Cryptocurrency is a marvel of the digital world. It has revolutionized online payments for millions and captivated investors’ interest with how rapidly it can grow in value. Learn how to trade cryptocurrency in this guide.

WHAT IS CRYPTOCURRENCY?

Cryptocurrency is a non-physical currency that facilitates financial transactions – you can use it to make online payments for goods and services. Also known simply as ‘crypto’, types of cryptocurrency include Bitcoin and ether.

All cryptocurrencies are decentralized as they operate on blockchain technology. So, they’re not backed by the government or any other central authority. This means increased efficiency through factors such as cutting costs, e.g. overhead costs and transaction fees.

Cryptocurrency has been around for over ten years and has seen a general spike in value – to the delight of investors. The record of ownership of cryptocurrency is stored on a blockchain, where transactions between users’ digital wallets are added.

While crypto is almost in its teen years, it’s safe to say that it’s far more volatile than the average adolescent. This means more opportunities to trade these types of financial assets.

CRYPTOCURRENCY TRADING STEPS

Understand how cryptocurrency trading works
Pick a type of cryptocurrency to trade
Open a trading account
Create a trading plan
Open, monitor, and close your first position

FIND OUT HOW TO PLACE A CRYPTO ORDER

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^{step one}Understand how cryptocurrency trading works

Getting a solid understanding of how cryptocurrency works is fundamental to enhancing your probability of success when trading it. Early investors had the last laugh as the value of crypto surged through the roof over the years. The grass may have been greener, but it’s important to consider current market conditions, along with possible impacting factors when making trading decisions as any cryptocurrency could always go either way.

Trading cryptocurrency means that you’re speculating on the price movements of non-physical currencies. As a tastytrader, you can go long on cryptocurrency if you think that the price will go up. You’d make a profit if you predicted the price movement correctly. But if the price moves against your position, you’d incur a loss.

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LEARN MORE ABOUT TRADING CRYPTOCURRENCY

TRADING CRYPTO: GOING LONG

^{step two}PICK A CRYPTOCURRENCY TO TRADE

Once you’ve done your research, you can take your pick from tastyworks’ selection of non-physical currencies to speculate on its future price.

With a tastyworks account, you can get exposure to these cryptos.*

Aave (AAVE)
Basic Attention Token (BAT)
Bitcoin (BTC)
Bitcoin Cash (BCH)
Cardano (ADA)
Chainlink (LINK)
Compound (COMP)
Dogecoin (DOGE)
Elrond (EGLD)
Enjin Coin (ENJ)
EOS (EOS)
Ethereum (ETH)
Kyber Network (KNC)
Litecoin (LTC)
Maker (MKR)
OMG Network (OMG)
Paxos Gold (PAXG)
Polkadot (DOT)
Polygon (MATIC)
Shiba Inu (SHIB)
Solana (SOL)
Stellar (XLM)
Tezos (XTZ)
Uniswap (UNI)
0z (ZRX)

DOWNLOAD THE TASTYWORKS COIN BIBLE TO LEARN MORE

While Bitcoin is the most popular and has the largest market cap worldwide, ether seconds it in terms of market capitalization.

* You can trade the CME Bitcoin and Micro Bitcoin futures contracts with tastyworks – the other cryptocurrencies listed here are the actual coin. SMFE crypto equity futures are also available.

^{step 3}OPEN A TRADING ACCOUNT

TRADE CRYPTOCURRENCY WITH THE BEST
‍Enjoy your non-physical currency trading journey with America's best online broker¹
MAKE YOUR CAPITAL GO FURTHER
Have your commission capped at $10 when trading cryptocurrency²‍
CHOOSE YOUR PREFERRED INTERFACE
Use desktop, browser or mobile on the fast, reliable and safe tastyworks platform

^{step 4}
CREATE A TRADING PLAN

Creating a trading plan is a must for anyone taking positions on the markets. You can document precisely what you hope to achieve and how you’ll do it using a trading plan. When thinking about this, there are some essential aspects to bear in mind.

CONSIDERATIONS FOR CRYPTO TRADING PLANS:

Choosing an asset, e.g. cryptocurrency, and looking at the types of the instruments you’re interested in. In this case, you could consider non-physical currencies such as Bitcoin, ether and Litecoin
Considering trading styles, e.g. day trading, and deciding on strategies to employ, such as trend trading or scalping
Planning your position sizes carefully based on the capital in your account means you can boost your capital efficiency while limiting your risk
Knowing what the various futures product price ranges are means that you can allocate money to trades more accurately, also boosting capital efficiency
Aligning with your risk appetite using tools such stop orders and limit orders as well as adjusting your position size
Taking advantage of binary events through news trading, taking positions based on occurrences and related developments that might affect the markets
Thoroughly checking whether the relative price movements of a product are slow-moving or rapid, regardless of volatility generally being high in the crypto market
Limiting losses in case of correlated positions by deciding on ways to hedge them
Sticking to your specifications on when to enter or exit a trade affects the affordability of other trades as well as how much of your capital you’re risking
Frequently monitoring your positions and your overall portfolio, and finding your ideal time intervals to do this; plus, you can supplement this with automated orders

An iron condor uses four options at different strikes, making it a defined risk strangle:

Sell 1 OTM put with a strike price closer to the current price
Buy 1 OTM put with a strike price below the short put strike price
Sell 1 OTM call with a strike price above the current price
Buy 1 OTM call with a strike price above the short call strike price

^{Step 5}
OPEN, MONITOR AND CLOSE YOUR FIRST POSITION

Do your research on cryptocurrency trading
Create a tastyworks account or log in
Enable cryptocurrency trading
Create a trading plan and manage your risk
Select the type of cryptocurrency you want to trade
Open, monitor, and close your first position

SELECT 'ASK' TO GO LONG

LIMIT THE ORDER TYPE

Cryptocurrency Trading Examples³

The outcome of a trade is everything - let's look at some cryptocurrency trading examples and how direction makes all the difference.

SCENARIO A

Suppose the price of Bitcoin is $45,000. You’re bullish – so, you take a long position on 2 coins. The price rises to $50,000, at which point you close your position. Since your prediction was correct, you’d make a profit. The price went up by $5,000 – for 2 coins, that’s a profit of $10,000.

SCENARIO B

Now imagine you’re bullish on ether and its price is currently at $4,000. You take a long position on 3 coins. You close the position when the price drops to $3,500. As your prediction was incorrect, you’d incur a loss. In this case you’d lose $500 per coin, which means $1,500 in total.

Cryptocurrency inveesting vs trading: what's the difference

Cryptocurrency investing and trading differ in a number of ways, e.g. you cannot hedge your portfolio with an investment, but you can with trading.

Let’s look at some of the key differences between the two.

INVESTING IN CRYPTOCURRENCY

Fewer longer-term investments
Subject to introductory limits, maximum deposits as well as additional costs like deposit and withdrawal fees
Have to buy the coins (taking ownership of the underlying asset) and hold them in digital wallets
Fundamental analysis

TRADING CRYPTOCURRENCY

Many shorter-term positions
Not subject to introductory limits, maximum deposits, and deposit and withdrawal fees
Trading the spot price of the coin itself (not buying actual coins and holding them in digital wallets)
Technical and fundamental analysis

HOW TO TRADE CRYPTOCURRENCIES SUMMED UP

Cryptocurrency, also known as 'crypto', is a non-physical currency that enables you to make financial transactions online, e.g. paying for goods and services – you can also trade or invest in it
Cryptocurrencies operate on blockchain technology, where ownership and all transactions are recorded
Cryptocurrency was invented over a decade ago – it’s a volatile market that has seen a general spike in value
Creating a trading plan helps you pinpoint precisely what you hope to achieve and how you’ll do it
Investing and trading are both ways of getting exposure to the cryptocurrency market, but they differ in a number of ways

¹Named the Best Online Broker by Investor’s Business Daily (IBD) in its ninth annual survey.

²Commission on smalls futures is $0.25 per contract. Some additional applicable commissions are capped at $10 per leg on equity option trades and $10 per opening and closing cryptocurrency trades. See tastyworks full commission fees.

³The cryptocurrency trading examples exclude additional fees.

tastyworks, Inc. and tastytrade, Inc. are separate but affiliated companies.

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How to Trade Cryptocurrency