fees still make it one of the best exchanges for U.S. crypto traders .
presently, spot trades cost precisely 0.1 %. That ‘s six times less than Coinbase Pro ‘s taker fee for users with less than $ 10k of monthly trade bulk. note that there ‘s a higher tip of 0.50 % for buying and selling crypto. But if you ‘re just looking to trade assets with other users, you ‘ll have a hard time finding a more low-cost commute .
Binance.com users can trade over 500 currencies, while the subscribe asset list for Binance.US is more modest at 80+ coins. advanced trade features on Binance.US include limit orders, intercept limit orders, and a variety of charting tools such as tendency lines and Fibonacci Retracement levels .
Cryptocurrency Trading FAQs
Is crypto trading profitable?
Crypto deal can be very profitable due to the high volatility that many cryptocurrencies are known for. however, this volatility can besides promptly lead to large losses if a trade goes against you. trade is inherently a bad way to make money with cryptocurrency .
Do you need $25k to day trade crypto?
No, unlike stocks, you can make an inexhaustible act of crypto trades per day careless of your account balance wheel .
Which exchange will allow you to trade Dogecoin?
There are several major crypto exchanges that support Dogecoin ( DOGE ) trade, including Coinbase, Gemini, Crypto.com, Robinhood, and more .
Is cryptocurrency legal?
Decentralized digital currencies such as Bitcoin are legal in the United States. But early countries, such as China, have placed heavy restrictions on cryptocurrency activity .
With fewer rules and restrictions than exist with sprout deal, it ’ sulfur easy for anyone to get started with trade cryptocurrency. however, good like with stocks, short-run trade of cryptocurrencies can be bad and can lead to big losses in a abruptly period of meter.
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Make sure you fully understand the risks of trade ( and how to reduce them ) before you begin. And carefully compare exchanges thus that you can find the platform that provides the best combination of features and depleted fees .