The popularity of cryptocurrencies made many people take to crypto trading. Several crypto trading platforms exist, and crypto traders use various trading strategies.
Crypto trading: What it is
Crypto trading refers to buying and selling cryptocurrencies. Traders buy cryptocurrencies in exchange for fiat currencies. They sell crypto to get fiat currencies, alternatively, they might trade one crypto for another.
Crypto traders use crypto exchanges and brokerage platforms for trading. They use a wide range of trading strategies to maximize their profit. The crypto market is volatile, therefore, sudden profits and losses are common occurrences.
How to trade cryptocurrencies?
Crypto trading involves the following steps:
1. Open a cryptocurrency exchange account and fund it
Cryptocurrency exchanges allow you to trade cryptocurrencies. You need to open an account by providing the necessary personal information.
You need to link a bank account with it and fund the crypto exchange account. Debit cards and wire transfers are common ways to fund a crypto exchange account.
Many traders use centralized exchanges like Coinbase. Some traders prefer decentralized exchanges (DEXs) like Uniswap.
2. Buy a cryptocurrency wallet
You will need to store cryptocurrencies, therefore, you need a crypto wallet. There are custodial wallets, software wallets, hardware wallets, and paper wallets. You will have a public key and a private key.
Custodial wallets are managed by crypto exchanges. These and software wallets offer less security, however, they make crypto trading easier and quicker.
Hardware wallets are the most secure since you store your crypto offline. Paper wallets are secure if you don’t lose them.
Many crypto traders store a portion of their crypto assets in a wallet like the Coinbase wallet for trading. They might use a hardware wallet from Ledger to store the crypto assets that they want to hold for a long time.
3. Choose cryptocurrencies to invest in
There are thousands of cryptocurrencies. You can invest in leading cryptocurrencies like Bitcoin and Ether. They have large market caps, and their prices are relatively predictable. Many crypto traders invest mostly in these cryptocurrencies.
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Crypto traders also invest in lesser-known altcoins. They have smaller market caps, and they are less predictable.
4. Select crypto trading strategies
There are many crypto trading strategies to choose from. Crypto traders with experience in stock trading can also use stock trading strategies. The following are popular crypto trading strategies:
- Day trading;
- Range trading;
- High-frequency trading (HFT);
- Dollar-cost averaging;
- Building a balanced portfolio;
- Avoid getting influenced by hype;
- Taking trading calls based on primary research;
Automated crypto trading is increasingly popular. Crypto traders can use automated crypto trading platforms like Coinrule.
Some of the top crypto exchanges are Coinbase, eToro, Uphold, Crypto.com, Binance.US, Kraken, Gemini, KuCoin, Bitstamp, Bittrex, bitFlyer, BitMart, BlockFi, and FTX.US.
Some of the top crypto wallets are Coinbase wallet, Electrum, Mycelium, Ledger Nano X, Exodus, and Crypto.com. Ledger Nano X is widely considered the best offline crypto wallet that provides excellent security to crypto traders.
At the time of writing, some of the top DEXs are Uniswap (v3), PancakeSwap (v2), Biswap, Uniswap (v2), Serum DEX, SpookySwap, SushiSwap, MM Finance, Curve Finance, and Astroport.