Cryptocurrency trading is one of the most lucrative ways to generate passive income today. The growing cryptocurrency craze has made it even more enticing for investors to invest in.
However, many investors and traders have yet to master crypto trading and its market, from how it works to the overall security of the market.
This article guides you on how to trade cryptocurrency if you’re a beginner. Read on and start your lucrative journey with crypto trading.
What Is Cryptocurrency Trading?
Cryptocurrency trading is a form of online investment wherein you buy and sell digital coins based on your speculated market price direction.
To enter the crypto market, you can trade on derivatives or a cryptocurrency exchange like Binance, CashApp, or Coinbase.
Derivative trading involves Contract for Difference (CFD). This means that you don’t own the underlying digital coin. Rather, you and your broker entered into an agreement that allows you to speculate on the short-term price movement, enter a trade, and either profit or incur losses, which is based on the difference between the open and closing price of the asset.
Meanwhile, trading on a crypto exchange means you hold the ownership of the cryptocurrency. This type of trading mostly mirrors HODLing, where you hold your cryptocurrency over an extended period and take advantage of its long-term value.
Note: A cryptocurrency in the crypto wallet can also be used as a payment method. Today, many businesses accept payments using several popular cryptocurrencies.
A crypto trader can go long (buy) a cryptocurrency will appreciate over the period of your trade. Meanwhile, if you think that the cryptocurrency will deprecate, you can go short (sell) to profit from the price movement.
Remember, profitable cryptocurrency trading is all about timing the price direction right like in any financial market.
How to Trade Cryptocurrency
There are many ways for investors to start trading cryptocurrency. This involves trading on a CFD or on a crypto exchange. Investors can even use cryptocurrency on options trading, where they enter a crypto trade at a predetermined price, which is better than the prevailing market.
Here are the five (5) easy steps to kickstart your crypto trading journey. Remember, this guide is applicable regardless of your crypto trading style.
Step #1. Look for a broker or a crypto exchange
The first thing you need to do before you can trade cryptocurrency is to find an avenue to do so. This can be by trading CFD with an online broker or by buying cryptocurrency on a crypto exchange.
Remember, these two are your only gateway to the cryptocurrency market. Without using the service of an online broker and an exchange, you wouldn’t be able to speculate, enter, and profit from the market.
There are several brokers in the market that offer crypto trading. For crypto exchange, here are the most common and the largest ones that even beginner traders can use:
- Binance
- Coinbase Exchange
- Cryptocurrency.com
- Kraken
- KuCoin
- Gemini
When you’re choosing which online broker or crypto exchange to use, you should confirm whether they comply with any regulatory body.
First, look at the business’ registration to see if it is a certified financial service provider. Second, check if a regulatory agency is underseeing the operation of the service provider. Lastly, scrutinize the terms and conditions to see whether the service is right for you.
Once you’ve decided on an online broker or crypto exchange, you should open an account. For online brokers, it’s best to choose one that offers a demo account, especially if you’re a beginner. This way, you can familiarize yourself with the market because it allows you to trade in a live environment using virtual funds.
Step #2. Deposit funds to your account
After you’ve opened an account with an online broker or a crypto exchange, you shall then need to deposit your trading capital into your account. You can deposit money into your trading account by connecting your bank to your broker or crypto exchange.
Remember, your trading capital cannot be withdrawn once deposited. The moment you exhaust your trading capital, you can always deposit more into your account.
Also, most online brokers have a minimum capital requirement for their clients’ first deposit.
Step #3. Research the best crypto to trade
Deciding on which cryptocurrency to trade can quickly become overwhelming. Remember, like any financial securities, different cryptocurrencies have unique quirks and drawdowns that you must consider.
Say you have a big risk appetite, large trading capital, and huge investment goals. With this, you have the liberty to trade in a highly volatile and risky cryptocurrency market. This includes the Bitcoin and Ethereum markets.
If you’re a beginner trader or if you have a relatively small trading account and risk tolerance, it’s best to trade cheap and low-volatile markets to weather short-term market fluctuations.
Step #4. Pick a trading strategy
Picking a trading strategy must be based on several parameters. This includes your trade itself, the prevailing market condition, the duration of your trade, and your overall financial objectives.
Here are the common crypto trading strategies:
| Duration | Strategies |
|---|---|
| Short-term trading | Scalping Day trading Swing trading Trend trading |
| Long-term trading | Buy and hold (HODL) Index investing |
Remember, there are more trading strategies out there for you to use. Make sure that the trading strategy you choose aligns with the prevailing market conditions, your risk tolerance, and your overall trading objectives.
Step #5. Store your crypto in a crypto wallet
Say you plan to hold your cryptocurrency. In this case, you need to open an account with a crypto exchange, use their crypto wallet, and store your digital coins in it. It’s like a digital wallet like PayPal, but for cryptocurrencies.
Remember, when you trade cryptocurrency on derivatives or CFD, there’s no need for you to open a crypto wallet because there’s no crypto for you to store. Always keep in mind that in CFD trading, you don’t practically own the underlying cryptocurrency.
Best Cryptocurrencies to Trade for 2024
Honestly, the cryptocurrency market has been saturated with the emergence of digital coins to the market.
But don’t fret, here are the best cryptocurrencies to trade this year. If you manage to properly time the market, you’ll see yourself profiting from your trade position.
Bitcoin (BTC)
Bitcoin, first introduced to the market in 2009, is the oldest and most heavily traded cryptocurrency in the financial market.
It first started as a decentralized peer-to-peer digital money transaction without the need for intermediaries like banks and financial institutions. It’s the first cryptocurrency that solved the risk of double spending, a fraudulent act of using a single unit of cryptocurrency twice or more.
As of writing, the Bitcoin market has had its all-time-high (ATH) of $69,324, which was recorded last March 2024. The cryptocurrency has a capitalization of $1.153 trillion, making it the largest cryptocurrency in the market.
Ethereum (ETH)
Introduced in 2014 by Vitalik Buterin, Ethereum has become one of the key players in blockchain technology.
Ethereum is a decentralized, open-source, and distributed computing platform that enables the creation of smart contracts and decentralized applications, also known as D-Apps.
Today, Ethereum has recorded an all-time-high (ATH) of $4,858 in November 2021. The ETH market is the second largest in the crypto market, with a capitalization of $359 billion.
Tether (USDT)
Unlike Bitcoin and Ethereum, Tether is a stable coin that is pegged to the value of the USD. Whatever the market condition is, the value of USDT will always follow the dollar.
It falls under the categorization of a stablecoin because it is pegged to the USD, and the USD is known for being a stable or safe haven currency.
Wait, what does “pegged to USD” mean? Well, it simply means that 1 Tether should and can always be traded for $1.
Today, USDT is the third largest cryptocurrency in the market, with a market capitalization of $110 billion. Also, its market is the largest among all the stable coins out there.
Binance Coin (BNB)
I know you’re already familiar with Binance, the leading crypto exchange as of 2024. But did you know that Binance has a native cryptocurrency?
Binance Coin (BNB) was originally used as a token in the exchange, primarily used to pay fees in the Binance Exchange. But today, it’s more than just a token because investors have started using BNB as a financial security that they can trade.
The BNB market has a capitalization of $87 billion, making it the fourth largest cryptocurrency. As for the record, the BNB market had a $686.31 ATH last May 2021.
Fun fact: Binance regularly performs Burning, where the company permanently destroys BNB to keep the supply of the digital coin low. This mirrors the essence of Bitcoin Halving.
Dogecoin (DOGE)
Created in 2013, Dogecoin has the most interesting introduction to the cryptocurrency market. It started as a joke, featuring the dog in the Shiba Inu meme. But today, the first-started-as-a-joke digital coin has become one of the most notable cryptocurrencies.
As of writing, Dogecoin has a market capitalization of $18.9 billion, ranking 8th as the largest cryptocurrency today.
For beginner traders, investing in Dogecoin is a good choice because it is relatively inexpensive, and its market movement greatly relies on market sentiment, including social media hype and trading activity.
Cryptocurrency Trading Platform in South Africa 2024
There are a growing number of cryptocurrency trading platforms and exchanges in South Africa today. When choosing which one to use, ensure you’re aware of its regulatory compliance to ensure you’re backed by a regulatory body when facing a dispute against your service provider.
Here are the crypto trader’s favorite platforms:
| Trading Platform | Website |
| VALR | https://www.valr.com/ |
| Binance | https://www.binance.com/ |
| Kraken | https://www.kraken.com/ |
| Yellow Card | https://yellowcard.io/ |
| Coinbase | https://www.coinbase.com/ |
Frequently Asked Questions
How Much to Start Trading Cryptocurrency
Your trading capital for your first crypto trade must solely be based on your preference. If you’re confident with your skills, you have the liberty to put in huge capital. However, if you’re new to trading, starting small is wise to avoid too much risk exposure.
Moreover, the broker and exchange requirements are another significant consideration for your starting capital.
How to Make Money by Trading Cryptocurrency
You can make money with crypto trading by riding the short-term market fluctuation or by holding the cryptocurrency to profit from the long-term value appreciation of the digital coin.
What Is a Cryptocurrency Wallet?
A cryptocurrency wallet functions as any digital wallet out there. Essentially, a crypto wallet is used by crypto owners or traders to store and secure their digital coins by allowing you to manage your crypto.
What Is an Altcoin?
Also known as Alternative coin, altcoin is an umbrella term for all cryptocurrencies that are not Bitcoin or Ethereum. Today, there are more than 13,000 altcoins in the crypto market.
Is Cryptocurrency Trading Profitable in South Africa?
Yes, the lucrative nature of crypto trading is also enjoyed by South African traders. However, the profitability of your trades depends on your market analysis, methods of placing orders, and other essential trading strategies.
