In this article we focus on, how to start profitable crypto trading as a beginner in EU or USA.
There are a few things you should understand before you start trading crypto. Also, it is important to find a good trading platform that is operating in your jurisdiction.
Here, we cover
- How to find a crypto trading platform?
- Different trading instruments and products
- What fees are associated with crypto trading?
- What is a taxable event?
- Automate your crypto trading
How to find a crypto trading platform?
In the table below, we have listed the best crypto trading platform. Some are available in the US while some are not.
We think the the most important things to consider are
- Is the crypto trading platform available in your region?
- Does the crypto trading platform have your desirable coins listed?
- Are there good fiat deposit methods?
- Does the crypto trading platform charge low fees?
- Does the crypto trading platform have your requested feature or trading instrument?
*Bityard is not listed on Coingecko and its hard to see their trading volumes
**OKX allow US traders but they need to register via VPN
Different Crypto Trading Instruments and Products
There are several different crypto trading instruments and products. Here, you first need to understand the difference and thereafter select an instrument applicable to your trading model.
The most common trading instruments and products are
- Spot trading (Normal exchange of cryptocurrencies with no leverage)
- Margin Trading (Leverage Trading)
- Futures (Leverage Trading)
- Perpetuals (Leverage Trading)
What is Crypto Spot Trading?
Crypto spot trading is a the process of buying or selling cryptocurrencies at the given exchange price from the order book. This is the most common way to exchange fiat to crypto or exchange a crypto for another crypto for retail investors.
What is Crypto Margin Trading?
Crypto margin trading allows you to make spot purchases and sales of cryptocurrencies, using funds that may exceed the balance of your account.
When you are using funds that exceed the balance of your account you are lending and use leverage.
What is Crypto Futures Trading?
Crypto futures trading is a type of derivative trading product. Therefor, they are not traded on the spot market since they are another trading instrument.
Futures are trading contracts between two parties and involve an agreement to purchase or sell an underlying asset at a fixed price on a certain date in the future. In the case of bitcoin futures, the underlying asset would be bitcoin.
Two important thing to understand with futures is
- They are often traded with high leverage which means you have to pay interest on the borrowed funds
- They are not traded at the spot price. Futures are a different product and is traded on expectations on what the price will be on the date the future expire
What is Crypto Perpetuals Trading?
Crypto perpetual futures are futures contract that do not have an expiry date.
In theory, you can hold the positions forever.
Perpetual contracts bring the idea of funding rates(interest on the lending/leverage amount) which can be paid either on a pre-set schedule by the exchange (Hourly, every 4 hour or every 8 hour are common intervals).
What Fees are associated with crypto trading?
Of course, you must understand what fees are associated with your trading before you start trading. There are different fees charged for different products.
- Spot trading – Trading commission(maker and taker fee), spread
- Margin Trading – Trading commission, spread, interest on open leverage
- Futures – Trading commission, spread, interest on open leverage
- Perpetuals – Trading commission, spread, interest on open leverage
Crypto Spot Trading Fees
Crypto spot trading fee is the trading commission charged by the crypto exchange to facilitate the service for you. There are a few concepts and terms you should know to fully understand crypto spot trading fees.
- Maker and Taker fee. There are different fees if you are a market maker or a market taker.
- 30 day average trading volume. Your trading fee is dependent on your trading volume the last 30 days on most exchanges (If your trading volume is high, you pay lower fees)
- Native coin balance (Kucoin and Binance). For Kucoin and Binance you can reduce your trading fees by holding their native coin. The more you hold, the lower trading fees you can pay.
- Referral code rebate (Kucoin, Binance, OKX, BitYard). If you use our referral code for these exchanges you can get -20% on spot trading fees.
Crypto Margin Trading Fees
Crypto margin fees are a bit different from crypto spot trading fees. Here, you also pay margin borrowing fees which is interest on your borrowed margin. In addition, some exchanges charge extra fees in addition to the spot trading fee. One example is Kraken.
Crypto Futures Trading Fees
Crypto futures trading fees are completely different from crypto spot trading fees and crypto margin fees.
Crypto futures are also a different product which makes it natural to charge a different fee.
Crypto Perpetuals Trading Fees
Crypto perpetual trading fees are the same as crypto futures trading fees since the products are very similar.
What is a crypto trading taxable event?
It is important to understand what a taxable event is since this can impact your net result significant.
While a taxable event is defined different for different jurisdiction the following statements can be used as a general benchmark
Crypto taxable events are
- Selling a cryptocurrency
- Trading or exchange a cryptocurrency
- Buy goods or services for a cryptocurrency
Once you close a trade, you create a taxable event. If the trade is profitable you own taxes and if the trade is non-profitable you might be able to deduct on your taxes.
We strongly recommend you to use a crypto tax software for crypto trading. Here, you can follow your tax obligations since they are tracking your trading in real time via an API.
Automate your crypto trading with a crypto trading bot
If you are an experienced trader and you are trading with certain predetermined rules, you probably want to use a crypto trading bot. Crypto trading bots are perfect for people that are already trading with certain rules and preset stop loss criteria.
However, it´s important to note that you can´t you buy a crypto trading bot and install it and hope to make profit for the rest of your life. The crypto market, as all markets, is dynamic and a crypto trading bot needs maintenance and adjustments to be profitable over time.