How to Trade Cryptocurrency: A Beginners Guide

What is Crypto Trading?

Crypto trading is the process of buying and selling cryptocurrencies, often to make a profit.

Cryptocurrencies are digital or virtual tokens that use cryptography to ensure that transactions are secure and the creation of new units is controlled. These currencies are decentralized, which means they are not subject to control by the government or financial institutions.

Since Bitcoin, the first generally best-known cryptocurrency, was created in 2009, thousands of other cryptocurrencies have been developed. These include Ethereum, Litecoin, Bitcoin Cash, and XRP.

Cryptocurrencies are often bought and sold on digital exchanges. Crypto trading can be risky and volatile, but it can also be lucrative once you know how to find your way through it.

5 key elements to know about trading Crypto

1. Choose a Cryptocurrency Exchange

The first step is to choose a reputable cryptocurrency exchange. There are many exchanges available, so it's important to do your research before selecting one. Some factors to consider include fees, security, user experience, and customer support.

2. Create an Account on the Exchange

Once you've selected an exchange, you'll need to create an account. This usually requires supplying some personal information, such as your name and email address. You may also be required to verify your identity by providing additional documentation, such as a passport or driver's license.

3. Deposit Funds Into Your Account

When you’re finished setting up an account, the next step is to deposit cryptocurrency or fiat currency into it. Fiat currency is government-issued currency, such as US dollars or Euros.

Most exchanges accept deposits via bank transfer or credit card. Some may also allow you to deposit cryptocurrency from another wallet.

4. Start Trading

With funds now in your account, it’s time to start trading. Most exchanges have a web-based trading platform that you can access in your web browser. Some also have mobile apps that you can download for iOS or Android devices.

When placing a trade, you'll need to specify the amount of cryptocurrency or fiat currency you want to buy or sell, as well as the price you're willing to pay. Your order will then be matched with another order from another user.

The exchange will transfer the coins to your wallet if you're buying cryptocurrency. When you sell, the coins will be transferred from your wallet to the buyer.

5. Withdraw Your Funds

Once you've made a profit, you may want to withdraw your funds from the exchange. Most exchanges allow users to withdraw fiat currency via bank transfer or PayPal. Some may also allow you to withdraw cryptocurrency to another wallet.

Before withdrawing, check the exchange's fees and limits. Some exchanges charge a fee for withdrawals, while others have minimum or maximum withdrawal amounts.

Crypto trading can be a great way to generate passive income, but it also comes with risks. Diligent research will help you avoid these risks and train you to invest smartly.

Basics of Cryptocurrency Trading

It's important that you know how to trade crypto, use exchanges, and store your cryptocurrencies safely before you begin trading.

Here are a few basics that you should know:

Trade Structure

A trade is an agreement between two people to buy or sell an asset at a certain price. Trades are made on exchanges and platforms connecting buyers and sellers.

Whenever you trade, you will need to set how much fiat or cryptocurrency you wish to buy or sell and the price at which you are willing to trade. Then, your order will be matched with another trader.

Order Book

The order book is a list of all the buy and sell orders that have been placed on an exchange. It can be used to see the current market price of an asset, as well as the highest and lowest prices that people are willing to buy or sell at.

The order book can also be used to see how many people are trading an asset and the total amount that has been traded.

Fills

A fill is when your trade is matched with another trade, and the transaction is completed.

For example, if you place a buy order for 1 Bitcoin at $10,000 and someone else places a sell order for 1 Bitcoin at $10,000, your orders will be matched, and you'll receive 1 Bitcoin.

Types of Orders

There are two types of orders: market orders and limit orders.

Market orders are executed immediately at the current market price. Limit orders are executed at a specific price that you set. 

For example, if the current market price for Bitcoin is €10,000 and you place a market buy order for 1 Bitcoin, you will receive 1 Bitcoin immediately. If you place a limit buy order for 1 Bitcoin at €9,000, your order will only be filled if someone is willing to sell Bitcoin at €9,000.

Different strategies for trading crypto

If you want to start trading crypto, there are roughly two main strategies that you can follow:

Buy and hold

The most straightforward strategy to follow is the buy and hold strategy. With this strategy, you purchase cryptocurrency and then simply leave it be. You buy it and hold on to it. By doing so, you anticipate an increase in the price of the crypto that you have purchased. A strategy that works very well: if the price of your purchase does indeed increase.

(Day) Trading

A second and more time- and energy consuming strategy is (Day) trading. When you (day)trade, you actively trade. Most often daily. To be effective, you have to keep a close eye on the prices, the market and developing trends, and ensure that you are always aware of things that influence the price of your purchased crypto.

Staking

Crypto staking is the process of holding funds in a cryptocurrency wallet to support the operations of a blockchain network. Essentially, it is a way to earn interest in your digital assets; the more you stake, the more you earn. In the BOTS App, we have bots dedicated to staking, shorting, fixed-income rewards, and HODLing, so depending on your goals, you can use the app to diversify your portfolio with specific asset classes.

Recommended: What does crypto staking mean?

4 Crypto Trading Options For You

Try the BOTS App

If you want to automate your trading to ensure transactions are being made at the right time, you can use an app like BOTS. Our app has several trained bots that place trades on your behalf. Curious about how this works? Download the BOTS app and start investing the smart way!

If you're wondering why bots trade better than humans, jump to the next section of this post.

Cryptocurrency Exchanges

A crypto exchange is a platform that allows you to buy and sell cryptocurrencies. Before choosing a cryptocurrency exchange, be sure to research it thoroughly. Security, fees, and customer service are some things to keep in mind.

Brokers

An alternative to using an exchange is trading through a broker. A broker is a company that will buy and sell cryptocurrencies on your behalf. You'll need to pay a commission for each trade, but you won't need to set up an account or worry about security.

P2P (peer-to-peer) Platform

If you want to skip the third party agent and trade directly with another person, you can use a peer-to-peer platform. Peer-to-peer platforms match buyers and sellers of cryptocurrencies. They usually have lower fees than exchanges. 

Why do bots trade better than humans?

Cryptocurrencies are digital currencies whose value can be slightly different every day. Even though this is the same for ‘physical’ money like the Dollar, the spikes and drops in the cryptocurrency market are much higher, and the market itself is more unpredictable: often creating many opportunities for exciting investments!

Bitcoin is the most known cryptocurrency, but hundreds of other cryptocurrencies (think of Ether) make for exciting investment opportunities. But the best part is that, just like the Dollar, cryptocurrencies are real money. There are plenty of websites where you have the option of paying for goods and services with cryptocurrency. If you’d rather pay the way you’re used to, you just go to one of the many websites where you can convert your cryptocurrency to real money! Would you rather keep your ‘money in the bank’? Then you can use the so-called ‘wallet’ or specific websites to store your cryptocurrency.

But knowing the basics doesn’t make investing in cryptocurrency easier. Trading with cryptocurrency can be pretty tricky. Especially without the needed knowledge and experience, it’s tough to decide when to buy and sell cryptocurrency to make a profit. In all honesty, trading in cryptocurrency is often only beneficial for those with comprehensive knowledge and experience.

Luckily, some platforms and apps make trading in cryptocurrency a lot easier. Coinbase and Binance, for example, are well-known services that will help beginners trade in cryptocurrency. Though, they still ask for some insight or experience in trading cryptocurrencies.

A third option worth mentioning, of course, is BOTS: this app has a different approach. You don’t have to invest your money trusting your gut, but you let these intelligent little bots, based on specific algorithms and strategies, do the work for you. They will buy and sell at the best moments to do so — without you losing any sleep over it.

The best part is that you can decide whether you want high or low-risk bots working for you. Another way to make for smooth sailing is to spread your investment over multiple bots. If one bot isn’t performing, your losses will be limited, and your other bots will continue to make money for you. The ideal way to start investing in cryptocurrency without knowing all too much about it!

Would you like to learn more about the BOTS app or get more investment tips? Just continue exploring our blog.

Can You Make Money Out of Investing?

It largely depends on the market conditions at the time you are buying or selling. For example, if you bought Bitcoin in December 2017 when the price was near its all-time high of $19,000 and sold it in January 2018 when the price dropped to around $8,000, you would have made a loss.

However, if you had bought Bitcoin in December 2018 for around $3000 and sold it in September 2019, when it was up to roughly $10,000, then you would have made a profit.

It's also worth noting that cryptocurrency prices are highly volatile, making both profits and losses. As with other investments, there is no guarantee you will make money from investing in cryptocurrency. However, if you're careful and do your research, it is definitely possible to make a profit.

Disclaimer:

This blog is for educational purposes only. The information we offer does not constitute investment advice. Please always do your own research before investing. Any views expressed in this blog and by BOTS do not constitute a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), portfolio of cryptocurrencies, transaction, or investment strategy is suitable for any specific person. 

There is no such thing as risk-free trading. It is possible to lose (part of) your stake.