This guide about cryptocurrency trading for beginners will take you from knowing nothing about crypto trading to being able to start trading your first Bitcoin or altcoin.
- Crypto Trading Platform for Beginners
- Cryptocurrency trading strategies for beginners
- Cryptocurrency trading portfolio software tools
- Crypto trading course for beginners and educational sources
- Crypto market and analysis for beginners
- Crypto trading risk management
No Financial Advice, Information only. Do your own research.
Cryptocurrencies are high-risk investments.
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1. Crypto Trading Platforms For Beginners
Crypto trading platforms are an online business that provides services for cryptocurrencies.
Such services are
- Trading and exchange products (Fiat deposits, crypto exchange, margin trading, derivative trading)
- Earn products (interest accounts, staking, liquidity mining)
- Additional services can be NFT marketplace, Launchpads, Crypto loans, P2P trading
Crypto Trading Instruments
All crypto trading platforms offer similar crypto trading instruments and present these categories
- Spot trading
- Margin trading
- Futures trading
- Perpetual Trading
Spot trading is the normal 1:1 exchange for fiat to crypto or crypto to crypto exchange. Spot market is the most common market to start trading for beginners.
Crypto Trading Fees and Costs
All the different crypto trading instrument charges trading fees. Trading fees can be complicated to understand and understand in the beginning, especially when you trade the derivative market with leverage.
For the spot market, the trading fees are relatively easy to understand. See our article about crypto exchanges with the lowest trading fees on the spot market.
Crypto Trading Platform Volume
Crypto trading platform volume is important to understand and take into account.
The crypto trading volume is a good measurement on
- How popular the crypto exchange is
- If the trading volume is good it often means that the spread and slippage are good as well.
Read more about the crypto exchange with the most trading volume in the derivative and spot market.
Crypto Trading Platform Security
All platforms dealing with any financial assets need to fulfill a certain level of security since they deal with their clients’ money.
Therefore, most of the best platforms enforce the multi-level checks to keep their users’ funds safe on the user’s side of the system:
- 2FA (two-factor authentification)
- Multi signatures
- Whitelisting IP
- Whitelisting crypto-addresses
- Email verification
- Daily limit withdrawal
- ID verification
On the back end, regarding the safety of funds already stored on the platform, some companies have cold storage where they keep cryptocurrencies that are not being used for trading. Cold storage is a crypto-security system that is not connected to the internet, contrary to a hot wallet.
Still, history has taught us that centralized trading systems are vulnerable to hacker attacks. As a result, many platforms have fallen victim to various malicious actions, losing their clients’ funds in the process.
Some of the most notable attacks were:
- 2014: MtGox (850,000 BTC)
- 2015: Bitstamp (19,000 BTC)
- 2016: Bitfinex (120,000 BTC)
- 2017: Nicehash (4,000 BTC)
- 2018: Coincheck (523,000,000 NEM)
Taking everything into account, it is always advisable not to keep your funds on an online platform but in cryptocurrency wallets, transferring them online only for trading purposes.
There are several kinds of crypto wallets available:
- Cold storage
Cold storage is a cryptocurrency hardware wallet mostly coming from a specialized USB stick that holds your private keys offline.
- Desktop wallets
These are the most common wallets that every cryptocurrency has for users to hold their assets. Individual downloads the wallet and gets the address to which he can deposit and keep his coins. It is important to always back it up.
- Mobile wallets
As the name states, these are wallets downloadable on your mobile devices, but otherwise, they don’t differentiate much from their desktop counterparts.
- Paper wallets
This can be considered an “old school” but also one of the safest ways to store cryptocurrencies. The asset owner gets his keys and can print them (or write them down) on a piece of paper. Keys are not stored or in any other way connected to the internet but only provide access to users’ funds held on the blockchain.
Read more on this topic in our article about what crypto trading sites are safe to use.
2. Crypto Trading for Beginners - Strategies
Many cryptocurrency trading segments we covered in this article, such as portfolio allocation or finding the right kind of wallet, may highly depend on the strategy you have chosen to use in the market.
For starters, let’s name the most used strategies and briefly explain their fundamentals:
Crypto Day Trading
When a trader does day trading, he aims to utilize the daily movement of the price of a cryptocurrency. However, this strategy can become a career as it can take up even more than 8 hours of your time since you have to be present in the market to make quick decisions to lock on those gains or avoid unnecessary losses. Read more about the best crypto exchanges for a day trading strategy.
Crypto Arbitrage Trading
Arbitrage is a strategy where traders utilize the price difference of a single asset between various exchanges or the disparity between more than two coins on a single exchange to make a profit. Since profits in arbitrage tend to be low in percentage, traders have to wield more than average funds for arbitrage to be worth the time spent doing it.
Crypto HODL (Buy and Hold)
The previously mentioned HODLing is when an investor does his fundamental analysis, finds the cryptocurrency with what he thinks is the one with the most long-term potential, buys it, and keeps a hold of it for a more extended period (usually more than a year) or until it reaches the pre-determined price. HODL doesn’t take up much of your time apart from the initial analysis.
Crypto Swing Trading
Swing trading aims to utilize swings in the highly volatile cryptocurrency market to benefit the trader. Contrary to day trading, in swing trading, funds stay invested or ready for an investment longer than one trading session while a trader is looking to spot a reversal pattern to exit or enter a trade.
Crypto Trend Trading
As the name applies, trend trading demands only one thing of the investor – to know how to recognize mid to long-term trends. Then, once the trend is spotted early in the making due to significant market events or political decisions, a trader jumps on the bandwagon and uses the momentum of the price movement for his benefit. Trend trading is more straightforward and rudimentary than day and swing trading but still requires more expertise than HODLing.
Scalping, except when bots do it, requires a lot of time and energy since a trader implementing this strategy focuses on small trades but numerous trades to add up profits that will, at the end of the day, be enough to satisfy his needs. Because of its high volatility, the cryptocurrency market is ideal for scalping since the price tends to move in both directions, sometimes a few times per day. Read more about the best crypto exchange for a scalping strategy.
3. Crypto Tracking and Reporting Software
When you invest in cryptocurrencies, it is always advisable to use software to keep track of your investments, returns, and tax liabilities.
Crypto Trading Bots Software
Crypto trading bots utilize their one significant advantage to benefit their owners – they don’t have to sleep. They can be present in the market 24/7, trading for their user, and, depending on how good the algorithm was set up, score higher o lower gains.
There are two basic kinds of crypto trading bots:
Arbitrage trading bots
Automatically use the previously mentioned price differences and make needed transactions.
Market making bots
Placing buys and sell orders on a single exchange, making a profit off the price movement.
There are many versions of crypto trading bots claiming to be profitable, but some of the most established and used are:
We can find out more about crypto bots in our article about the best crypto trading bots.
Crypto Trading Tax Software
Cryptocurrencies, back in the day, used to be non-taxable as governments worldwide haven’t yet devised a taxation policy towards these new, arising assets. However, lately, most countries are taxing cryptocurrency trading gains.
Just like it is a bit difficult to fill out your tax application, it would be even more awkward to keep track of everything you do in the market and file an accurate tax calculation yourself. That is when crypto trading tax software solutions can be critical.
Cryptocurrency trading tax software can be downloaded separately, or it is already a part of your portfolio tracker (like with Cointracking.info). It follows your market actions and calculates the realistic tax rate in real-time, making it possible for you to get the exact taxable amount and the speed.
Some of the best such software solutions are:
If you want to learn more about them, please refer to our article covering how to pay crypto tax in depth.
Crypto Trading Portfolio Tracking Software
Tracking a portfolio is also essential for those who make a lot of transactions across various platforms, as things tend to get more complicated that way.
Creating a portfolio in some portfolio tracking tool is always a good idea because it is automated to show the overall value of your funds and the value of all your investments compared to their value at the time you acquired them. Good portfolio trackers also have a notification system, which, much like an alarm clock, tells you if your cryptocurrency has reached the desired price or fallen below some valuation.
All these functions are beneficial for managing your investments and making decisions.
Let’s name a few of the best options for tracking your portfolio:
A desktop and mobile portfolio tracker with trading fees, multi-portfolio options, and a wide range of tokens and exchanges.
By far the most popular mobile portfolio tracker. Has multiple-portfolio management options, outstanding exchange, and token coverage with excellent charting.
One of the few desktops and mobile portfolio trackers with advanced tax-report possibility. However, the mobile version is limited, so desktop access is a must-have.
Coinmanager is a portfolio tracker with, by far, the best charting available in the market. Also, it has an integrated arbitrage detection function and, most importantly, an in-app trading function.
Simple to use App allows users to import Bitcoin, ERC20, Litecoin, and Dogecoin wallets. Cointracker also has a good tax calculation option but falls short on charting and exchange support.
Read more about the best crypto day trading tools and portfolio management tools.
4. Crypto trading course for beginners and educational sources
To become a profitable cryptocurrency trader, you must know how to implement various tactics and techniques while trading. Knowledge indeed gained trading some other assets may come in handy. Still, since the nature of cryptocurrencies is so unique, specific instruments and their usage has to be tweaked to be functional in the crypto market.
From the very beginning, you will be better if you make an educated decision about which trading strategy you will use. After that, you will have to learn either technical or fundamental analysis or even both to succeed. Furthermore, even if you acquire a trading bot, you will need to program it correctly to score gains.
Therefore, apart from articles like this one, you will need many more sources of knowledge to enhance your skills. Information can be found online, in various webinars, eBooks, quizzes, videos, or even boot camps.
Cryptocointrade.com has already brought you an article about crypto trading courses and education which can guide you in choosing your learning platform, but let us name a few valuable sources where you can search for knowledge online:
- Crypto Trade Academy
- Trading Heroes
In the end, remember, it is never about what was being said but who is saying it. After receiving information, research before investing because that can save your portfolio. Look for relevant and verified sources, and don’t fail to double-check those too.
5. Crypto market and analysis for beginners
Crypto Trading for Beginners – Technical Analysis
Our guide, crypto trading for beginners, presents a short introduction to technical analysis focused on crypto. Technical analysis (TA) is tool traders use to discover market trends and reversals through a series of technical indicators and oscillators.
Every charting tool offers various technical calculations represented visually, either on the chart itself or underneath it.
There is what seems like an infinite number of tools you may use for TA. Still, to be as accurate in your predictions as possible, you will have to devise your strategy, implement those indicators you know how to utilize best, and stick to what you are comfortable with.
One more thing to have in mind when implementing a strategy based on TA is that while it can give you an upper hand in a day or swing trading, TA may not provide as much when you are looking to keep hold of your crypto for the long run (HODL).
However, if you want to know much more about crypto technical analysis, we suggest you read our article, which dives deep into that topic and thoroughly discusses it.
Crypto Trading for Beginners – Fundamental Analysis
As stated, the TA will not do much good for HODLers. So, what to hang on to if you want to decide on which crypto to keep for a more extended period?
The answer is fundamental analysis.
Fundamental analysis is a package of information regarding the basic knowledge of the crypto asset. This information covers a lot of fundamentals, such as the circulating and maximum supply, the development and founders team pedigree, the underlying technology, possible competition, the upcoming development milestones, and even the number of exchanges a coin is listed by.
Fundamental analysis is what crypto traders usually refer to as DYOR (do your research) because we are all different individuals who tend to think differently about the same things.
For example, while your friend can think all the best about Ethereum because it was the first innovative contract platform allowing the issuance of crypto tokens to the masses, you may realize that there are some serious problems with Ethereum’s scalability in comparison with its competition, making it a less desirable asset in the future.
While it is true that fundamental crypto analysis may vary from person to person, it may be good for you to educate yourself more by reading our article covering that topic in-depth.
Contrary to other kinds of assets traders may own, whose value is primarily denominated in US dollars, Chinese yuan, Japanese Yen, etc., in cryptocurrency trading, things aren’t so simple.
As stated in this article, the vast majority of coins are paired with BTC as a pivotal point of crypto exchanges, so the most trading volume in the market comes from crypto to crypto pairs with Bitcoin.
Therefore, when investing in an altcoin that isn’t paired with any fiat currency or stablecoin (cryptocurrency whose price correlates with the cost of some fiat currency at a 1:1 rate), one must also follow the price of Bitcoin. This is important because if our coin’s price is rising compared to BTC and the cost is declining in comparison to USD, you may find yourself losing value in the US dollar.
However, most top cryptocurrencies, such as Ethereum (ETH), Litecoin (LTC), and Ripple (XRP), are paired with either stablecoin or fiat option, making it more simple to keep track of the value of your investment.
Crypto Trading Hours
Unlike the stock market, which has its working hours, the cryptocurrency market never sleeps, making it a fast-moving, living organism susceptible to regional conditions across the globe.
A trader can’t keep track of the market 24/7, so one should be able to adapt to these unique conditions where the time difference between traders in various parts of the world using the same platforms plays a huge role in the overall price movement.
Note that a trader can be everpresent in the market by using a cryptocurrency trading bot, which you can read in the coming paragraphs.
6. Crypto Trading Risk Management For Beginners
Regarding portfolio allocation in cryptocurrency trading, many theories may or may not suit your needs best.
Usually, the most common practice is investing approximately 50% of your portfolio in Bitcoin (BTC), as it is the most potent cryptocurrency and asset traders invest the most.
Otherwise, it is also a good idea to have your portfolio balanced and not “put all your eggs into one basket” because as much as you believe in the success of a single crypto-related project, it may fall short of your expectations and produce losses. That is when other coins you have invested in may show up to re-balance your losses. Therefore, it is advisable to diversify that additional 50% of your portfolio according to the amount of risk involved, leaving approximately 5% for a game of “high stakes” risk trading.
Still, the cryptocurrency market consists of assets that, in most cases, “follow the leader,” meaning that others tend to follow once Bitcoin moves. Nevertheless, this rule has constant exceptions, and one has to be prepared when they occur. History tends to repeat itself. However, sometimes history surprises us and takes a turn into the unknown, but it most definitely can give you a hint of some possible occurrences.
The other thing you should be aware of when portfolio allocation concerns are your trading style and strategy.
If you decide that day trading suits your needs best, the idea is to keep your funds in fiat or a stablecoin to be able to use a possible sudden dip and score gains out of short-term volatility. On the other hand, HODLing funds in a stablecoin will not produce any profits, so that is when a proper, educated portfolio diversification comes into play.
If you want to know more about how to allocate your portfolio following your trading preferences, you will be able to find out in the “trading strategies” paragraph.
Read more about crypto trading risk management.