How to trade cryptocurrency

04-Jan-2023

Cryptocurrencies disrupted the world of finance when they were first introduced. Completely digital, some unregulated by governments or central banks – they seemed poised to become the 21st century’s favoured form of money. To a certain extent this was true – traditional economists scoffed at the idea of cryptocurrencies, only be shocked when the first credible online retailer started accepting them as payments.

For traders, cryptocurrencies present an unprecedented type of trading with substantial price movements and frequent volatility. This is one of the primary benefits of trading cryptocurrency CFDs as they allow you to trade both upwards and downwards movement. Of course, as with any instrument or period of high volatility extra caution should be exercised to avoid risk.

Luckily, easyMarkets offers multiple risk management, trading tools and advantageous conditions to help. If you would like to further protect yourself by enriching your trading knowledge. Explore our easyMarkets Academy that features 9 lessons that feature knowledge tests at the end of each unit.

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What are cryptocurrencies?
How does cryptocurrency trading work?
How to start trading cryptocurrency with easyMarkets

Trading on easyMarkets Platform
Factors that affect cryptocurrency prices
Cryptocurrency FAQs

What are cryptocurrencies?

As mentioned in the introduction cryptocurrencies are purely digital currencies. Unlike FIAT currencies that are issued by governments and central banks, which usually have notes and coin denominations, cryptocurrencies are saved in digital wallets, bought, sold and traded on cryptocurrency exchanges online.

These cryptocurrency exchanges work like stock markets, where buyers and sellers come to a consensus on price to perform a transaction.

There are numerous cryptocurrencies. Some are well established and widely adopted, such as Bitcoin and Ethereum. Some less so, like the cryptocurrency created by Kodak, called KodakCoin, which was intended to help manage pictures and pay photographers for their rights. They even launched their cryptocurrency with a proprietary mining rig called the Kodak KashMiner. At least their branding was on par.

How does cryptocurrency trading work?

Just like other exchange markets, cryptocurrency exchanges perform two transactions; buying and selling. To buy a unit or denomination of a cryptocurrency, first you will have to figure out what kind of cryptocurrency wallet you’d like: desktop, mobile, paper or hardware.

Desktop wallets are pieces of software that you can download to your personal computer, but your PC’s security needs to be very high or you risk your wallet being hacked.

Mobile wallets can be installed to mobile devices, and again security should also be of very high concern.

Hardware and paper wallets are inherently much more secure than the previous types as they have no external connections. Unfortunately, they have other disadvantages. If you lose them, you may not be able to recover your cryptocurrency assets.

Then, when you want to trade, you must decide whether to leave your cryptocurrency in the exchange account, where it could potentially be vulnerable to hackers, or keep it in your wallet, which depending on the type you use; could be vulnerable or could be lost.

This is one of the great benefits of trading cryptocurrency CFDs; due to the fact that CFD traders are not obligated to own the underlying asset, they can both buy and sell an instrument almost immediately. There are other benefits to trading cryptocurrencies CFDs but we’ll cover those in a later section.

How to start trading cryptocurrency with easyMarkets

Unlike the multiple steps involved with owning and trading actual cryptocurrencies, trading CFD cryptocurrencies is much simpler.

To trade cryptocurrencies with easyMarkets markets, you can sign up with just your email, deposit and trade. At some point, for your own protection, you will be asked to provide KYC documents and information about your knowledge, experience and financial profile which you can do so via our convenient and secure tool.

After you sign up and deposit you are ready to start trading with easyMarkets. When trading on easyMarkets web platform and app, you will have access to innovative and exclusive tools and conditions.

Protect your account

dealCancellation*

Undo losing trades within a specified amount of time for a small fee.

Free Guaranteed Stop Loss & Take Profit

You can protect your account by setting the highest and lowest levels you are comfortable with

Trade in completely new ways:

easyTrade*

Set up quick hedges to help mitigate risk during events or announcements

Freeze Rate

Pause live rates momentarily so you can open and close trades

Trading on easyMarkets Platform

easyMarkets has invested a large amount of research and development to create a trading platform that is both intuitive for new traders, but powerful enough for experienced demanding traders.

To the right you will find all the instruments you can trade, with live rates. The center of the platform is the “trading area”. The tabs at the top give you four options of order types or ticket types:

Day Trade

Straightforward buy or sell order, popular with day traders or high frequency traders. This trading ticket also features Freeze Rate and dealCancellation.

easyTrade

This is something that to their detriment many beginners overlook, currency markets move frequently and rapidly. Knowing what affects these markets and what times volatility is higher can help you avoid these movements or even take advantage of them.

Forward Deals

Lock in today’s rate for a future date up to 30 days. Usually used as a hedge against future volatility.

Pending order

Set a rate you would like your trade to open at. The trade will be executed when that rate is reached, at which point “turns” into a day trade.

To the right of the “trading area” is the “analysis area”. Here you can choose between charts, market news, signals and a financial calendar. When in chart view mode, you have a choice of adding indicators, overlaying other instruments (compare), changing time frames and chart type. You can also save your indicators and overlays with the “templates” option.

You see open trades in the section directly below the “trading area” with each ticket occupying their own tab with an option to see all of your positions under “See All” tab. If you have activated dealCancellation and would like to undo your losing trade, the rate will show in red and the numerals will be struck out. Click on the red rate (button) and undo the trade, recovering your funds.

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Factors that affect cryptocurrency prices

There are numerous factors that influence the price of cryptocurrencies. One of the biggest motivators of the price is supply and demand. Here are a few more factors:

Government regulation or trading restriction

Market sentiment

Upcoming forks

Government Regulation or Trading Restrictions

Market Sentiment

As mentioned above cryptocurrency prices are largely moved by supply and demand. News and coverage (which was seemingly ceaseless during the Bitcoin Bull run) can cause a surge of speculative trading, making the price jump, or inversely a drop if the news is negative.

Upcoming Forks

If a disagreement amongst the community exists, then the fork might result in a completely separate cryptocurrency – like Bitcoin and Bitcoin Gold. Of course, this is a simplified version of what happens during a fork; for a more in-depth explanation you can visit this link.

Cryptocurrency FAQs

What is a crypto CFD?

Crypto CFDs are a type of trading vehicle which follow the price of cryptocurrencies. They allow you to trade the price of cryptocurrencies without obligating you to own the underlying asset. This not only makes the process of trading cryptos is simpler and more immediate, but it also protects you against exchanges being hacked, your cryptocurrency wallet being lost, or being stuck with a cryptocurrency asset that is quickly becoming devalued.

How much do I need to start trading cryptocurrency?

You can start trading with just $25. That is easyMarkets minimum deposit and with easyTrade, one of easyMarkets proprietary ways to trade, you can start trading cryptocurrencies almost immediately. Another great benefit is that easyTrade allows you to set the maximum amount you are willing to risk, without putting a cap on your potential.

What is leverage trading in crypto?

Leveraged trading cryptos are only available when trading CFD cryptos or cryptocurrencies. Leverage basically increases the size of your trade. For example, if you have a $5 trade with 1:10 leverage, you are instead trading with the equivalent of $50.

Of course, this does increase your risk (or exposure to the market) as it “amplifies” price movements, both positively and negatively. When using leverage your broker will also require you to a certain amount of funds in your account, called margin, a type of collateral for the leverage they are offering you. This amount remains in your account and is freed when you close your trade.

Is crypto trading safe?

As with any type of trading risk is involved. No type of financial trading or investing is completely safe. That being said there are two ways to avoid unnecessary risk: first, read easyMarkets cryptocurrency trading book for beginners to learn everything you can about the market and instrument you are trading. Second, trading with a creditable CFD broker will help you avoid the risk associated with potentially losing your wallet or the exchange you are using being hacked.

What is the difference between trading cryptocurrency and forex?

The difference between FOREX CFDs and cryptocurrency CFDs are primarily the instruments involved. In Forex, the instruments involved are FIAT currencies or currencies issued by Central Banks from around the world. When trading CFD cryptocurrencies only one of the two instruments in the pair is a FIAT currency, and the other is a cryptocurrency. When trading with easyMarkets cryptocurrencies are traded against USD.