Learn How to Trade Cryptocurrency for US: A Beginner's Guide
Trading is risky and you might lose part, or all, of your capital invested. The information provided is for informational and educational purposes only and does not represent any type of financial advice and/or investment recommendation.
How to trade cryptocurrency for beginners:
Complete research to ensure you thoroughly understand the market
Choose a reliable trading platform
Practise on demo crypto accounts
Start with a single currency
Diversify your assets to create a robust trading portfolio
Keep yourself in the know, crypto is constantly evolving
Cryptocurrency trading is the process of buying and selling cryptocurrency to make a profit.
Understandably, the volatility of the cryptocurrency market deters many investors. However, this unpredictability means that traders can yield extremely high rewards, often making substantial profits in short timeframes.
In this article, you will discover cryptocurrency trading skills and learn the essential steps to succeed in cryptocurrency trading.
The 5 Best Crypto Brokerages in the US
Before you can begin cryptocurrency trading, you will need to select a cryptocurrency exchange from which you will work.
1. eToro
Pros
Availability to copy other traders' portfolios
0% commission on stocks
No withdrawal fee for US clients
Cons
Only available in 41 states
More expensive than competitors
All experienced investors and traders will be familiar with eToro as it is one of the most established platforms on the market. With over 20 million users, eToro has all the features that beginner crypto traders or investors need.
eToro is ideal for beginners due to its wide range of educational resources. eToro users can also learn from each other thanks to the news feeds and other social features. eToro also offers copy portfolios, where traders can copy the portfolios of successful investors.
Don’t invest in unless you’re prepared to lose all the money you invest.
2. Pepperstone
Pros
Great customer service
No minimum deposit
Extensively regulated
Cons
Withdrawal fee for clients outside the EU and Australia
Mostly CFDs
Pepperstone is an award-winning brokerage based in Australia.
Pepperstone is great if you’re concerned about security, as it is regulated by seven national authorities, including the FCA (Financial Conduct Authority) in the UK and the ASIC (Australian Securities and Investments Commission).
Pepperstone has low fees and does not charge for inactivity.
3. Coinbase
Pros
Excellent customer service
Easy-to-read interface
High-level security system
Cons
Doesn't support lesser-known currencies
Higher fees
Not available in all countries
Founded in 2012, Coinbase is one of the most popular cryptocurrency brokerages in the world. It has an excellent reputation amongst beginner investors due to its simple user interface, excellent app and high-level security features.
Coinbase has a second platform, Coinbase Pro, with an advanced charting functionality that can benefit traders.
4. Bitpanda
Pros
User-friendly platform
Useful resources for beginners through to experts
Low minimum investment
Cons
Deposit fees below certain thresholds
Not available to US clients
Bitpanda was founded in 2014 and specializes in buying and selling crypto within Europe. The company is based in Vienna and has over 900,000 users.
Bitpanda is an excellent option for beginners looking to trade cryptocurrency.
5. Crypto.com
Pros
Large range of cryptocurrencies
Available via website and app
Discounts on high-volume trading
Cons
Limited customer support
No educational resources
Founded in 2016, Crypto.com now has over 10 million users across 90 countries. Crypto.com is known as a one-stop-shop in the market – great for anyone who wants to spend, store or trade cryptocurrencies.
However, if you’re starting out in crypto, you might prefer a more beginner-friendly platform. The user interface on crypto.com can be challenging to navigate, and there is a lack of educational materials.
What Is Cryptocurrency?
Cryptocurrency, often referred to as ‘crypto’, is a form of decentralized digital currency.
Most cryptocurrencies are supported by blockchain technology and created via a process known as mining. Technically, anyone with a computer could mine cryptocurrency. However, it uses a tremendous amount of energy and time, and often the rewards do not reflect the cost of mining.
Individual crypto ownership information is stored in a digital ledger, which makes coins and tokens almost impossible to duplicate.
Bitcoin (BTC) and Ethereum (ETH) are the two best-known cryptocurrencies, also known as digital assets, but there are more than 12,000 different ones.
Unlike traditional currencies, there are still very few e-commerce sites that allow payment via cryptocurrency. However, the rapidly growing value of cryptos has made them popular for peer-to-peer monetary transfers.
All alternative currencies (that are not bitcoin) are known as altcoins.
Types of cryptocurrency include:
Binance
Ethereum
Cardano
Dogecoin
Litecoin
Why Use Cryptocurrency?
Before exploring how to learn cryptocurrency trading, you must appreciate the benefits of using cryptocurrency over other traditional banking and investment methods.
Cryptocurrency is secure – As cryptocurrency operates in a blockchain, it is almost impossible to forge. What’s more, cryptocurrency transactions are mostly confidential, so you can transact privately in a way that cash or traditional banking does not allow.
A new, decentralized currency – Cryptocurrency is not controlled by one state, so it is much more resilient to politics. This also eliminates a single point of failure, such as a major bank collapse.
Improved liquidity – Because there are no third-party intermediaries, large transactions are often much faster than traditional banking methods.
Increased trading hours – The stock market is only open for a certain number of hours per day, whereas cryptocurrency is a 24/7 business. This gives investors and cryptocurrency traders more freedom and opportunities.
Flexibility – As cryptocurrency is not tied to one bank in a specific place, the assets are available to the trader or investor regardless of their location.
Inclusive financial system – Flexibility of location also means that cross-border transactions can be completed effortlessly.
Volatility of the market – Investors in the traditional stock market are often put off by the high volatility of crypto. However, those interested in trading cryptocurrency are usually excited by this instability. The frequent price rises and falls can be lucrative for short-term traders.
Specialization – Many cryptocurrencies have been designed for a specific use. For example, some have been created specifically for large business transactions, while others are built for use in games.
The purpose of specific cryptocurrencies should be a focus while you learn how to trade them.
Crypto Trading Versus Crypto Investing
The terms trading and investing are often used interchangeably, but there is a significant difference between cryptocurrency investing and cryptocurrency trading:
Investment Period
Generally, investors think long term, and traders think short term.
Investors consider the long-term growth of an asset over several months or years. Seasoned investors are not concerned with daily variations in the market.
Traders are interested in daily fluctuations, often thriving in a more volatile market. Sometimes, traders will hold onto crypto for just a few minutes, cashing in on profits as the markets rise and fall.
As your expertise grows, you may be interested to learn to day trade crypto.
Trade Frequency
As mentioned, investors are searching for long-term results, whereas traders are interested in short-term gains.
Therefore, investors will typically purchase or sell crypto weekly, monthly or quarterly. Traders may buy or sell multiple times per day.
Risk Profile
Traders often thrive in a riskier market, whereas investors tend to be more risk-averse.
The reasoning here is that, over time, the highs and lows of a volatile market will lead to a general incline, creating a steady profit for investors. Conversely, traders are often willing to make quick transactions in turbulent markets to yield high returns.
How to Learn Cryptocurrency Trading – Step by Step
If you’re looking to learn how to trade cryptocurrency, don’t jump straight in. Follow these steps to reduce the risks associated with cryptocurrency trading.
1. Research
Research is the first and most important step for beginners who are learning how to trade cryptocurrency.
The crypto market works very differently from most other financial markets, with many buzzwords and jargon that you must understand before you begin trading.
It is a good idea to choose a few currencies and spend time observing the trends and patterns as well as reading articles and blogs from multiple sources. You may also wish to enroll on a crypto trading course to ensure you obtain a well-rounded understanding.
Remember, never trade more than you are willing to lose, and practice mindful trading. You may also wish to speak with a specialized financial advisor before kickstarting your crypto trading journey.
2. Choose a Cryptocurrency Trading Platform
To trade cryptocurrency, you must sign up with a crypto exchange platform.
At this point, you will need to provide the brokerage with some basic personal information, such as your address, date of birth and contact details. Some platforms can take 24 to 48 hours to verify your details, while others allow immediate trading.
You will also need to link your bank account to start trading with the platform.
For instant access needed for regular trading, you store your cryptocurrency on the exchange platform of your choice. However, if you intend to keep some of your assets mid to long-term, you should choose a secure cryptocurrency wallet.
3. Practice
The best trading platforms usually have dedicated areas for educational material. Alongside tutorials and guides, there will be demo accounts, allowing you to experience trading without risking your capital.
This is an excellent way to experience actual fluctuations in the market. Practice several different crypto trading strategies to see which suits your personal trading style best.
4. Start With a Single Currency
Starting your crypto trading journey with a single currency is the best way to thoroughly understand the process. Once you begin to mix in multiple currencies and wallets, the process can become confusing.
5. Diversify
When you are happy with your single currency and thoroughly understand the process, it’s important to diversify your assets. A diverse portfolio is much more robust against market fluctuations, giving traders more flexibility on regular transactions.
Other than the type of crypto, different ways to diversify your cryptocurrency portfolio include:
By industry – Investing in coins used in both stable and rapidly growing businesses
By timing – Setting aside specific amounts of money to invest at specific times
By geography – Investing in different projects around the world
Some traders also choose to invest in an automated trading bot as an alternative or additional trading strategy.
6. Keep Up to Date
Cryptocurrency is a rapidly changing, evolving field. Therefore, traders must keep themselves well informed on current market trends.
This can be done by reading blogs, following experts on social media, or signing up for email newsletters.
Tips for Trading Cryptocurrencies
Complete Your Own Research
There is lots of misinformation surrounding cryptocurrency online. In addition, many people sell courses and promote their brands by posting information on social media. This information is often incorrect or out of date.
Therefore, it is essential that you stick to facts and research using a range of reputable sources.
Understand Your Wallet
It is essential to understand the different types of cryptocurrency wallets and choose one that suits you.
Hot wallets (connected to the internet) are generally favored by beginners, whereas more experienced traders lean towards cold wallets (hardware devices to keep your data offline) for an extra layer of protection. While you’re on the journey of diversification, explore both options.
Once you've chosen your wallet, be sure to keep your password and equipment safe.
Avoid FOMO
FOMO (Fear of Missing Out) is one of the main reasons why investors and traders fail. As a beginner trader, it is vital that you create your own plan and stick to it.
Following short-term trends can lead to dramatic losses.
Manage Your Own Risk
Every trader will have a different risk appetite and a unique level of capital they are willing to stake.
Set limits to the amount of crypto you’re willing to purchase each month and stick to your plan.
Frequently Asked Questions
Is it difficult to learn how to trade crypto for beginners?
If you have no trading experience, learning to trade crypto for beginners can be daunting. You need to understand the complexities of how cryptocurrency works to invest your money wisely.
Using a variety of online tools and resources is essential when learning how to trade cryptocurrency.
Where is the best place to learn cryptocurrency trading?
There are many online courses for learning cryptocurrency for beginners. Some of the best include Thomas Kralow, Shifting Shares and ProfitFarmers.
Can trading crypto generate a sustainable income?
Yes! Trading cryptocurrency is a long-term investment that can yield sustainable results. However, you need to be aware that the market can fluctuate rapidly, and your capital is at risk when investing in crypto.
How much money do you need to start trading crypto?
There is no minimum amount of money needed to start trading crypto. Many investors start with as little as $1.
What is the best cryptocurrency to invest in?
The best cryptocurrency will depend on your individual appetite for risk. Some investors prefer a more reputable cryptocurrency, such as Bitcoin. However, others opt for a more volatile, lesser-known asset that can reap substantial rewards.
Is trading crypto tax-free?
The profits you make on cryptocurrency are generally not tax-free. The amount of tax payable will depend on your other income streams and where you live.
Do I need a degree to trade cryptocurrency?
No, you do not need a degree to trade cryptocurrency. This relatively new industry evolves rapidly each year, so traders are encouraged to continuously educate themselves.
How can I start trading crypto?
As discussed, there are clear steps to begin your crypto trading journey.
First, do your research before choosing a platform and experimenting with mock portfolios. The next step is to process a single currency and trade with this. Once you are comfortable, diversify your crypto assets to create a strong portfolio.
Final Thoughts
As you have seen, cryptocurrency can be an extremely lucrative skill (although there are always risks so only invest if you can afford to lose your money). However, it can also be intimidating for the beginner.
If you want to start trading cryptocurrency, research is key.
You should use various sources and take advantage of the practice accounts across different crypto platforms. Once you've got the hang of one currency, and your trading is successful, remember to diversify your assets. This might mean using an additional platform, a new currency, or investing in a trading bot.
Please remember, like all investments, cryptocurrency is risky. Therefore, you may choose to speak with a financial advisor before purchasing cryptocurrency.