What is cryptocurrency trading?
Looking for the
best cryptocurrency to invest in? Cryptocurrency trading is a type of financial trading that involves speculating an asset’s price movement against another fiat or cryptocurrency. This speculation can be based on many things including media coverage, researching into the coin, the addition of new investors, unveiling of a coin on a new exchange etc.
Any new information, release or coverage of a coin will trigger a positive or negative market response. It is down to the trader to determine if this action will have a short or long-term effect on the asset and buy, sell, or hold depending on their trading style.
Short-term trading focuses on the minute, hourly or daily volatility of a coin, where traders will aim to make profits off of short-term price swings. For a particularly aggressive day of crypto trading, you would expect some news within the crypto world to have been released. This news could include a new feature or soft fork being implemented, real-world media coverage or a large buy order from a notable investor.
The latest example of this would be Bitcoin’s price exploding through its all-time high just hours after Elon Musk invested $1.5 billion Bitcoin into Tesla. This trading style is suited to those who trade on a full-time basis, have easy access to media, can spot trends and are part of the crypto community. Execution of trades is critical, and your timing will be the difference between a good trade and a great trade.
Long-term trading focuses on the weekly, monthly or yearly development of a coin, where traders will aim to profit from the increased popularity and demand for a coin. Long-term traders select their assets based on research, current investors and coin road maps, searching tirelessly through ICO’s and start-ups in the hope of finding the next Bitcoin. This type of trading is ideal for those looking to remove the stress of trading, have the patience to wait for returns, and have extensive knowledge of the crypto world.
The market itself is still relatively young and full of great promise, particularly if we consider the rise of popular coins like Bitcoin, Litecoin & Ethereum. Unfortunately, there does still seem to be a great stigma around investing and trading cryptocurrencies, predominantly due to the number of scare-monger stories and scams out there.
If you understand how to trade currencies on the Foreign Exchange Market (Forex), then you will find this section seems a little familiar. Firstly, you will need to decide which cryptocurrency trading exchange you wish to trade on – don’t worry, we go into more detail on the best US crypto trading platforms later.
Once your platform has been chosen, you will need to get yourself signed up. This process generally involves filling in your name, address, email address, telephone number, creating a username and memorable password. Next, you will receive an email asking for confirmation of account creation, input the code the platform has supplied, and you should now be able to start the verification process.
Most exchanges ask for proof of identification to allow for a larger deposit and withdrawal limit, and some ask for identification to trade full stop. All platforms will expect to see a passport or driving license, followed by proof of residence, such as a credit card statement or rental agreement.
Once verification is complete, you may be asked to add another level of security to your account, also known as the two-factor authentication process. This process can be completed by syncing your phone to your account or downloading the ‘Google authenticator’ app. Both methods will supply you with a code every time you log in, make withdrawals, deposits and place any trades, confirming that you are in control of your funds at all times.
You can then look to deposit funds into your trading account. Whether you are sending crypto from your wallet or sending fiat from your bank account, the process is relatively self-explanatory.
Once the transaction has been confirmed, and funds are sat in your trading account, you are ready to do some cryptocurrency trading! Once you have decided on your USD crypto pairing and placed your buy/sell, limit, stop or market order, you can sit back (or on the edge of your seat) and wait until you are happy with your profits or you are kicked out of your trade.
Any profits from your trading experience can be used to trade in your preferred exchange or you can store assets as a long-term investment in your crypto wallet.
Those of you who want to get a little practice in first are in luck as most reputable
crypto brokers
will offer new users the chance to create a demo account. A demo account uses all the same features and functions as a normal account, without the risk of losing your funds. It’s a great place to start, as you can place trades live and get a feel for the crypto market. The only downside is any profit you may make isn’t yours to keep!
The importance of a crypto wallet – Our crypto trading reviews
Whether you are trading or
crypto mining, your wallet acts as a key storage point for your assets, allowing you to send and receive cryptocurrencies.
Unless you are looking to keep your crypto stored directly on a
cryptocurrency exchange, you will need to decide what type of wallet is best for your needs. A few key questions to ask yourself before opening a wallet are, do you need easy access to your funds? Are you planning on holding your assets or do you want to be able to buy the dip? What type of cryptocurrencies are supported by the wallet?
Ensuring you choose the right
crypto wallet
for your style of trading is key; the main wallet types are:
Hardware wallet
Hardware wallets can easily be mistaken, on looks alone, for a USB. Small and compact, these wallets have a starting price of around $60 and are deemed one of the more secure approaches to storing your crypto assets.
Desktop/Mobile wallet
Easy-to-use and involving no third party, your desktop wallet allows for speedy cryptocurrency trading, transfers, payments, and ensures privacy. Anti-Virus is required due to the nature of the internet and its genuine threats. A mobile wallet works in a very similar way; however, they use QR codes for any transactions.
Paper wallet
A paper wallet is a physically printed QR coded form wallet. The major flaw with a paper wallet is that you cannot send partial funds and so it cannot be reused.
When searching for your crypto wallet, you will come across the terms Hot and Cold. A hot wallet refers to a wallet that is connected to the internet, generally seen as less secure but more user friendly. You will find this is the top pick for daily traders. A cold wallet is stored offline, generally the preferred method of investors. Cold wallets are hack resistant, making them a perfect long-term storage device.
Editor’s Recommendation – The best crypto trading sites in the US
When looking at crypto exchanges, it is very easy to select a household name such as Coinbase, or eToro. Whilst these are great exchanges in their own right, we wanted to highlight some lesser-known platforms that tick all of the boxes mentioned above. Remember, you can always check out our in-depth reviews of each provider, too – such as our
eToro review.
Robinhood
Robinhood is a free-trading app that offers both web and mobile trading. The platform is purposely basic, allowing for new-investors to trade with ease. The exchange enables traders to buy and sell Bitcoin, Ethereum, Dogecoin and other cryptocurrencies commission-free. The process of opening an account will take you less than 10 minutes (providing you have your proof of identification at the ready).
SoFi
San Francisco-based SoFi boasts over 1 million users, despite only being available to US traders. The platform is specifically designed for long-term traders and investment purposes, using Coinbase to complete transactions for Bitcoin, Bitcoin Cash, Ethereum & Litecoin. The simplicity of buying, selling and holding assets is the key to SoFi’s popularity, to use their own phrasing, you really can “Invest with ease – no matter your experience level”. You can read our
SoFi review
for more in-depth information.
Tradestation
Known for its impressive desktop platform with over 270 trading indicators, Tradestation is a superb choice for serious investors. Tradeable crypto includes Bitcoin, Bitcoin Cash, Ripple, Ethereum & Litecoin, all of which come with a 1% charge per trade for balances under $100,000. You can also invest in your knowledge using the platform’s free comprehensive educational resources.
TD Ameritrade
One for the future, TD Ameritrade are one of the most established names in trading and investing, with over 350+ branches across the US. Currently, they only offer Bitcoin futures; however, there are plans in place to work alongside ErisX to provide crypto trading in the USA. Our
TD Ameritrade review
found that they already provide education, guidance, retirement planning and ForEx platforms that are simple to use regardless of your experience. We would recommend keeping your eyes peeled for the release of their crypto market too.
Now you have chosen your preferred wallet and understand what style of trading approach you are going to take; it is worth researching and reviewing what key attributes turn an ordinary platform into a good platform.
First things first, the security and licensing of any broker should be your main concern. Generally speaking, all license information, regulated and governing bodies, company numbers, etc. will be displayed at the bottom of your chosen platform’s web page. Failing that, be sure to check out their “about us” section or indeed contact them directly.
If contacting them directly, it is worth considering what methods they have, how polite their customer service rep was, how long it took them to answer/reply to an email and how helpful the response was. These are all great indicators of what sort of exchange you are signing up to and, if/how any future issues will be resolved.
Of course, if you do not need to contact your exchange directly, you can always do your own due diligence, researching their customer service and online reputation. A good starting point is finding out investors, partners and who the exchange is affiliated with. Look at their social media, responses to any public queries, and the FAQ page on their website.
Last but by no means least, always read the terms and conditions. Lengthy and probably a little boring, but reading through the terms of service will ensure you know exactly what you are getting from your exchange. Your money is on the line, so ensuring you know about platform fees, what happens if your account is compromised, maximum withdrawal limits etc. is imperative for profitable trading.
As previously mentioned, the crypto world is new, exciting, and at times volatile. Research plenty and trade sensibly, there is potential for some great returns providing you manage your risk well and don’t attempt to run before you can walk. We advise choosing a platform that works around your knowledge level, lifestyle and how you wish to trade.
For beginners, we would suggest using an easy-to-use, simplistic platform such as our
Robinhood review. This platform boasts no minimum deposits and minimal fees, meaning you can break yourself slowly into the crypto world, adding more funds to your account as your confidence, and profit, increases.
For the experienced trader, we suggest taking a look at our
Tradestation review. This platform offers cryptocurrency, stock, options and futures trading, allowing you to research to your heart’s content, execute instant trades and utilise the built-in tools to help you analyse graph and market data. (This is not investment advice)
Our
crypto reviews
aim to provide you with a broader knowledge of the trading world, explain how to trade, and highlight some of the USA’s best crypto trading platforms. We hope we have been successful and wish you all the best in your trading venture.
