What is Cryptocurrency Trading? How it works?

What is Cryptocurrency Trading? How it works?

Before the advent of digital currency — like cryptocurrencies, conventional currencies dominated the world of finance. However, since the beginning of Bitcoin In 2009, cryptocurrency became a popular and rapidly growing alternative means of payment and trading. Many investors and companies across the world have adopted cryptocurrency because of its many advantages.

If you want to start trading cryptocurrencies, it would be better to understand cryptocurrency and everything related to it. This article will provide a step-by-step guide on how to trade cryptocurrencies.

What is cryptocurrency about?

Before we delve into cryptocurrency trading, let’s start with the basics of cryptocurrency.

Cryptocurrency is any digital currency that secures transactions through Encryption. Therefore, cryptocurrency derives its name by merging “cryptography” and “currency”. Cryptocurrency is purely virtual and exists only as digital records in an online database.

Cryptocurrency encryption is a series of complex algorithms that ensure security and verify transactions. The basis of cryptography is Blockchain technology.

Blockchain is a digital ledger that records replicas and distributes transactions across a computer network. When you receive or transfer cryptocurrency funds, transactions are recorded in this ledger.

Each block contains some distributed transactions being linked by cryptography. So if a block in a chain changes, it will be discovered. Therefore, this technology makes it difficult for hackers to manipulate the system.

Unlike traditional currencies, cryptocurrency is decentralized and works without third-party intermediaries. This means encryption works without banks, government or other financial bodies. This makes cryptographic transactions fast and efficient, but prone to illegal activities or fraudulent.

Cryptocurrencies are called “currencies” and are stored in a digital wallet. Interest in cryptocurrencies has increased because they can be used as investment instruments and traded for goods and services.

Furthermore, some decentralized financial networks rely on cryptocurrencies for their operations as they use Tokens as tools for making transactions.

What is cryptocurrency trading?

What is cryptocurrency trading?

Cryptocurrency trading is buying and selling cryptocurrency coins through an exchange or brokerage. Cryptocurrency trading is also speculating on cryptocurrency price trends through CFDs.

Like stocks and other financial markets, cryptocurrency trading can be complicated and requires knowledge.

Cryptocurrencies are high risk and highly volatile. Once you learn to time the market, study trends and speculate accurately, you can earn high returns in a short time. However, you can lose your money quickly if you don't understand the market.

Cryptocurrency investing is a somewhat speculative investment and may not be suitable for all investors.

The potential for high returns in the long run may be vague, as no one can determine the outcome in the future. However, you can invest in cryptocurrencies if you have high risk tolerance and good speculation.

Pros and Cons of Cryptocurrency Trading


  • Cryptocurrency can be used as an alternative means of exchanging value. Trading becomes flexible and straightforward.
  • Security and protection are provided by Blockchain technology. Blockchain also avoids double spending.
  • Cryptocurrency provides a more transparent and accountable financial system. This makes cryptocurrency trading reliable.
  • In cryptocurrency trading, there are no fixed market hours. The cryptocurrency market is available and accessible 24 hours a day.
  • Cryptocurrencies are more liquid than other investment vehicles. As a result, transactions are quick and easy.


  • Cryptocurrency wallets on exchanges (exchanges) can become prone to cyberattacks. As a result, you may lose your capital and investments.
  • There is high volatility in cryptocurrency and high risk involved in cryptocurrency trading.
  • Learning about cryptocurrencies takes time and effort.

Is cryptocurrency trading legit? Is it Regulated?

The legitimacy of cryptocurrency trading depends on the type of country. While some countries accept and adopt cryptocurrencies, others prohibit their use.

Cryptocurrency is still a new invention. Thus, government authorities and regulatory agencies around the world are working to understand its nature.

The decentralization of cryptocurrencies can pose some legal risks for cryptocurrency users. Thus, it would be wise to confirm the legitimacy of cryptocurrency trading in your country before starting to trade.

Before the advent of digital currency — like cryptocurrencies, conventional currencies dominated the world of finance. However, since Bitcoin's inception in 2009, cryptocurrency has become a popular and rapidly growing alternative means of payment and trading. Many investors and companies across the world have adopted cryptocurrency because of its many advantages.

Although it is called a digital currency and can be exchanged for goods in some establishments, Bitcoin (BTC) is not legally considered a currency in Brazil. The asset is also not part of the Brazilian Payments System, nor does it fit the definition of the central bank of payment modalities. So far, the Central Bank has not even signaled any intention to lead a movement to regulate Bitcoin and other digital currencies.

Can I do Day Trade trading?

Cryptocurrency trading is a high-risk strategy of buying and selling cryptocurrencies on the same day. The dynamics of cryptocurrency markets make it liquid and volatile, making room for day trading.

Unlike actions, the day trading it is unlimited and accessible. That's because in day trading, you don't need to open a brokerage or margin account, which gives you easy access to make short-term trades. However, day trading is high risk and you should trade with what you are willing to lose.

How can I trade cryptocurrencies?

In general, there are three different platforms for trading cryptocurrencies:

Cryptocurrency Exchanges

Cryptocurrency exchanges are likened to a digital marketplace where cryptocurrency traders can buy, sell and convert cryptocurrencies. When deciding on the best cryptocurrency exchange to use, be mindful of pricing, withdrawal options, and security. Examples of cryptocurrency exchanges are Coinbase, Binance and Changelly.


A broker is an individual or company that functions as a financial intermediary between people who wish to exchange goods or services and money. The broker can become a direct seller by buying many cryptocurrencies to sell on their platform.

CFD Brokers

A contract for differences (CFD) is an advanced cryptocurrency trading strategy that can be complex for beginners. It is a contract between a trader and a CFD broker to trade the difference in the value of a financial asset such as cryptocurrency during the trading period.

How to start trading cryptocurrencies — a step-by-step guide

Below is a four-step process on how to start trading cryptocurrencies:

  • Step 1. Choose a cryptocurrency trading platform.

The first step in trading cryptocurrencies is deciding on a reliable cryptocurrency trading platform and opening an account. Some of the best cryptocurrency trading platforms are eToro, Coinbase, Binance and Changelly. These platforms offer a good range of altcoins and are easy to use.

Create an account by providing basic identifying information such as name, date of birth, and email address.

  • Step 2. Start with a minimal investment.

The next thing to do is fund your newly created account. Bank deposits via bank transfers and debit cards are a good way to fund your account.

You can start trading with as little as $100. Remember that you must invest with capital that you are willing to lose. This is because you may not be able to tell the outcome of your first trade. That's why you need a trading strategy.

  • Step 3. Test your strategy.

When you decide what currency you want to trade with, you need to develop and test your strategy. This strategy will depend on the cryptocurrency knowledge you have accumulated.

As a beginner, try downtrend strategies that use low leverage. keep in mind that manage risk is an important skill in trading.

  • Step 4. Learn, Learn, Learn.

You should learn how the cryptocurrency market works and its terms before starting cryptocurrency trading. This is because the cryptocurrency market differs from other financial markets and you can lose your capital.

As a beginner, you need to learn trading strategies. It would be better to have a mentor or financial advisor to guide you through this process.

Best cryptocurrency exchanges

Quick registration

Buy and sell crypto seamlessly at the best available rate with our competitive market liquidity.


Bybit is a Singapore-based trading platform for cryptocurrency derivatives — the contracts that give you the right to buy or sell cryptocurrencies at certain prices in the future.

The Bybit platform is used by over 1,2 million traders. It is very simple to understand, hence the influx of people. With a little practice, you can learn the basics quickly and start making a profit.

Bybit is an attractive cryptocurrency derivatives exchange. The platform has some shortcomings, and its limited ability to convert fiat currencies to cryptocurrencies is a prime example.

But it also has many advantages, like cold wallet storage with multiple signatures. You will be able to trade with leverage and manage your positions with its user-friendly interface.

  • Top 3 derivatives trading volumes
  • Currency and USDT Settled Contracts
  • Reduced risk of price manipulation and settlements
  • high bonuses
  • high leverage
  • Supports anonymity
  • A limited number of trading pairs
  • ByBit is not regulated
Quick registration

Bitfinex is a Hong Kong-operated cryptocurrency exchange that has been in operation since late 2012.


Bitfinex is an experienced Bitcoin exchange with a dark history of hacking and accusations. The exchange is suitable for sophisticated traders with both margin and loan trading options available.

Bitfinex accepts EUR, JPY, GBP and USD as fiat currency deposits. Deposits in fiat currency can only be made by bank transfer.

Tether, a quasi-fiat currency that is informally pegged to the US dollar price, is also supported by Bitfinex.

Bitfinex has the most liquid order book in the world. Traders value high volume because it guarantees a low spread, or the difference between the best bid and asking prices.

Bitfinex has a sophisticated and customizable user interface, 50+ trading pairs (e.g. BTC/LTC) and a variety of order types.

The user interface of the trading platform on Bitfinex can be customized. Advanced graphics capability and API access are also available. These elements combine to make it a popular Bitcoin exchange among experienced traders.

Bitfinex's P2P margin trading platform allows users to borrow and trade with up to 3,3x leverage. Loan terms can be set manually by the user or automatically by Bitfinex.

  • Ethics - paid back all losses to traders who were hacked in 2016 on the exchange
  • High liquidity
  • Allows deposits and withdrawals by bank transfer
  • Suitable for experienced traders
  • Supports over 100 cryptocurrencies
  • High trading fees
  • Not a regulated exchange
  • The customer support team can only be contacted by email
Quick registration

With over 17 million registered users, eToro offers one of the largest and most active trading communities


Innovative platform: eToro has distinguished itself through its social investing platform, an innovative tool that allows users to copy trades from other investors.

Internationally Established: Founded in 2007, eToro has over 20 million users in 140 countries worldwide — and the US is now on that list.

However, while eToro runs multi-asset exchanges (offering stocks, commodities and Forex trading) in other countries, so far US clients can only trade cryptocurrencies on the platform.

Social Trading: EToro's CopyTrader allows you to automatically copy and trade based on the movements of other traders. How it works: You choose an investor you want to copy, and with a click of a button you can start mirroring their positions automatically (with the option of a stop-loss level to limit potential losses).

The minimum amount to copy a user is $200 and the maximum amount is $500.000. Users can copy up to 100 traders simultaneously. Even without using CopyTrader, users can view millions of portfolios, statistics and risk scores from other traders.

  • Offers access to 17 cryptocurrencies.
  • Expanding the educational offer for novice traders
  • Social Trading: Ability to copy trades from popular traders.
  • Free stock and ETF trading
  • Regulated in two high-profile jurisdictions
  • Customer support needs to be improved
  • Internal withdrawal fees
  • Low leverage and higher minimum deposits, but within a reasonable range


Quick registration

Using Binance's native cryptocurrency, the BNB, reduces fees by 25%.


Binance is a household name for anyone who has ever traded cryptocurrencies or was looking for the best cryptocurrency exchange. It's one of the dominant exchanges in the industry, and there are some good reasons for that.

For starters, Binance has some pretty high trading volumes. If you're a novice when it comes to encryption negotiation (or simply negotiation in general), you may not be aware how significant this point actually is!

See, if an exchange has some high trading volumes, that means people really trust the platform, and there are a lot of cryptocurrencies that go through it constantly.

  • A well-known cryptocurrency platform
  • More than 100 different cryptocurrencies available for trading
  • Two-factor authentication
  • It can be a little difficult for beginners.

How much can I earn?

When trading cryptocurrencies, there is no fixed return amount. With the right strategy, patience and investment, you can win big in the long run.

Cryptocurrency market conditions are a significant factor influencing the price of cryptocurrencies and the amount of earnings you will earn. When the market is up, it's easier to make money. When it's down, it can be difficult.

Therefore, understanding the market is a must to include in the trading strategy you employ.


Before the advent of digital currency — like cryptocurrencies, conventional currencies dominated the world of finance. However, since Bitcoin's inception in 2009, cryptocurrency has become a popular and rapidly growing alternative means of payment and trading. Many investors and companies across the world have adopted cryptocurrency because of its many advantages.Cryptocurrency trading frequently asked questions


Can you get rich trading cryptocurrencies?
Yes, if you play your cards right. Trading cryptocurrencies is a high-risk venture — especially day trading, where you buy and sell cryptocurrencies in a short amount of time for short-term returns. This can cause you to lose your capital. But you can also get high returns in a short period if you implement a good trading strategy. Alternatively, “hodling” your cryptocurrency can serve as a long-term investment as the value of coins is expected to increase over time. But the cryptocurrency market is speculative with high volatility. So understanding crypto and a good trading strategy cannot be overemphasized.
How do you trade cryptocurrencies?
As a beginner, it would be best to start trading cryptocurrencies after researching the cryptocurrency market, cryptocurrency platforms and trading strategies. Start by choosing a trusted cryptocurrency trading platform — whether it’s a cryptocurrency exchange or a regulated exchange. Create and fund your account with the least amount you can save. You can choose Bitcoin, Ethereum or any of the available altcoins. Then proceed to implement the trading strategy you learned.
What is the best way to trade cryptocurrencies?
You can buy a cryptocurrency on an exchange, keep it in your digital wallet and wait for the price to increase in value before you can sell it. Alternatively, you can wait for the price to drop so you can buy more coins. On the other hand, you can use CFDs and speculate on cryptocurrency prices. For starters, you can seek guidance from a financial advisor or mentor on effective strategies to earn returns from your cryptocurrency investment.
How much does it cost to start trading cryptocurrencies?
Unlike stocks, you can start trading cryptocurrencies with as little as $100. Experts suggest that beginners start trading cryptocurrencies with the small amount you can afford to lose. This is due to the high volatility of the cryptocurrency market, and beginners are more likely to lose capital on the first test.
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