How to Trade Cryptocurrency – The Complete Guide for 2021

As the world economy is on the brink of a historical recession, financial markets enter unknown territory. The perfect storm is brewing on the horizon, and the threat of long-term debt looms large over everyone. The future may look bleak, but there is no help in panicking. If there ever was a perfect time for […]

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As the world economy is on the brink of a historical recession, financial markets enter unknown territory. The perfect storm is brewing on the horizon, and the threat of long-term debt looms large over everyone.

The future may look bleak, but there is no help in panicking. If there ever was a perfect time for investing in alternative financial assets, 2020 is the one. Cryptocurrency is one of the few emerging markets that may come out of this debacle with flying colors. Bitcoin and its rival altcoins are ripe for investment, and you may want to consider them for your portfolio.

This guide on how to trade cryptocurrency should show you the first steps into the exciting market of digital assets and virtual cash. We will discuss:

  1. Fiat Money to Crypto Trading
  2. Storing Cryptocurrencies
  3. Cryptocurrency to Cryptocurrency Trading

For an easy understanding of how crypto trading works, we will give examples using some of the most popular fiat currencies, cryptocurrencies, wallets, and crypto exchanges on the market. This way, the instructions will be accessible for both entry-level traders and seasoned investors.

1.     How to Trade Fiat Money to Cryptocurrency

One of the founding principles of cryptocurrency is decentralization. It means that, contrary to the banking world, there is no central authority overseeing crypto trade and operations. So, if you want to trade fiat currency for digital money, you will go to an internet platform called a cryptocurrency exchange.

Exchanges provide an intermediary portal for traders that go in and out of the cryptocurrency market. It helps new investors trade in their fiat money for cryptos, and weathered traders to redeem their crypto tokens for real currency.

Also, exchanges practice relatively small trading fees, and they employ high-security protocols for the users and their assets. Simply put, they’re safe. And, the more popular they are, the safer is your money.

There are numerous exchanges to pick from for your first trade. Before you sign up to one, you should do your due diligence and research the platform. Here are a few indicators that will help you choose a viable solution for your future investment:

  • Legality: Make sure that the exchange operates legally in your area.
  • Notoriety: Avoid exchanges that are less-known or which have bad reviews.
  • Exchange rates: These figures vary slightly from one exchange to another, so opt for one that is convenient for you.
  • Security: Exchanges are under hacking attacks all the time. Go through the hacking history of each exchange on your list, and consider the one that fights them off better.

There are numerous resources online where you can do in-depth research on cryptocurrency exchanges. To save you a bit of time, we will list the most popular crypto exchanges in 2020:

You can have your pick from these, or look for other exchanges that better suit your goals.

Sign Up to a Crypto Exchange

To speed up the learning process, we will choose Coinbase as an example of how to sign up and create an account on a cryptocurrency exchange. Let’s get started!

Signing up is a straightforward process. You simply go to Coinbase.com and tap on “Sign Up.” Next, create an “Individual” account. Here, you will have to provide a set of information that will certify you as an authentic trader, such as:

  • Your First and Last Name
  • Your Email Address
  • A Password of Your Choice

Lastly, you only need to agree to their Terms and Conditions and solve a puzzle that proves you are a human being and not a robot.

Creating a Coinbase account for trading crypto is that simple!

Set Up Your Account

On the next step, you go through an essential authentication process that will increase the security of your account, such as:

Phone Verification

You provide a valid phone number, and the exchange sends a unique, time-limited code by text message. All you have to do is put in the code into the application, and now you have a 2-step verification protocol for your account.

Payment Method

Coinbase accepts several forms of payment including wire transfers, by debit card, or directly from your bank account. There are specific benefits and downsides to every form of payment, for example:

  • If you use your bank account, you get to buy, sell, deposit and withdraw easily. Unfortunately, it takes as many as 5 days for the money to reach your account every time you redeem your assets.
  • If you use a debit card, you get instant transactions, but only when you buy crypto. You cannot use a debit card to sell, deposit, or withdraw.
  • If you use a wire transfer, you have to wait between 1 and 3 days to receive the money. Also, you only get to deposit and withdraw funds, and you cannot use this method to buy or sell cryptocurrency.

Identity Verification

Like every reliable crypto exchange out there, Coinbase abides by the KYC/AML regulations, which require that customers of any kind, including traders, have a verified identity. The process of verifying your identity is quite simple to follow, and all you need to do is provide the authentic personal data every step of the way.

2.     Storing Cryptocurrency

One of the fundamental conditions for trading in cryptocurrency is having a wallet where you store your assets, and from where you send and receive cryptos. The wallet is defined by two elements:

The Public Address

You will provide this data whenever you buy or sell virtual money

The Private Key

It gives access to all the components of your wallet, so you never reveal it to anyone. You should be the only person in the world that knows the private key to your cryptocurrency wallet.

There are two kinds of cryptocurrency wallets:

  • Hot Storage Wallets
  • Cold Storage Wallets

Let’s take a closer look at the two forms of cryptocurrency storage before you decide which one is the best for you!

Hot Storage Wallets

Many experienced traders prefer hot wallets because they are quickly accessible and easy to carry around. They do so even if these wallets are highly vulnerable to hacking attacks. Here are some examples of hot wallets:

  • Exchange wallets
  • Desktop and mobile wallets
  • Multi-Signature wallets

You may opt for any of these hot wallets, but eventually, you will have to face the same benefits and downsides that they share, such as:

Benefits of Hot Wallets

  • They provide instant access to your digital assets
  • You can access them on various devices
  • Ideal for entry-level traders

Downsides of Hot Wallets

  • Highly susceptible to hacks
  • Their security also relies on the device where you store them may break, or get stolen

As you can see, there is a delicate balance between the pros and the cons of using hot storage solutions for your cryptos. Here are some of the most popular types of hot wallets that you can choose from:

Exchange Wallets

When you sign up for an account with a cryptocurrency exchange, you receive access to an exchange wallet as well. This type of hot wallet is the most basic form of hot crypto storage, and if you have created an account on Coinbase, as per our instructions, you already have a Coinbase exchange wallet.

You no longer have to go through the hassle of setting up a hot wallet on a third-party site or app. However, having an exchange wallet poses a high risk of malicious attacks on your assets, since exchanges are fighting off hackers regularly. If only one of them succeeds, you may lose your stored cryptos forever.

Desktop and Mobile Wallets

Desktop wallets are somewhat more secure than exchange wallets. They come in the form of an app that you download on your computer. This kind of hot storage solution is easy to install and simple to use. However, you may access it from that computer only. So, if you are on the road, and your laptop is at home, you won’t be able to speculate on a massive event on the cryptocurrency market.

You can overcome this disadvantage by using a mobile wallet. Most of these apps are available and easy to set up on both Android and iOS-running devices. However, being connected to the internet all the time makes your phone and the hot wallet on it very vulnerable to viruses and hacks.

Multi-Signature Wallets

MultiSig wallets are the most secure type of hot storage solutions because they require the signatures (keys) of multiple users to open.

Generally, companies that host Initial Coin Offerings (ICOs) or other forms of fundraising use multi-signature wallets. They ensure both the investors and the developers that one of the organizers will not give in to greed, steal the funds, and disappear.

You may opt for a multi-signature wallet if you and other people that you trust aim to trade cryptos for a specific purpose, and a limited period.

Cold Storage Wallets

If you are not looking to make quick transactions often, and you do not need a wallet readily accessible, then cold storage wallets are perfect for you.

Contrary to hot wallets, a cold wallet is not connected all the time to the internet. It means that it is less prone to hack attacks and that your funds are better protected. There are two types of cold storage wallets:

  • Hardware wallets
  • Paper wallets

Both options are relatively safe for storing your precious virtual money, and both will provide you with similar benefits and downsides, such as:

Benefits of Cold Wallets

  • High protection against hacks, malicious attacks, and viruses
  • An ideal solution for long-term crypto storage

Downsides of Cold Wallets

  • Not suitable for daily transactions
  • Impractical for on-the-spot trades
  • Not ideal for entry-level traders

If you are extremely fearful of losing your first crypto investments in a hack attack, you may opt for cold wallets. However, you will have to give up the user-friendly factor to gain that maximum level of security.

Hardware Wallets

A hardware wallet is a physical device, usually a USB stick specifically formatted to support cryptocurrency, which you can use as a storage unity for your digital assets.

Pros of Hardware Wallets

  • Easy to carry around everywhere you go
  • Extremely safe and almost impossible to hack
  • The device has a microcontroller that uses a high protection protocol, which prevents the private key from being transferred to another device
  • It can store multiple addresses
  • It features pin code protection

Cons of Hardware Wallets

  • It easy to steal or lose, if you don’t guard it properly
  • It is susceptible to physical damage
  • It can only store a limited number of cryptocurrencies

As long as you take great care of it, a hardware wallet can keep your cryptos safe and sound almost indefinitely. Two of the most popular hardware wallets out there are Trezor and Ledger Nano S.

Paper Wallets

This cold storage solution is exactly what its name says – a paper that contains the address and your private key in print form. Most paper wallets also come with QR codes printed on the paper, and which you can scan to get quick access to your funds.

Needless to say, the only person that should ever lay their eyes on it is the owner of the wallet, respectively.

The biggest advantage of paper wallets is security. Unless you lose or share that paper with someone else, your funds will forever be inaccessible to others.

The downside of storing your cryptos on a paper wallet is that you do not get access to your funds as quickly as you would do with a hot wallet, or even with a cold, hardware one. So, this kind of crypto storage solution is best for when you want to HODL on your assets or just save them for a rainy day.

You can generate your paper wallet on safe websites like

Paper wallets offer some of the best ways to ensure long-term crypto storage. You will want to keep yours in a safe place, and not to forget about it. There are many stories out there about crypto owners who lost a fortune simply by forgetting their private keys, or where they stored them.

After carefully weighing your options, you should opt for a crypto wallet that best suits your needs. From there on, you can start trading cryptocurrency.

3.     Cryptocurrency to Cryptocurrency Trading

Now that you have traded fiat money for virtual currency on a crypto exchange, and stored it in a wallet of your choice, you can move ahead to the last part of our guide, and learn how to trade a cryptocurrency for another.

For an easy understanding of the process, we will discuss crypto to crypto trading on one of the most popular exchanges in the world, Binance. Let’s get started!

Creating an account on Binance

The process of signing up on Binance is just as easy as creating an account on Coinbase in one of the previous steps, and it goes like this:

  1. Go to binance.com and tap on “Register”
  2. Enter your Email and create a password
  3. Pass the “I am not a robot” verification
  4. Open the confirmation email that you should instantly receive from Binance
  5. Go through the Safety Risk Notice

Done! At this point, you should be redirected to your dashboard, which is a user-friendly interface with plenty of stats and widgets where you can follow your performance on the platform.

Trading on Binance

Binance makes crypto-to-crypto trading easy. The exchange even has a native token, Binance Coin, which you can use in transactions and enjoy numerous benefits, such as:

  • Discounts for the trading commissions
  • Smaller withdrawal fees
  • Discounts for commission lists
  • A 50% discount that is available for your first year of membership

Trading cryptos on Binance is straightforward. This guide will give you a complete overview of the process. However, if you wish to try your luck on other exchanges, you can have your pick from:

Bittrex

KuCoin

Huobi

Understanding Cryptocurrency Charts and Metrics

Trading cryptocurrency for the first time may seem overwhelming. You have to check out the latest trends and news about the cryptos you wish to trade. You also need to understand charts, figures, metrics, and indexes, some of which require in-depth analysis and remarkable intuition.

You most probably just want to try your hand at the trading cryptocurrency, and see if it is something worthy of your investment portfolio. So, not mastering all of these aspects of the trade at first will not impede your operations too much. You will discover most of them as you move forward and trade regularly.

To give you an easy start in crypto-to-crypto trading, we will discuss a few of the standard elements that you will find on a cryptocurrency exchange.

The Japanese Candlestick Charts

This chart is the basic indication of a cryptocurrency’s trend, and you will find it on most exchange platforms. It looks like a chain of red and green candlesticks, and each one shows the price movement of the asset during a specific time interval.

Here’s how to interpret a Japanese candlestick chart:

  • Every candle has a body and a couple of shadows that are sticking out of it
  • The body shows you the difference between the opening and closing price
  • The shadows show you how high or how low these opening and closing prices have moved
  • In a green candle, the upper shadow is the close price while the lower shadow is the open price and vice-versa for red candlesticks

Once you learn how to read this chart, you will be able to identify the movements of the market and distinguish various patterns for one or more cryptocurrencies. Using this data and your intuition, you will be able to predict future movements as well.

The Relative Strength Index (RSI)

The Relative Strength Index or RSI is the tool that measures the strength and speed of a market’s price movement by comparing the current price of a cryptocurrency to its past performance.

The RSI also indicates the degree of recent increase or loss in value for a specific cryptocurrency, and therefore, proving if it has been overbought or oversold.

Usually, the exchange calculates the RSI of a cryptocurrency for you, and you can use the result to determine how you will trade next. You should always take into account RSI, as it can show you if the cryptocurrency you are trading is on an upward trend or the brink of a slippery slope.

The Bottom Line – How to Trade Cryptocurrency

Trading cryptocurrency in 2020 is much easier than in the previous decade. Nowadays, there are plenty of guides and resources that spoon-feed you the information you need when you first access the crypto market.

Today, the cryptocurrency industry is solid. It features world-renowned assets, high-end investors, and reliable exchanges. It is a reliable alternative to other financial markets, and hopefully, one that will not struggle through the imminent economic crisis.

Learning how to trade cryptocurrency does not only give you an extra means of income. It also helps you become an all-around investor and a potential beneficiary of one of the most profitable markets of the future.

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