Do you want to start trading crypto?
And, why not, as a lot of beginners who learned the art of crypto trading are becoming rich. And, at the same time, there are beginner traders, who lose their lives long earnings in crypto trading.
The difference between winners and losers is, winners, know what they are doing, and they follow the wisdom of risk management. Whereas losers are mostly, coming with gambling mentality, and they let emotions like greed, fear takes over their best self.
In this guide to trading crypto, I will help you learn the way of winners, and riches.
Let’s learn the basics to ensure you don’t make the mistakes that others make. And, make great wealth from crypto trading as well.
Before everything else,
Let me congratulate you if you have decided to start trading cryptocurrencies. It is an era of new beginning, and you are perhaps one of the first few in your social group to be thinking out of the box.
It definitely comes with the risk of the unknown, but if one thing history has taught us, the wealth and power come to those who take bigger risks.
Keeping my philosophy behind, and let me help you get on-board into the world of crypto trading.
Disclaimer: Cryptocurrency trading is highly risky and volatile. Cryptocurrency markets are largely unregulated. This guide does not constitute investment advice. The author is not responsible for any trading losses incurred. Trade at your own risk and invest responsibly based on your financial situation. Follow proper risk-management to limit your losses.
- What are the types of crypto trading?
- What is the difference between Trading Vs. Investing?
- What you need before you start trading cryptocurrencies?
- How to Start trading cryptocurrencies:
- Important things to know about crypto trading:
- What are the Risks of crypto trading?
What are the types of crypto trading?
There are two major types of crypto trading:
1. Fiat to crypto:
In this type, fiat (USD, GBP, SGD, INR) is the base currency, and you trade it against cryptocurrencies like Bitcoin, Ethereum and others. The goal here is to grow your fiat money and keep booking the profit on a regular basis.
In the further section of this guide, I have shared the example of fiat to crypto trading.
2. Crypto to crypto trading: (Altcoin trading)
This is by far the least understood, and most profitable form of crypto trading. In this type, you use crypto as a base, and trade against other cryptocurrencies (altcoins) to grow the base coin. For example, you start with 0.1 BTC and trade it against other coins such as ETH, BNB to grow your BTC holding from 0.1.
This is also popularly known as altcoin trading. At the time of the bull market, this is one of the best ways to increase your Bitcoin holding.
A lot of beginners stick with Fiat to crypto trading, as it seems easy and familiar. However, another league who is using crypto to crypto trading, makes a significant profit over time.
What is the difference between Trading Vs. Investing?
Another important thing to know at this stage is, do you want to be a crypto day trader or a silent crypto investor. This decision depends upon a lot of factors such as:
- Your existing profession?
- Your risk tacking appetite
- Your trading style
- Your long term emotional state
- How long you have been following the crypto market
The last two are most critical, and an important deciding factor.
However, with time and practice, you can learn emotion and behavioral management, which is the key to ace in trading cryptocurrencies. I will be sharing a bit of pointer around this in the further section.
A lot of people who got into cryptocurrency in the early days, now enjoy a mix of investing and trading. The reason for the same is the wild volatility of crypto prices, which brings a great opportunity for someone to grow their crypto holdings with a strategy.
Short term trading
Short term trading is buying a cryptocurrency for a short time span, such as days, weeks or months for making a profit. A lot of people get into day trading, where they buy and sell crypto on the same day or a couple of days.
Do note, in short-term trading (a.k.a. day trading), you will be winning some days, and you will be losing some days. Stop loss is going to be your best risk management strategy, to ensure you don’t end up losing a large portion. However, if you are coming from stock trading background, the typical stop loss logic will not apply to crypto trading, due to high volatility.
A lot of users prefer to invest over trade. Since you are new, you should know about the popular crypto terminology called HODL. It means “Hold on to your dear life”. After buying crypto like Bitcoin, you simply hold it for a significant long time (years), and then sell it for a significant profit.
This is recommended for those who believe particular cryptocurrencies like Bitcoin, Ethereum and others are going to the moon, and their investment will grow multiple folds.
The advantages of long term trading are, you are immune to short term volatility, and you don’t need to follow the trading chart on a regular basis. Rather, you can simply look at the fundamentals to plan your trading strategy. This is suitable for only blue-chip coins like Bitcoin, Ethereum, Binance coin to name a few.
Now, let’s look at the ways by which you could start trading cryptocurrencies:
What you need before you start trading cryptocurrencies?
To get started, you need the following things:
There are a few popular ways to fund your crypto trading account:
- Stable coins
- Fiat like USD, GBP, AUD, INR, AED
The basic idea here is to buy Bitcoin, from your local exchanges, and then transfer the Bitcoin to these any crypto trading platforms.
You could decide a number of funds you would like to put in for crypto trading. As shared by many wise crypto traders, you should put only that money into trading, that you are ok to lose.
2. A Cryptocurrency trading website:
You need a crypto exchange that offers high liquidity and sophisticated tools for trading cryptos. Since you need to buy Bitcoin or other cryptos to get started, it should offer an option to let you buy crypto from fiat.
It supports the following trading types:
- Spot trading
- Margin trading
- Arbitrage trading
- Futures trading
- Copy trading
- Automated bot trading
It also serves as a bank, as you can earn interest on ideal funds. You can learn more about it in our Binance review guide.
3. Technical analysis:
Now, this is a skill that you could develop as you move ahead in crypto trading. However, having a basic understanding of how to see charts, technical indicators such as RSI, MACD, Bollinger bands will help you a lot in the days to come.
Learning about charting, and technical indicators do not take a lot of time, and with regular practice, you can hone your skills. Most of these trading websites offer integrated technical analysis chart.
You could also use something like Tradingview for checking the TA chart.
4. Risk management:
When trading crypto or any other asset class, the biggest thing you need to manage is the risk. A lot of smart people end up losing all their money in trading because they get overconfident by not following the basic risk management principle. Do remember, you will not win all the trades you take, and with proper risk management, your losses are controlled and you are never out of the market.
Note for the advanced users: If you are coming from a traditional stock trading background, you may be surprised by the wild swing of crypto price movements. So the traditional hourly or daily resistance and support level, may not hold true here. You can consider adding an indicator called “ATR” in Tradingview to account for crypto volatility when deciding your stop loss.
Learn about Risk-reward ratio here.
5. Paper trading:
Many of you will not follow this rule, but if you join the elite club of crypto traders who make more than 6 figures a year trading crypto, practice is how you will get there.
A nice alternative before you put real money into crypto trading is, by making use of Paper trading. In this, you practice crypto trading before you put your real money. This way, you can always check your trading skills, before you start putting your hard-earned money.
How to Start trading cryptocurrencies:
Well, if you have made it until here, you should give a nice pat on your back. You are not only motivated but also keen to make a difference in your financial life with crypto trading.
In this section, I will help you to get started with Fiat to crypto trading. Once you understand this, you could apply the same logic for crypto to crypto trading.
Alright, here we go:
Fund your account:
You can directly deposit USDT, BTC from any other website or wallet to Binance. You can also buy BTC on the Binance platform to fund the account. I believe you are aware of it, if not, just drop a comment and I will extend this section to include a video.
To fund, click on Wallet > Spot wallet, to see your Bitcoin wallet address
Alternatively, you can also click on “Buy cryptos” at the top left of Binance website, and select the amount for which you wish to buy Bitcoin or other altcoins.
How to trade cryptocurrencies:
Now, click on trade > Basic and select the market on which you want to trade.
For example, I wish to trade in USDT:BTC pair. I will simply select the USDT and BTC market (As shown in the screenshot below)
Note: Notice the yellow star next to BTC/USDT pair. You can select any pair, and marking the star to yellow will add them to the favorite tab.
Now, you are all set to start trading cryptocurrency. On the same trading terminal page, you could buy/sell any pair of your choice.
The price by default is the market price: The current traded price.
However, you can change it to any other price of your choice, and once Bitcoin (in this example) reach that price, your order will be fulfilled.
Important things to know about crypto trading:
1. Trading fees:
This is an important factor to consider to calculate crypto trading profits. Some exchanges are notoriously high when it comes to fees, and your big profit becomes small after deducting the fees. A lot of platform offers platform-specific coins, which gives you a rebate for paying your trading fees in the platform coin. For example, Binance has a platform coin called BNB, and it offers a 50% discount on trading fees when you pay using BNB coin.
2. Stable coins:
Another cool thing about crypto trading is, you can use stable coin like USDT, USDC to hold your funds in USD. These stable coins are pegged with USD, and they are the best way to trade virtually. Learn more about the best stablecoins here.
3. Profit calculation:
Here is another better way to think about this crypto profit calculation from trading:
If you investing lets say $10000 and this meant with current market value, you should be able to buy 1.1 BTC
Now, there are two ways to think forward:
- The total value of your asset should be more than $10000 after trading for months or any time horizon that you set.
- The total value of your asset should be more than $10000, and should enable you to buy more than 1.1 BTC, after trading for months or any time horizon that you set.. If not, then buying and holding BTC is a better option.
Start using a Crypto tax software from day one, as it would save you headache in the future. Two recommended tax software’s are:
What are the Risks of crypto trading?
Here are some well-known risks of crypto trading that you should be aware of:
- Some technologies will be gone: A lot of cryptocurrencies (Altcoins) will be gone in no-time. It has happened a lot of times, and you should be cautious about this. At times, some coin would look too promising, but under the hood, it is a bitcoin (A popular crypto term).
- Lack of Fundamental analysis: If you are looking to day trade as a profession, it’s a good idea to also learn about fundamental analysis of a coin. Even for the day trade, It is good to bet on a coin, that has a strong foundation. Else it is not uncommon to see a coin losing more than 70% of its value in a matter of time.
- Lack of volume: You want to ensure that the crypto you trading on, has significant volume. Else, you may face liquidation risks.
- Technology savvy: If you are tech-savvy, it will help you grow. However, if you are not, learning about security best practices, hardware wallets, and 2FA would help you build a career in the cryptocurrency market.
- Prevent yourself from a scam: Like it or not, the cryptocurrency market like any other financial market is full of scammers. The worse here is, cryptocurrency is still highly unregulated, and an unconscious trader could fall for some well-known crypto scams. You should put extra caution to groups that provide crypto buy/sell signals. A lot of them are nothing but a dump/pump mechanism, and you put yourself into great risk with such scam groups. A lot of them would also ask for a fee to let you join the group (offering great promises), and you should refrain from such groups.
Here are a few popular FAQ’s related to Crypto trading:
⭐️How are cryptocurrencies traded
⭐️How safe is cryptocurrency trading??
Cryptocurrency trading falls in high risk, high reward category. As cryptocurrency exchanges are not yet regulated as they should be, there are a lot of risks involved. One thumb rule of crypto trading is, don’t keep a lot of funds on an exchange. Another rule is, use a quality platform like Binance or Bybit for trading.
⭐️Does cryptocurrency have trading hours?
Cryptocurrency trading is available 24 hours a day, 7 days a week.
Now, you should be able to begin crypto trading following this tutorial. In the future, I will extend this guide with more videos, and anecdotes to help you master trading cryptos. For now, if you have any questions, feel free to ask me in the comment section below.
For further reading: