An Easy Guide To Understanding How Crypto Trading Works

Crypto trading is a new, relatively uncharted territory for most people. But are you wondering what the heck are all these numbers and letters? Have you ever wished there was somebody to guide you through this process of figuring things out? Well, that’s why this post exists – to help explain the basics of crypto trading, without any jargon or technicality. Let’s get started!

What Is Crypto Trading?

how crypto trading works

Previously, it used to be extremely difficult to invest in things like Bitcoin or Ethereum. You would have had to find somebody willing to sell them under current market value, and then convince them that your resources were worth the money you’re offering for them. When trading, you’ll also want to learn how to use bitcoin mining software to track your trades and manage your coin collection. It was a very time-consuming affair, even when you get the hang of it. In comes crypto trading! Crypto trading is simply buying or selling cryptocurrencies from a third-party service, such as an exchange platform – more on that later. But how does this process look like?

Types of Crypto Trading Exchanges

There are three major types of exchanges you can buy and sell cryptocurrencies on. There are also sub-categories within these, but I’ll keep things simple for now. Here’s what they are:

Crypto Brokers

These online platforms allow you to buy coins using your credit or debit cards (you still need to verify your identity, don’t worry). All you need to do is deposit fiat currency (that’s legal tender like USD or EUR) onto the platform and start buying coins.

Crypto Marketplaces

If you want to add a layer of anonymity between yourself and the exchange, check out crypto marketplaces. Here, people can buy and sell cryptocurrency directly from one another in an open-air “marketplace,” without any verification process or oversight – that’s why they’re called marketplaces. You’ll still need to vet your trade partner though (after all, we’re talking about cryptocurrencies here!). Don’t trust anybody with too much money right off the bat! It wouldn’t be very difficult for somebody who wants to rip you off to do so, especially since there are no identity checks.

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Crypto Trading Platforms

These are the most popular type of exchanges out there. They’re also the safest ones – they follow all legal guidelines and have to comply with strict verification processes that protect both you and them (anonymity is still possible though). These platforms make buying coins super easy too – simply deposit fiat currency onto the platform using your credit/debit card or bank account, place an order on how much cryptocurrency you want to buy, and wait for it to show up in your account!

SEE ALSO: How to Mine Bitcoin

Crypto Currencies That Exist Now

Now that you know what cryptocurrencies are and how they’re traded, it’d be a shame if you didn’t learn about some of the more popular ones out there. Here’s a shortlist: Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), bitcoin gold (BTG), Litecoin (LTC), Dash (DASH), Zcash (ZEC), Cardano (ADA – partnership with Emurgo!), Neo (NEO – working towards mainstream adoption!), Iota/IoT, Stratis/STRAT, Basic Attention Token/BAT… Keep in mind that this isn’t an exhaustive list of all available cryptocurrencies as I write this post! There is more popping up every day as cryptocurrency trades seem to be on the rise.

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Types Of Trades & Orders

There are two types of orders when it comes to crypto trading: market orders and limit orders. Market orders are the simplest orders out there. You simply tell the platform how much of a certain coin you want to buy, and your trade will be processed. The only downside is that market orders can get you into trouble if market conditions have shifted while your order was being executed – but more on that later! Limit  Crypto trading with limit orders introduces an entirely new layer of complexity into the table. You place an order, just like before.

However, now you’re telling the exchange at what price you want to sell/buy coins at – otherwise known as “the limit.” For example, let’s say I wanted to invest $100 into Ethereum. I could do that using a market order and it would be done immediately, but what if the price of Ether skyrocketed after I placed my payment? My $100 wouldn’t go as far as it should! That’s why limit orders are used: to make sure you get the most bang for your buck!

How To Start Trading Cryptocurrency

crypto trading graph

You don’t need to be a tech expert or an experienced trader to get started with crypto trading. You just need to set up your accounts, make your orders and let the platform do its thing. That said, if you’re looking for some tips on how to become a successful trader, here’s what I recommend – Set your orders wisely – If you want your trades to go through as quickly and smoothly as possible (and we all do!), then use market orders. Limit orders will slow everything down and can even get canceled by the exchange itself due to “market volatility.” A good rule of thumb is that limit orders are best reserved for investments over $100 in value!

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You can’t just set your orders and forget about them. You need to keep track of the market – especially its volatility. That’s why it’s so important for you to check what’s happening with Bitcoin’s price every day, not just once or twice per week. It’ll give you a better idea of when to place your orders! If an exchange supports stop-losses (and they do on some exchanges), use them! These triggers automatically close your order(s) if the coin hits a certain value, protecting you from further losses in case market conditions turn against you.

SEE ALSO: Best Bitcoin Exchanger

Cryptocurrency trading is still a relatively new concept to the world – but it doesn’t have to be as intimidating as you think! All you need is one thing: research. Find out everything you can about the coins that interest you, find out what exchanges they’re traded on, and make sure those exchanges let you place market or limit orders before committing your hard-earned money! Good luck!

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