Basics of Cryptocurrency Trading

Basics of Cryptocurrency Trading: The Ultimate Guide

If you’ve recently heard about crypto – the first thing that came to your mind is what a big moneymaker it is. Well, It’s true, cryptocurrencies are gaining popularity, and thousands of people around the world trade crypto for profits every day.

But the sad truth is “trading cryptocurrencies can take your breath away” especially if you don’t know exactly what you’re doing.

For this reason, we crafted this basics of cryptocurrency trading for you— Here we discussed everything you need to know about cryptocurrency trading. We also included a guide on how to get started with crypto trading

Basics of cryptocurrency trading

How to start trading cryptocurrencies

Just like trading assets on the stock market, crypto exchanges enable you to buy and sell any tokens of your choice. But what is cryptocurrency trading? How do you make crypto trading profitable? Is it safe? What are the common terms associated with cryptocurrencies? Read on to find out everything you need to know about trading cryptocurrencies.

What is cryptocurrency trading?

Cryptocurrency trading is the buying and selling of cryptocurrencies— similar to forex trading, investors attempt to make money from fluctuations in the market value of a currency pair (like USD/BTC or USDT/BNB).

How does cryptocurrency trading work?

Cryptocurrency trading is a complex process that involves analyzing charts, buying and selling digital assets, and making educated decisions about when to invest or sell. In other words, there are several factors for traders to consider when deciding what coins to trade on and when.

Some of these include the characteristics of the coin itself, market conditions. While it is always difficult to predict where a cryptocurrency price will go in the future, taking all of these factors into consideration can help you make an informed decision about what cryptocurrency pair to buy or sell at a given time.

What is a trading strategy?

what is a trading strategy

A trading strategy is a plan of action that is designed to achieve a specific goal, such as making a profit on a financial investment. There are many different types of trading strategies, but they all share a few common elements.

A trading strategy must include an analysis of the markets in which the trader plans to invest. The trader must identify which indicators are most important to them, and then develop a plan of action that will allow them to take advantage of price movements in the market. Additionally, the trader must have a risk management plan in place to protect their investment capital.

Because cryptocurrency trading is a highly speculative and extremely volatile, it is important to have a strategy in place before you start trading.

Some of the most important factors to consider when trading cryptocurrency include: your investment objective, your risk tolerance, and the market conditions at which you will execute your trade.

1). Investment objectiv: Your investment objective should be clear and concise, and it should be based on your long-term goals.

2). Your risk tolerance: You should have a clear understanding of your risk tolerance, which is the amount of money you are willing to lose in a given trading session.

3). Market conditions: Lastly, the market conditions should be considered when making your trading decisions—this includes the current trend, the price of different cryptocurrencies, and the liquidity of the market.

Once you have a solid understanding of these factors and  stay committed, you will most likely become a profitable trader.

What is the best strategy for trading?

There is no one perfect strategy for trading. Different strategies will work well in different markets condition, as a trader you need to be able to adapt your strategies to changing market conditions.

Here are a number of different crypto trading strategies:

1). Trend trading

Trend trading


Trend trading is a type of investment strategy that attempts to take advantage of long-term price trends in the markets.

The goal is to buy assets when they are trending upwards and sell them when they begin to trend downwards.This can be a profitable way to trade, but it requires a lot of patience, discipline and a good understanding of how the markets work in order to spot trends.

2). Scalping


Scalping is a trading strategy employed by traders who seek to profit from short-term price changes in highly liquid markets.

Scalpers attempt to make many trades throughout the day in an attempt to “chip away” at the market by taking small profits on each trade. They may also attempt to “catch” big moves when they believe that the market has made a significant change in direction.

3). Day trading

Day trading

Day trading is the process of buying and selling a crypto pair, or other securities within the same day. Traders who engage in day trading are called day traders.

A day trader typically opens and closes multiple trades during a single trading day in an attempt to make a profit.

4). Range trading

Range trading

Range trading is a trading strategy that tries to take advantage of price fluctuations and movement within a certain range. This range can be identified by studying the past prices movements of a cryptocurrency pair. Once this range has been identified, traders will buy or sell within that range in the hopes of making a profit.

One of the benefits of range trading is that it helps to reduce risk. By focusing on a specific area or range, traders are able to minimize their losses if the market moves against them. Another benefit is that it can be used in both rising and falling markets, making it a versatile strategy.

5). Breakout trading

Breakout trading

Breakout trading involves buying or sell cryptocurrency pair when they break out of a consolidation pattern. Breakouts are one of the most common forms of technical analysis. Because they give traders a great opportunity to trade with the flow of the market and have an edge over other traders who do not utilize this trading strategy.

The price breaking past a certain level gives traders confidence in their trade and allows them to make a profitable trade. Although, this does not guarantee that someone will make money from any given breakout trade, but it offers you best chance at earning profits from predicting where price action is headed.

If you want to be a successful cryptocurrency trader, you need to master at least one trading strategy.

How do you analyze cryptocurrency chart?

How do you analyze cryptocurrency chart

When trading cryptocurrencies, you should always make sure that you are performing proper research and analysis. Knowing when to buy and sell is key if you want to be successful.

Not only does market analysis offer a way to get an overview of price information, but it also offers to time your entry point— depending on which indicators you choose to focus on, you might be able to get a glimpse at what will happen next in the market.

Here are the various techniques Cryptocurrency traders use to analyze or predict price movements and trade accordingly:

1). Technical analysis

Technical analysis (TA) is the study of past price movements in order to predict future movements. It is one of the most commonly used methods to trade cryptocurrencies.

There are many different indicators that can be used for TA, but the most popular ones are Moving Averages, RSI, and MACD. Moving averages are used to identify support and resistance levels, RSI is used to measure overbought and oversold conditions, and MACD is used to identify trend changes.

2). Fundamental analysis

Fundamental analysis is considered to be one of the most important approaches to successful investing. It is based on analyzing supply and demand and the effect that the economic environment has on price movement.

To put it another way, fundamental analysis studies real events that impact markets, while technical analysis focuses on patterns in price movements.

3). Sentiment analysis

Sentiment analysis, or market sentiment, is a method used by traders to predict future trends in the price of a currency through analyzing emotions that are attached to the trader’s opinions.

In other words, how do people feel about a particular coin? This information is used to infer whether the market will be bullish or bearish about a currency pair for a particular trading period.

Although sentiment analysis has the power to predict trends, it’s not a flawless predictor. This is why you have to remain vigilant; monitoring the information you receive while also using it to increase your profit potential.

How to start trading cryptocurrencies

How to start trading cryptocurrencies

In order to start trading cryptocurrencies, you need to follow this simple steps:

1) Research tokens/coins before trading them. Some are scams, others are legitimately valuable.

2) Decide whether to trade on a centralized exchange like Binance or a decentralized exchange like Pancakeswap.

If you are new to cryptocurrency, trading on centralized exchange will be lot easire for you, here you can sign up with Binance or any other centralized exchange and start trading right away after depositing funds: See our Binance exchange review and trading guide

3) If you choose to trade on a centralized exchange, you will have to provide your personal information and verification documents.

On the hand, if you choose to trade in decentralized exchange, you will have to set up a wallet where your fund will be stored. See our guide on how to trade on a decentralized exchange using Trust wallet.

4) If you choose to trade on a decentralized exchange, simply start trading with the wallet you set up in step 3.

Takeaway: Cryptocurrencies are traded on centralized and decentralized exchanges. The main difference between them is the verification process they use.

How do you make crypto trading profitable?

Cryptocurrency trading is a great way to make a profit, but it’s also a great way to lose money. If you want to make money trading cryptocurrencies, you need to learn the basics of technical analysis.

Technical analysis — the study of price action and volume patterns in order to predict future price movements. By studying past price movements, you can identify trends and patterns that may indicate when a particular cryptocurrency is ready to rise or fall in price.

In addition to technical analysis, it’s also important to have a good knowledge of fundamental analysis— a method of evaluating a security by analyzing the economic and financial conditions that underlie its price.

In contrast to technical analysis, which focuses exclusively on a security’s past and present price movements, the fundamental analysis attempts to determine a security’s intrinsic value by examining factors such as revenue, earnings, dividends, book value, and other measures.

A thorough understanding of fundamental analysis is important for all traders because even the most technically sound security can be overvalued or undervalued at any given time. A security’s price may not always reflect its underlying fundamentals, so traders who understand both technical and fundamental analysis are better position to have more winning trades.

Basics of cryptocurrency trading FAQ

What are the different ways to trade cryptocurrencies?

Cryptocurrency trading can be a complex and confusing process, but that doesn’t mean that there isn’t any room for profit. There are different ways to trade cryptocurrency, each with its own set of benefits and drawbacks.

1). One popular way to trade cryptocurrency is through centralized exchanges. These Exchanges allow you to buy and sell cryptocurrencies, and they usually have a variety of currencies available for trading. Some exchanges like Binance offer margin trading, which allows you to borrow money from the exchange in order to increase your investment.

2). Cryptocurrencies can also be traded on decentralized exchanges (DEXs) like Pancakeswap. DEXs are unique in that they do not have a central authority or clearing house. This means that the security of your coins is dependent on the security of the DEX itself. However, DEXs are not as liquid as exchanges and can sometimes be more difficult to use. Finally, you can also trade cryptocurrency through peer-to-peer transactions.

What are the benefits of trading cryptocurrency?

Cryptocurrency trading has become a popular way to make money, and there are many reasons why. First and foremost, cryptocurrency trading is highly speculative, meaning that the chance of making a profit is high.

Additionally, cryptocurrency trades are fast and easy, which makes it an ideal way to make a quick buck. And last but not least, cryptocurrency trading is an extremely volatile market, which means that the profits you make in a previous trade can quickly disappear if you don’t follow the good market practice.

What are the risks of trading cryptocurrency?

The popularity of cryptocurrency has surged in recent years, as investors seek to capitalize on the potential profits offered by this new form of currency. However, as with any investment, there are risks associated with trading cryptocurrency. Some of the risks associated with cryptocurrency include:


As a commodity, cryptocurrency is subject to market fluctuations. The more volatile the market, the greater the risk of loss. One way to mitigate this risk is to make sure you have enough liquidity in your account.

For example, if your account balance is not sufficient to cover the full value of your position at the time of liquidation, you will be liable for any losses resulting from this event.

Market manipulation

When it comes to cryptocurrency trading, there are concerns about market manipulation. A lack of regulation in the cryptocurrency market means that cryptocurrencies are not backed by any form of a government entity or central bank.

Illegal activities

Cryptocurrency trading has been linked to illegal activities such as money laundering and tax evasion. To combat these illegal activities, regulators across the world are beginning to crack down on exchanges and other crypto-related businesses.

This has resulted in some countries banning cryptocurrency trading altogether, which can reduce the overall demand for cryptocurrency. This may have a negative impact on market prices and liquidity.

Unregulated markets

In the cryptocurrency space, virtually anything goes. There are thousands of coins, and many of them do not trade on major exchanges. Many smaller cryptocurrencies can be extremely volatile; for example, the price of a coin can double in a week, and then lose two-thirds of its value the following week. With so many unknowns and so much volatility, it is best to tread carefully in this nascent market.

No guarantee of profits

Cryptocurrency is still a relatively new asset class, and there is plenty of speculation in the market. While many investors have made money investing in digital currencies, others have seen their investments tank. The bottom line: there is no guarantee that you will make money trading cryptocurrency.

Increased risk of fraud

Cryptocurrencies are unregulated, which means they are not subject to government oversight or protection. This makes them susceptible to fraud and scams. For example, a recent ICO raised $32 million from investors but was later revealed to be a scam where the founders ran away with investor funds.

Given the lack of regulations, investors must do their due diligence and approach all investment decisions with great care.

What are the different types of cryptocurrencies?

There are several types of cryptocurrencies. With Bitcoin, the first cryptocurrency ever created currently ranked as the largest and most well-known cryptocurrency in the world and a top-tier cryptocurrencies.

Other cryptocurrencies are often called altcoins, these are not Bitcoin clones but are built from scratch to be their own unique cryptocurrency with different features and functions.

For instance, some cryptocurrencies emphasize privacy through the use of encryption methods that prevent anyone from tracking transactions on its network. Others take a more streamlined approach by offering faster payments or lower transaction fees for consumers who want to pay for goods or services in crypto form.

In addition, some altcoins are used in decentralized finance (DeFi) services such as lending and borrowing tools that let users earn interest on their holdings.

What are the terms used in crypto trading?

When you enter the world of crypto trading, you will come across a variety of terms that are specific to the cryptocurrency market. Here are some key definitions to help you get started:

1). Currency pair

Currency pair means the two currencies being traded in a transaction, for example BNB/USD or BTC/ETH

2). Altcoin

Altcoin is a term used to describe any cryptocurrency that is not Bitcoin. Blockchain: A digital ledger in which transactions made in cryptocurrency are recorded chronologically and publicly.

3). Fiat Currency

Fiat currency is a government-issued currency that is not backed by a physical commodity. The value of fiat money is determined by the government or central bank that issues it.

4). Market Capitalization

Market capitalization is the total market value of a company’s outstanding shares. It is calculated by multiplying the stock price by the number of shares outstanding.

5). Bullish market:

A bullish market is one in which the prices of securities are expected to rise. The term is derived from the fact that a bull attacks its prey by thrusting its horns upward, and is often used to describe the market condition during an uptrend.

6). Bearish market:

A bearish market is one in which the prices of securities are expected to fall. The term is derived from the fact that a bear attacks its prey by thrusting its paws downward, and is often used to describe the market condition during a downtrend.

7). Margin Trading

Margin trading is the act of buying crypto with money that has been borrowed from an exchange. The goal of margin trading is to increase the buying power of the investor.

This can lead to increased profits if the value of the asset goes up, but it can also lead to large losses if the price drops. For this reason, margin trading should only be used by experienced investors who are comfortable with the risks involved.

8). Derivatives market

The derivatives market can be divided into two main categories: the derivatives market and the spot market. The derivatives market is where contracts are traded between two or more parties. The spot market is where the actual underlying asset is traded.

10). Forward contracts

A forward contract is a bilateral contract in which two parties agree to exchange goods or assets at a fixed price at some point in the future. The contract is not traded on an exchange but is rather a private agreement between the buyer and seller.

11). Futures contracts

 A futures contract, on the other hand, is a more standardized contract that is traded on an exchange. Futures contracts are standardized in terms of quantity, quality, and delivery time.

12). Perpetual futures contracts

A perpetual futures contract (PFC) is a contract that is never settled. PFCs are used to trade commodities, currencies, and other assets. A key benefit of PFCs is that they allow market participants to roll their positions forward indefinitely. This means that they can hold a position in a market without ever having to take delivery of the underlying asset.

Another benefit of PFCs is that they provide a way to trade assets that are not currently available on traditional exchanges.

13). Order book

An order book is a list of all outstanding orders for a security, usually a stock or derivative.

The order book is divided into two parts: the “bid” side and the “ask” side.  The bid side consists of all buy orders at or above the current market price. While the ask side consists of all sell orders at or below the current market price.

14). Limit order

A limit order is an order to buy or sell a security at a specific price or better. A limit order to buy is placed above the current market price, and a limit order to sell is placed below the current market price.

15). Leverage

Leverage is the use of borrowed money to increase the potential return on an investment.

16). Slippage

Slippage is the difference between the expected price of a security and the price at which it is actually traded.

17). Liquidity

liquidity is the degree to which an asset can be bought or sold quickly and at a low cost.

Bottom line

Cryptocurrencies are here to stay and have a bright future. In this blog, we have covered the basics of cryptocurrency trading so that you can start making money from the comfort of your home. With the help of our interactive content, you will be able to understand the concept of cryptocurrency trading and how it works.

We have also listed out some helpful resources so that you can get started with your own trading strategy without any hassle.

Let us know in the comments below if you have any question that we didn’t cover and we will be more than happy to help!

Useful Resource

Binance Academy

A guide to crypto trading


Ogedi is the Co-founder of CryptoBasics. He writes on a number of topics related to Blockchain technology but focuses mostly on Cryptocurrency, NFTs, and Decentralized Finance.

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