With cryptocurrency trading you can buy and sell cryptos with people from around the world 24/7. The cryptocurrency exchanges that are available for the public never sleeps and there a great variety of cryptocurrencies available to buy for the long-term or for day trading and swing trading.
Popular crypto exchanges right now are:
In this section we will guide you through how cryptocurrency trading works, the different types of trading methods, useful tips and tools to make you a better trader.
With global cryptocurrency markets you can:
- Trade at any time of the day. Directly from your computer or mobile phone on the go.
- Take full advantage of a global cryptocurrency trading world. Where at any point there are hundreds of cryptocurrencies with enough trading volume for you to reap in your cryptocurrency trading rewards.
- Be part of a digital transformation and a new technological surge. With cryptocurrencies, blockchain, smart contracts, IoT all creating this new, smart and automated universe.
- Trade your ways to riches of money, experience and stories. Like with other markets (stocks, commodities, etc) you can if you are good enough earn money from trading cryptocurrencies. There are people who earns a living trading crypto.
Define your trading strategy
What is your goals with trading on the cryptocurrency markets? Is it to engage with trading frequently to try and make money? Then a daily or weekly cryptocurrency trading strategy is what you need to set. Or would you prefer to buy a few different coins and hold them over a longer period to see growth. A longer period could be a few weeks or months, to even years. The time horizon defined should be part of your strategy as well. The time horizon might differ between the different coins in your portfolio of course!
- Frequent trading (aka day trading or swing trading to make smaller percentages frequently)
- Long-term holding (holding coins over a longer period to see growth)
Frequent trading – important to know
- Have a clear strategy for your trading – no plan = no success
- For each trade, set profit targets and stop losses. Trading without those is just playing with fire
- Avoid the FOMO! As part of tips #1 you should have a clear strategy for how your cryptocurrency trading works. That means that FOMO doesn’t exist in your world. But you can still make use of other traders FOMO urges.
- Risk management! Never trade more than you are willing to lose. And each trade should only consist of a small percentage of your cryptocurrency trading portfolio. Use stop losses when possible to minimise your exposures to risks of trades going wrong.
Long-term holding – important to know
- Holding long-term doesn’t mean that you should hold forever. You need to have goals in mind for taking profit and selling at a loss
- Set profit goals. It’s smart to set several smaller profit targets along the way to that final goal. So if your end goal is $100,000 USD then maybe $25,000 + $50,000 + $75,000 USD might be separate targets where you cash out X percentage
- Have individual long-term holding goals for each cryptocurrency in your portfolio. It wouldn’t make sense if all coins would have the same targets. Because every project is different, with different market cap, different goals and visions and a completely different perception from the crypto community.
- Holding doesn’t mean that you can just keep the coins in your portfolio and never look at them for months on end. You should always keep track of the coins you hold, the work that the team does, what’s going well and not so good? Evaluating how well the cryptocurrency is to hold for the long-term is a continuous activity.
Crypto Trading Bots
Trading bots are software programs that help in managing trades. These bots work with the help of algorithms to communicate with exchange platforms. With trading bots, you can be able to get the available market information. They also help to put sell and buy orders for traders according to program rules.
Analyzing several market actions helps cryptocurrency trading bots to make the right decisions. These actions can be in the form of prices, the number of orders, and trade volume. Traders have the chance to reset parameters from trading software to their preferences. When talking about trading bots, traders have three kinds of options to select.
Learn more about how crypto trading bots works and reviews of the best current programs in this crypto trading bot guide.
Popular crypto trading bots products are:
Margin trading is a way for traders to ‘borrow’ funds called a leverage from the cryptocurrency trading platform in order to trade with more funds, and therefore potentially yield a higher return. The money that the trader goes in with himself is called the margin.
Lets use the example of Steven who goes to OKEx to margin trade with his $25 USD, this $25 is called the margin. The more money a trader goes in with the greater return he can get. So he uses a 2:1 leverage (doubling his money $25 x 2 = $50 USD) to bet that Bitcoin’s value will go up (he goes long). Steven is an experienced margin trader so he knows to put a profit target and a stop loss target. Meaning if Bitcoin’s price increases to his profit target or decreases to his stop loss target he will immediately stop his trade.
This is very important from a risk management perspective.
Risk management is crucial for day traders
As mentioned above maintaining a healthy risk management plan is going to be crucial in the long run. That means only using a portion of your trading portfolio at any given trade. No matter how tempting it can be to go above that threshold because just this trade seems so promising. And yes a trading portfolio should be established and is separate to your entire cryptocurrency portfolio.
It would be sad and poor risk management if perhaps after 4-5 bad trades you’ve lost not only half of your trading portfolio but also half of your entire crypto portfolio. That’s why every experienced trader have a separate portfolio for trading. And they only risk about 10% max, if even that much for one trade.
Long vs short positions in cryptocurrency trading
You could quickly explain that a long position is a bet that a cryptocurrency will increase in price, and a short position is a bet that a cryptocurrency will decrease in price.
The longer explanation is that by taking a long position you buy cryptocurrencies with or without a leveraged position (1:1 / 2:1 / 3:1, etc added stakes). And you could potentially buy those cryptocurrencies with the plan of selling them imminently after a rise in price, or it could be a long-term hold for months or even years. It depends on your trading strategy.
And for short positions you basically borrow money from an exchange or trading platform at a given price, betting that the cryptocurrency will drop in price and then you will re-buy at a lower price. If the cryptocurrency drops in price you will repay your loan and gain the difference from the price you rebought at minus any fees taken by the exchange/platform.
Margin funding a way of earning passive income
Another potential to earn money with cryptocurrency is via margin funding. Which is basically you who operate as a lender via a cryptocurrency exchange and borrow your cryptocurrencies out to a margin trader. And in return for funding their leveraged trades you get a percentage of the fee in return.
This is how it works – margin funding via OKEx
- Users who wants to margin trade on OKEx uses funds from a margin funding pool – call them margin traders
- Users who wants to earn profit and passive income from their funds sitting on an exchange allocates their funds to that margin funding pool and get paid in return call them margin funders
- The margin traders then uses the funds to open a long or short position and uses funds from the pool. When they close their position the funds are returned to the margin funders
- Another fairly easy way of earning passive income from crypto
The funds kept in your exchange wallet can be used by other traders when traders open long and short positions when margin trading. Margin trading basically means that a trader borrows money to speculate on the future price change of an assets like Bitcoin. They can speculate that the price will go down (short position) or go up (long position). Traders who opens long/short positions uses real funds to ‘bet’ on that trade going their way. And you ‘lend’ out your funds and in return you get paid interest. According to us another easy way of earning passive income from crypto.
- If a trader borrows USD to long BTC, the trader pays the funding cost to the funding provider in the equivalent value of USD at the agreed upon USD funding rate.
- If a trader borrows BTC to short BTC, the trader pays the funding cost to the funding provider in the equivalent value of BTC at the agreed upon BTC funding rate (find out more what margin trading is here).
Find out more information about margin funding at OKEx
11 best tips for crypto traders and holders
We have created this guide for both beginners and more experienced cryptocurrency traders – it suits both if you want to trade more frequently, or prefer to hold your coins for the long-term.
We have lots of other useful and helpful content at our guides section, be sure to check it out!