Ultimate Beginner’s Guide To Trading Cryptocurrencies

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 being popularized as well.

One of the best parts about cryptocurrencies is that they are decentralized, which means no specific organization or government entity controls their operations and market presence. They run across networks of computers that hold the blockchain together. The blockchain contains the digital records of its users.

Cryptocurrencies have a digital form and can be stored in wallets. During a transaction between two parties, one party sends crypto to another party’s wallet. The transaction is verified after a process called mining. Mining is also how crypto coins are released to the market. 

Various crypto exchanges emerged that allowed people to make money from crypto trading. Now, anyone can purchase coins and trade them for profit.

Here, we 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 that, let’s try to understand what is cryptocurrency trading, and if there’s anything in it for beginners.

What is cryptocurrency trading?

Cryptocurrency trading refers to the act of predicting the price of the crypto market and buying or selling crypto coins using an online exchange platform. 

To trade on an exchange, you need to set up an exchange account and store the coins in a wallet before you sell them. Trading on an exchange requires skills and an understanding of the price charts. However, this is something that you can build on over time with effective research and practice.  

You need to be able to predict the next movement of the price curve. You make money if the price goes up at a particular point in time, and you decide to sell your asset. You lose money if you sell it below your price at which you purchased it. Buying in and selling at the right time will ensure constant profits, and this you determine by observing the chart and keeping an eye on the trends.

You can set stop losses to ensure you pull out of the trade at the right time.

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

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 that 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 mined or received. These digital platforms allow people to trade crypto for other assets, such as digital currencies and conventional fiat money.

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

How does cryptocurrency trading work?

Crypto trading can be done via exchange accounts or contract for difference (CFD) accounts. CFD accounts are leveraged products where you open the position for a fraction of the trade’s full amount; your losses are also increased if the market moves against you.

With CFD accounts, you need to speculate whether the market will move up or down and the prices are quoted in US dollars.

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

When you start cryptocurrency trading, you may find a difference between buying and selling prices for a cryptocurrency. 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 the market value.

Cryptocurrency is traded in lots because the crypto market is highly volatile. So, a batch of crypto tokens is traded to standardize the size of trades. Some cryptocurrencies are traded in bigger lots than others.

You can gain exposure to huge profits without paying the full value of the trade, this is known as leverage. Here you deposit a small amount as margin and the closing of the leverage is based on the profit and loss on the full size of the trade.

Can beginners earn from crypto trading?

Yes, beginners can earn money from cryptocurrency trading, but it might take some time to get used to trading. As mentioned earlier, there is a learning curve for crypto trading and the cryptocurrency market is very volatile. One moment the price may be at an all-time high and the very next moment the price may reach a new low.

Cryptocurrency trading can yield a good amount of profit if done correctly. Any wrong prediction or misjudgment can lead to a loss as well. For predicting the price, you need to perform an analysis of the current price charts and look at its tend.

As a beginner, you will also have access to basic tutorials by exchanges on how to go about crypto trading. You also have the assistance of the world wide web where professional traders give beginners advice and help them earn profits.

Trading the cheapest Currencies

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

Professional traders make the money they do by putting in all their time and effort, which a beginner may not do. They also have a clear trading strategy that helps them maximize their profits.

Based on various indicators or data on the crypto assets, you need to develop your own trading strategy. You cannot expect to buy in and wait for the profits to pour in.

You also need to avoid making the mistake of investing all your savings. Start trading a small amount, get familiar with the platform and price charts, build a trading strategy, and then increase your investments step by step based on your profits.

As a beginner, you also need to learn from their mistakes. It is pointless to hope for recovery after a loss; sometimes, you may never earn back your losses.

Reasons to start crypto trading

As you already know, cryptocurrency has become popular ever since Bitcoin was launched in 2009, right after the global financial crisis. Many people lost a considerable amount of money, and the market was at an all-time low.

Also read: Should You Invest in Bitcoin in 2020?

This is due to regular currencies that the government has set for the general public. The value of any currency can change as it is handled by the government or, in other words, centralized. Cryptocurrency is decentralized, and its market is based on supply and demand.

Crypto trading is one of the best ways to earn cryptocurrency, but it is risky as well. The downside of being decentralized is that the market is highly volatile due to the investors and coin holders. 

But, as more investors and coin holders emerge, the market takes up the bullish patterns and the price will maintain an upward trend. 

The main benefit of a decentralized currency is that it can be a haven to maintain your money and value. With a stable market, the value of crypto coins will increase or become steady, so if you ever invest in cryptocurrency, a global financial crisis will not affect it.

Industry Overview: What’s Happening With the Top 5 Cryptocurrencies

Ready to start crypto trading? Find out what’s happening with the top 5 cryptocurrencies.

In recent years, there has not only been an increase in price growth, but there is also growth in the number of cryptocurrencies and their world-wide adoption.

By the first quarter of 2020, there were around 47.41 million Bitcoin wallet users, a 36% increase from the Q1 of 2019. Within a year, there were around 12.48 million new users of the Bitcoin wallet. These statistics are just for Bitcoin users; imagine if other cryptocurrencies were included!

Ecuador was one of the first countries to launch an electronic currency after the government banned Bitcoin

China was the largest base for mining Bitcoin, around 72% of the total Bitcoin mining power. But its government had restricted any crypto-related activities until 2019. China’s President Xi Jinping announced that he is ready for the country to work closely with Bitcoin’s ever-developing technology.

Want to get into cryptocurrency mining?

Read our guide on cryptocurrency mining at home.

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

However, the top 5 countries that adopt cryptocurrencies are countries you probably would not expect to top the list. Turkey, Brazil, Colombia, Argentina, and South Africa are the top 5 countries.

Turkey holds 20% of the cryptocurrency across the globe. There aren’t many banks and government trusts, and the fiat currency is prone to inflation. Their uncertain relations with the USA have led the citizens to look for hope in cryptocurrency.

Brazil also has similar issues with the government and banks. It accounts for almost 18% of the world’s cryptocurrency.

Colombia is tied with Brazil in terms of crypto-adoption and has a Bitcoin-friendly government. Like the top 2 countries, Colombian citizens look to Bitcoin to preserve their wealth and investment opportunity amidst constant economic inflation.

Argentina and South Africa are tied for third place with 16% crypto adoption.

How to start cryptocurrency trading and earn money

As you might have figured out, the cryptocurrency market is volatile, and crypto trading might yield profits only if done right.

So it all comes to this question – how to start crypto trading and earn money?

There are two main ways to make money from crypto trading — quantity and value. The higher the number of coins you hold, the more money you get. If the cryptocurrency is worth quite a lot of money (higher value), trading will yield bigger profits.

The Ultimate Guide to Crypto Wallets

Need a place to store your cryptocurrencies?
Read our wallet guide.

Buying cryptocurrency with your fiat currency remains the easiest and safest way to own crypto coins for your dollar. Although other modes may yield bigger returns, they are highly risky as well. Cryptocurrency for investment is quite risky, no matter how hard you believe in its glorious future.

Some cryptocurrencies cannot be purchased with fiat currency; they have to be exchanged with popular coins such as Bitcoin or Ethereum. If you buy Bitcoin with your money, you will get the exact coins for the amount.

Best exchanges for cryptocurrency trading

Here are some popular exchanges where you can buy and store your coins. 

1. Poloniex

Poloniex

Background

Poloniex was first created in 2014 in Delaware, USA. In 2018, it was acquired by Circle Internet Financial ltd and, since then, has been geared towards expansion and more mainstream activities. For example, there are currently plans to register the exchange with the SEC and FINRA as a broker/dealer. It is one of the biggest exchanges in the cryptocurrency industry. 

Poloniex allows fiat to crypto and crypto to fiat transactions, as well as various trading pairs. Besides this, margin trading and lending are also offered on Poloniex. 

Ease of use

The Poloniex website is quite easy to navigate and is mobile-friendly. There is also a mobile app on both iOS and Andriod that makes trading easy on the go. Credit and debit card transactions are allowed, and so the exchange is quite accessible. 

Privacy

If you are seeking privacy, Poloniex would be a good exchange for you. You do not need to verify your identity if you are conducting transactions below a certain threshold.  

Speed

In terms of speed, Poloniex is one of the fastest exchanges on the market. In 2019, the exchange completed an upgrade that significantly increased the speed of transactions. Deposits and withdrawals are typically completed in a few minutes and trades completed in 225 milliseconds. 

Fees

Poloniex is fairly affordable in terms of transaction fees. They charge 0.0005 BTC for Bitcoin withdrawals and have the best industry withdrawal rates for tokens such as EOS and NEO. these fees tend to be blockchain fees and not for the exchange itself. Poloniex works with a maker-taker fee schedule which also factors in your 30-day volume. There are also tools online which can help you calculate your potential Poloniex fees before you conduct your trade. 

Reputation

Poloniex is known as a very transparent exchange within the industry. When they suffered a hack in 2014, the funds stolen were repaid to customers.

Limits

There aren’t many limits to trading with Poloniex as they offer most of the tools and options that a cryptocurrency exchange would want.

Pros
  • A wide selection of altcoinsnFavorable transaction fees nHigh speed nPrivacy for small transactions
Cons
  • The exchange has previously suffered hacks

Poloniex supports more than 100 spot trading pairs.

2. Gemini

Gemini exchange

Background

Gemini was founded by the Winklevoss twins, who are known for their early involvement in Facebook. The two bought up 1% of the Bitcoin supply in 2011 and started their own exchange. The exchange initially only handled bitcoin but now has an impressive roster of altcoins.  

Ease of use

Gemini has a very easy-to-use website, along with mobile apps. Their dashboard and features are considered very easy to use and their customer service is top-notch. 

Privacy

Gemini is very particular about sticking to regulations, so you cannot open an account without providing valid government identification. If you are big on privacy, this might not be for you.

Speed

Gemini is not the best exchange in terms of fees. For deposits and withdrawals, these can take days to complete. This is because Gemini deposits and withdrawals can only be made through bank transfers, and these can take days to clear. 

Fees

Fees on Gemini are a bit complicated as they have at least 7 fee schedules on their website. These include API Fee schedule, Mobile Free schedule, and Web Fee schedule. This means that it is not easy to know how much you will pay in fees from the start. It has been reported that they charge 0.5% as trading fees and a transaction fee on top. 

Reputation

Geminin, while they do not make as many headlines as their counterparts, are known as one of the most professional exchanges in the business. In 2016, New York governor Andrew Cuomo declared that Gemini was the only exchange in America that was fully licensed and regulated to deal in Ether. They are also known for being very secure. 

Limits

You cannot open an account with Gemini without a US bank account. Also, Gemini does not allow for the purchase of cryptocurrency using debit or credit cards. 

Pros
  • Very securenAn extensive roster of tokens nEasy to use
Cons
  • Slow withdrawals and deposits nMust provide a government ID nConfusing fee structure

Explore institutional-grade crypto storage and great security.

3. Bittrex

Overview

Bittrex was founded in 2014 by three former Microsoft employees and is currently one of the prominent cryptocurrency exchanges in existence. They offer fiat-to-crypto and crypto-to-crypto transactions as well as margin trading. 

Ease of use

Bittrex has a straightforward website that is easy to navigate and register on. Furthermore, there is a Bittrex app for iOS and Andriod, which makes trading on the go easy. Searching for trading pairs is made very easy with a search bar.

Customer support is made available through many channels, though some have reported slow responses. Bittrex also allows the funding of accounts using debit or credit cards. 

Privacy

To register on Bittrex, government-issued identification is required, and this might be inconvenient if you wish to maintain privacy during your dealings. 

Speed

Bittrex uses an automated monitoring system, which means that withdrawals and deposits are completed very quickly. 

Fees

The volume of the transaction determines the fees in Bittrex. There is a base fee of 0.25% for both maker and taker fees. However, higher volume transactions are given a discounted trading fee. 

Reputation

Bittrex has a reputation for being one of the most secure exchanges available. They encourage two-factor authentication and are constantly improving on their security. In 2020, it was revealed that they had taken out $300 million in insurance for their tokens in cold storage.

Limits

Bittrex only allows USD for fiat trading pairs and some users might find this restrictive. 

Pros
  • Very secure nEasy to usenExtensive customer service
Cons
  • Has limited fiat trading pairs

Explore great UI that enhances your trading experience.

4. Coinbase

Overview

Coinbase has been in existence since 2012 and is one of the biggest exchanges in the industry. It operates in over 190 countries and offers a very extensive roster of tokens and wallet services. 

Ease of use

Coinbase’s website and apps are remarkably easy to navigate and use. 

Privacy

Coinbase is not where you want to go if you want privacy. Your name and bank account is attached to your account, which means that it is not completely anonymous.

Speed

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

Trade speeds, however, are very fast on Coinbase.

Fees

Coinbase has a maker and taker fee schedule on their website, and thus, fees depend on volume and other factors. Digital assets are not charged a fee for withdrawals and deposits but wire transfers, SWIFT, and SEPA attract a fee.

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 their team could thwart the attempt, and no funds were stolen. 

Limits

They are not a good option for those seeking complete privacy as transactions cannot be carried out anonymously. 

Pros
  • An extensive roster of tokens nHigh security nFast trades
Cons
  • Slow bank withdrawals and depositsnMust connect to bank accounts

Portfolio management, vault protection, recurring buys, and more.

5. Binance

Overview

Binance was founded initially in China but has since moved out of the country following the ban on cryptocurrency implemented by the Chinese government. 

Binance is one of the largest cryptocurrency exchanges in existence, with several arms such as Binance Jersey which operates in Europe and Binance US. 

Ease of use

Binance’s user interface is noticeably simple to use, and the exchange offers a mobile application for both iOS and Andriod devices. Even those with little experience on cryptocurrency exchanges will find Binance easy to navigate. Besides this, Binance also has 24-hour customer service. The exchange also has hundreds of cryptocurrencies to choose from. 

Privacy

Binance is a good option for those seeking privacy, as you can open an account with only an email address. This is not without its limitations; however, as users are limited in daily volume, they can trade before verification is required. If you intend to trade only a small amount of cryptocurrency daily, you may choose to use Binance. It might not be ideal, however, if you wish to deal with large cryptocurrency volumes. 

Speed

Binance is one of the fastest exchanges in the business, processing a reported 1.4 million a second. 

Fees

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

Reputation

Binance is considered the standard with regards to cryptocurrency exchanges, and for a good reason. It is known to be safe, fast, and very easy to use.

Limits

Most of the limits that exist with Binance are as a result of verification levels. The less verified a user is, the fewer transactions they can carry out. Verification in this sense means the provision of official identification. 

Pros
  • Has a large roster of cryptocurrencies nIs very securenAllows some level of anonymity nLow fees n
Cons
  • Limited transaction volume depending on verification level

Trade Bitcoin, BNB, and numerous other cryptocurrencies in no time.

Conclusion

If you want to earn profits after mining or purchasing crypto coins, crypto trading is where you can begin. You begin with day trading and technical analysis of the price charts to predict the prices’ rise or fall.

There are large financial parties and banks involved in crypto trading. They usually have research information that is not even available to the general public, which stiffens the competition.

As you begin crypto trading and are not careful with your data such as emails and phone numbers, you might start getting random spam emails claiming to provide help for your trading. 

Do not fall for scams! 

If you do happen to click on the link, you may lose all your crypto balance and even personal information such as credit card details.

Always sign up for legitimate, popular, and regulated exchanges. Do not sign up for random exchanges that pop up as they may take away your crypto balance. Before you invest your money anywhere, always do your own research. 

It might take a few more years for cryptocurrency to be standard for payments and trading. It is still new and flourishing. The crypto market has been volatile and will continue until the supply and demand levels are normalized.

Frequently asked questions (FAQs)