How to trade Crypto Currency online

Posted On June 12, 2023

With the rise of cryptocurrencies, online trading has become increasingly popular. Trading crypto currencies can be a rewarding venture, but it requires knowledge and careful decision-making. In this blog, I will provide a comprehensive guide on how to trade cryptocurrency online. Whether you’re a beginner looking to get started or someone with some experience seeking to refine your skills, this guide will walk you through the essential steps, from setting up a trading account to executing trades and managing risk.

So just what is “Cryptocurrency Trading”?

It’s a good question as it can leave many people scratching their heads feeling they should know what that means, but just aren’t entirely sure. In short, Cryptocurrency trading involves buying and selling digital assets with the aim of making a profit. It can difficult to get your head around the “digital asset” part as many people feel they need to be able to hold something that they buy. But in this Crypto world, everything we own remains in the digital world. Basically it’s a case of “look but don’t touch“.

Unlike traditional financial markets, crypto trading takes place on online platforms called exchanges. These exchanges allow users to trade (or exchange) various cryptocurrencies against one another or against fiat currencies, such as the US dollar or Euro. FYI if you’re not familiar with the term FIAT (no it has nothing to with cars) it’s simply your local currency from the country you reside in.

So how do I get started?

The first and pretty fundamental step is to set up a trading account. Setting up a trading account can be a little tricky for a beginner and it certainly was for me. Everything seems SO confusing, but trust me, like most things in life, the more you do it the more comfortable you become. I can break down this section into three distinct parts;

1. Research and Choose a Reliable Exchange: Start by researching and selecting a reputable cryptocurrency exchange that aligns with your requirements. Factors to consider include security features, available cryptocurrencies (strangely enough not all exchanges have the same Crypto currencies available, so you may need to shop around if there is a specific one you’re looking for), fees, and user experience. I’ve tried a few and personally find Coinbase to be excellent. I use my mobile for trading and Coinbase is very user-friendly.
2. Sign Up and Complete Verification: Create an account on the chosen exchange and undergo the necessary verification process, which may involve providing identification documents and personal information. I know this can scream SCAM and make you want to run a mile. It’s ok….this is part of the process and is essential to prevent fraud and money laundering.
3. Secure Your Account: Implement strong security measures, such as two-factor authentication (2FA) and unique, strong passwords, to safeguard your trading account against potential threats.

Show me the money

So now you’ve identified an exchange so next thing you’ll need to do is add some cold hard cash (Fiat) to your account.

Deposit Fiat or Crypto: Depending on the exchange, you can fund your account by depositing fiat currency (such as USD, GBP or EUR) or by transferring existing cryptocurrencies to the exchange’s wallet. Odds are you’ll want to add Fiat which you can do using either your bank account or credit card. Note that some bank prohibit payments to Crypto exchanges so you may find funding your account to be a little challenging, but hopefully not a show stopper.

Understand Trading Pairs: Cryptocurrencies are typically traded in pairs. For example, Bitcoin (BTC) can be paired with Ethereum (ETH). Currency pairs can present themselves as something very confusing, but they are actually quite easy to understand – once you know what you’re looking at.

If you see a pair such as BTC/ EUR this means that you are looking to BUY Bitcoin using Euros. The fist “pair” (in this case BTC) is called the “base currency“. The second “pair” (in this case EUR) is called the “quote currency“. So the crypto you are looking to buy is the first one in the pair and you’re looking to buy it using the second crypto (or often Fiat) in the pair.

Imagine someone travelling to Italy from USA. They want to convert from USD to EUR. So they would look to see what the exchange rate for EUR/ USD is as they are buying the first “pair” using the second “pair”. Same principal applies in Crypto. So in the image about, you would be looking to buy EUR using USD and at this point in time your 1EUR will get you $1.1302.

So in the crypto world you’ll see trading pairs such as BTC/ETH or ADA/LUNC and pretty much any combination you can think of. So if you see a trading pair that looks like BTC/ETH – £14,503 this means that you need £14,503 of ETH to buy one unit of BTC.

But a word of warning, because when you’re on a trading platform you’ll see a view that looks something like this image to the left.

You’ll notice the 5X or 10x in green. If you are new to Crypto and thinking “what does that mean?” then avoid this at all costs. This is something called Leverage and is VERY dangerous in amateur hands.

Leverage allows traders to borrow funds from a cryptocurrency exchange or platform to increase their trading position size. The “5x” indicates a leverage ratio of 5:1.

With 5x leverage, a trader can control a position that is five times larger than their actual account balance. This means that if they have £100 in their trading account, they can open a position worth up to £500. Leverage magnifies both profits and losses, so while it can potentially increase gains, it also carries higher risks. It is recommended for experienced traders who are familiar with the dynamics of the cryptocurrency market.

Understand the lingo

Crypto brings with it a world of fancy words that make people sound very clever indeed. But if you’re new to this world it can become pretty off-putting. So here’s a breakdown of some of the common terms you should get your head around. The list below relates more to day trading that to conventional trading where you buy and hold.

1. Market Orders: A market order allows you to buy or sell a cryptocurrency at the current market price. This type of order provides quick execution but may not guarantee a specific price as things are literally moving all the time (albeit very small movements, but movements non the less).
2. Limit Orders: A limit order enables you to specify the price at which you want to buy or sell a cryptocurrency. The order will only be executed if the market reaches your specified price.
3. Stop-Loss Orders: A stop-loss order helps manage risk by automatically selling a cryptocurrency when its price reaches a predetermined level, limiting potential losses and getting you “out”.
4. Take-Profit Orders: A take-profit order allows you to set a target price at which you want to sell a cryptocurrency to secure profits. When the market reaches your specified price, the order is executed. Note that if the price continues to rise you won’t reap the rewards of the higher price but that which you left the trade at.

Risk Management and Strategies

1. Start with a Demo Account: If you’re new to trading, consider practicing with a demo account to familiarize yourself with the platform and test different strategies without risking real funds.
2. Develop a Trading Plan: Establish a clear trading plan that includes your risk tolerance, investment goals, and entry and exit strategies. Stick to your plan and avoid making impulsive decisions based on emotions.
3. Manage Risk: Use proper risk management techniques, such as setting stop-loss orders, diversifying your portfolio, and not investing more than you can afford to lose.
4. Stay Informed: Stay updated on market news, cryptocurrency developments, and relevant events that may impact prices. Knowledge and awareness are crucial in making informed trading decisions. Personally I sign up to Coffee & Crypto which offers excellent daily updates.

I hate goodbyes

Trading cryptocurrency online can be an exciting and potentially profitable venture, but it requires a solid understanding of the market, careful decision-making, and diligent risk management. By following the steps outlined above and continuously educating yourself about the crypto market, you can begin your journey as a crypto trader with confidence. Remember, trading involves risks, and it’s important to start with a cautious and disciplined approach. With time, experience, and dedication, you can refine your skills and navigate the dynamic world of cryptocurrency trading successfully. If you are new to all this then check out my blog where I walk you through all there is to know about Cryptocurrency for Beginners.

I wish you the very best in your journey and if you ever want to seek some advice, just drop me a comment below and I guarantee I’ll get back to you.