How to Trade Cryptocurrencies: Beginner's Guide 2024

Want to jump straight to how to trade cryptocurrency? You can trade crypto on Plus500, eToro ($10 bonus), Robinhood, Coinbase and Uphold!

If you have followed the news over the past few years, you have inevitably come across cryptocurrency at some point or another. This relatively new asset has made waves in several industries, leading many to make large profits. Additionally, some believe that the cryptocurrency industry is just getting started. If this is the case, there is potential for even more growth and returns on investments. Let’s take a look at how you can start investing in crypto today.

How to Trade Cryptocurrency Step By Step

The world of digital finance is changing, and trading cryptocurrency has become an attractive investment option for many. This guide will outline the basic steps to help you start trading cryptocurrencies successfully and with confidence.

Step 1: Open a Cryptocurrency Brokerage Account

The first step in owning crypto is to create an account on a crypto brokerage. These are sites that work similarly to stock brokerages but specialize in crypto. eToro, Coinbase, Kraken, and WeBull are some of the best sites for this purpose.

With a brokerage selected, you can sign up using an email and password. The exchange will then likely ask for some personal information, such as your Social Security number, driver’s license, etc. 

Step 2: Fund Your Account

Once you’ve signed up with a crypto brokerage, you’ll need to connect your bank account. Most crypto brokerages offer bank funding through debit cards and wire transfers. ACH deposit (linked bank account transfer) is typically your cheapest option to fund your account, and it’s free on most platforms.

Step 3: Choose a Strategy

Before you start making trades, it is important to have a set trading strategy so that you have a greater chance of profiting. For beginners, you can purchase a trading course or find other introductory trading resources on the web.

There are also a handful of day trading strategies that traders can use to make their trade ideas that can be personalized to their own goals and risk tolerances.

Step 4: Consider Automated Crypto Trading

When you seek out a crypto trading strategy, you might try automated crypto trading. Trading bots enact a strategy that is intended to give you the best results given your investment goals. Because automated trading can provide you with a conservative, neutral, or aggressive method, you can make money quickly, hold your coins, or diversify your portfolio.

You might also consider actively trading cryptocurrency on some platforms while using automated trading with others.

Step 5: Make Your Purchase

With a selected strategy and a funded account, you can begin allocating your funds into different tokens. To simply buy a token, you can search for it on the site, select the “Buy” button, and enter the amount to purchase. 

Additionally, with tokens in your portfolio, you can store them in a variety of places. You can keep them on the exchange, but a wallet is likely a safer choice. There are software wallets, such as Coinbase Wallet, that store the private keys needed to send crypto online and give you full discretion over your tokens. Hardware wallets, such as Ledger, are even safer, storing the private keys in a physical device that must verify all transactions. 

Compare Cryptocurrency Brokers & Exchanges

With tons of crypto brokers to choose from, it can be a bit overwhelming to single in on one. However, eToro and Coinbase have set themselves apart from the competition in terms of ease of use, security, and low fees. 

What is Cryptocurrency and How Does It Work?

Cryptocurrency uses blockchain technology to allow for peer-to-peer (P2P) transactions. Blockchain is a ledger that stores information on all transactions and is publicly viewable. The ledger is immutable and decentralized, meaning that it cannot be altered, and it is not owned by any single person or entity. This creates numerous benefits for the users of crypto:

• There are oftentimes smaller fees on transactions
• More security and less risk of hacks
• Coded token supply allows for stability
• Faster transaction speeds
• Accessibility for those without access to traditional banking
• Privacy of transactions and holdings

These are just some of the benefits that arise from a decentralized and immutable ledger. However, within crypto, many different types of tokens serve different purposes. For example, Bitcoin is seen as a store of value due to its capped supply, while ethereum is more of a means to access other projects on Web3. While there are tons of uses for crypto, they all still rely on the basic building blocks of blockchain. 

What is Crypto Trading? Why Is It Different From Stock Trading?

Crypto trading refers to the buying and selling of cryptocurrencies, such as Bitcoin, ethereum, or Ripple, on various cryptocurrency exchanges. Traders aim to profit from the price movements of these digital assets by analyzing market trends, patterns, and news events. It differs from stock trading in that there are fewer regulations surrounding trading, more assets available to invest in, and it is open 24/7.

Here are some popular crypto trading strategies that traders can consider implementing:

Day Trading

This involved buying and selling tokens within the same day to capitalize on intraday price movements. This usually requires trades to make quick decisions and search for opportunities in the market. 

HODLing

A term created by the crypto community, HODL stands for “hold on for dear life,” a strategy in which traders buy a token and hold it throughout price fluctuations. 

Swing Trading

Similar to day trading, swing trading is when investors buy and sell tokens for days or weeks to take advantage of larger market sentiment. 

How To Analyze The Crypto Market?

Crypto markets are extremely volatile and can move very quickly. Because of this, it is very important to stay on top of all the news and updates that come from the tokens you are trading. There are a variety of ways to do this, including tracking sentiment on X and other social media, reading crypto news each day, talking with other traders on social platforms such as eToro, etc. These are places where you can potentially find news that will move the markets before it becomes priced in. 

While there are tons of ways to stay up to date, Benzinga offers a ton of resources to help retail traders succeed in fast-paced markets. 

How to Select Investments When Trading Crypto

Here are some of the top things to look for when investing in crypto:

Risk Tolerance

Some cryptocurrencies can be riskier than others, so it is important to understand how volatile a specific token is before investing. 

Security

Some projects place a strong emphasis on security. This is usually a good thing, as it points to a potential for increased adoption in the future. 

Diversification

Creating a diverse portfolio can help mitigate risks from any single token and potentially increase returns. You can create a diverse portfolio by investing in many different tokens across many different aspects of crypto. 

Liquidity

It is important to be able to exit a trade when you would like to. This requires a liquid token, meaning that there are strong trading volumes to help buyers and sellers meet on a price. This can help you get higher profits and smaller losses. 

Roadmap

Many projects have a road map that details the plans for the future. Analyzing this road map can help you get a sense of what the project has in mind and what an investment could look like. 

Pros and Cons of Investing in Cryptocurrencies

Cryptocurrencies have attracted a lot of interest recently, as many view them as a new type of asset that comes with both potential benefits and risks. It is important to consider the advantages and disadvantages before entering this unpredictable market to make informed choices regarding your investment approach.

Pros:

Potential for High Returns

Cryptocurrencies can increase in value significantly, and some investors have seen considerable profits in a short time. This possibility of high returns draws many investors interested in increasing their wealth.

Diversification of Investment Portfolio

Investing in cryptocurrencies gives people the opportunity to broaden their investment portfolios beyond just traditional assets like stocks and bonds, which can help manage risk and potentially enhance overall returns.

Accessibility and Liquidity

Cryptocurrencies are available for buying and selling around the clock on different exchanges, which offers good liquidity and easy access for investors, allowing individuals to trade and react to market fluctuations.

Blockchain Technology Advantages

Investing in cryptocurrencies allows people to learn about blockchain technology, which has various applications in different sectors. Gaining knowledge of this technology can provide insights into new solutions and investment possibilities beyond just cryptocurrencies.

Decentralization and Autonomy

Several cryptocurrencies function through decentralized networks, allowing users greater control over their funds without depending solely in traditional financial institutions. This independence may attract individuals who value privacy and self-sufficiency in their financial dealings.

Cons:

Volatility and Price Fluctuations

Cryptocurrencies exhibit high volatility, with prices capable of changing rapidly, potentially resulting in considerable financial losses for unprepared investors.

Lack of Regulation

The cryptocurrency market has limited regulation, which may increase the risk of fraud and scams for investors. Compared to traditional financial markets, oversight is reduced, posing challenges for inexperienced investors.

Security Risks

Digital wallets store cryptocurrencies, but they can be at risk of hacking. If a wallet is breached, investors may lose their whole investment and have limited options for recovering the lost funds.

Complexity and Understanding

The technology behind cryptocurrencies, such as blockchain, can be complicated and hard to grasp for many investors. This complexity may result in misguided investment choices and confusion about how cryptocurrencies work.

Potential for Regulatory Changes

Governments worldwide are evaluating ways to regulate cryptocurrencies, and regulatory changes could greatly affect the value and usability of various cryptocurrencies, leading to uncertainty for investors.

Frequently Asked Questions