How to trade cryptocurrency for cash

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Which is better? And, how do you take advantage of this distinction to effectively make your trades? The two terms are often used interchangeably, but they are different. They are only similar to the extent that the end goal is the same — gaining profit from your activities. They are different in that results from trading activities are generally expected within a short to medium-term period. This could be anything from minutes or hours to a few days or weeks.

With investing, the trader is in it for the long haul. As a beginner, you probably want to choose a trading strategy that involves medium to long-term trading and investing. This will typically require more time to research and analyze your trades before committing. Crypto market vs. Stock market The stock market has been around for a long time now, and there is a bunch of literature on the topic.

But, how different or similar is it from or to the nascent cryptocurrency market? Similarities between the crypto and stock market Stock trading and investing tools are more or less the same. This is especially true for technical traders using tools such as charts to analyze the market.

You can use the same tools to perform TA Technical Analysis for trades on either market. Assets denominated using fiat currencies. The crypto market may be innovative and revolutionary with the assets designed to append the current financial system. However, the denominations in the marketplace are still valued compared to fiat currencies similar to the stock market. Trading and investing strategies are similar. In the stock market, traders can choose to day trade, swing, or position trade. They can also opt to buy and hold their assets for the long term.

Similarly, traders and investors in the crypto market can do the same things. Similar market products. The stock market has been around for generations, leading to innovative products such as derivatives and techniques such as using leverage to inflate gains and losses. Those same products and techniques have been ported over to the new age cryptocurrency market. You can now trade Bitcoin futures, options, and leveraged tokens.

You can use leverage on most of your trades on most leading cryptocurrency exchanges, such as Binance , Bitfinex, or BitMEX. The full list of digital asset exchanges with a leverage trading here. Please note: DO NOT trade cryptocurrencies with leverage unless you are fully aware of what you are doing and what risks you face.

Differences between the stock markets and crypto markets Market volatility. Owing to its old age, the stock market is more stable and less volatile. The crypto market, on the other hand, is accustomed to wild price swings. It is pretty normal to see double-digit percentage swings in a matter of hours. Market maturity. Age is a significant factor in trading. The stock market has been around for a long time, while the crypto market is only about a decade old.

This means that market value and trade volume in the former is much larger compared to the latter. The younger age also contributes to the wild volatility experienced in the crypto market. Market assets. In the stock market, you invest in the publicly listed company shares by buying their stocks. In the crypto market, you invest in the idea, the technology, or the currency or token , but not the company if any behind the currency.

This contributes to the minimal volatility we highlighted earlier. In the cryptocurrency market, this is not the case. Why trade cryptocurrencies? Given that cryptocurrencies seem to have more negatives against the stock market but not enough positives, why would you want to trade digital assets?

Well, here are some of the pros below. Benefits of cryptocurrency trading hour trading. As opposed to the stock market that opens and closes at specified times, there is no closing of the cryptocurrency market. Market volatility. This may be seen as both a negative and a positive feature. Traders not investors live off market volatility. The crypto market has this in troves, and this means that as a trader, you will get better trading opportunities with the cryptocurrency market as opposed to the stock market.

Privacy and anonymity. With crypto trading, you have access to decentralized cryptocurrency exchanges. These allow you to trade with self-custody assets when only you have possession of your digital money without the need to submit your identity online.

The multitude of assets. Despite its relatively young age, the crypto market has advanced so much so fast that traders now have access to similar stock market products, including futures, options, leveraged tokens, swaps, CFDs contracts for difference.

Every kind of derivative currently available on the stock market has already been ported over. Easy account opening. In crypto, there is a shallow barrier to entry. You can easily create an account in an exchange and start trading in a matter of minutes. Cryptocurrency trading techniques There are two main techniques to use to analyze and evaluate cryptocurrency. The techniques have existed for generations and have successfully been implemented for traditional financial assets. Often they are used complementary to each other, but it is possible to apply either independently.

Through FA, you will be able to know whether that asset is either overvalued or undervalued at the current valuation. If you can figure out that question, you can then decide whether or not to invest, when, and for how long a period you would look to keep the investment. Fundamental analysis for cryptocurrency involves evaluating two important factors — on-chain and off-chain metrics.

Luckily, with cryptocurrency, most of the networks are public such as Bitcoin and Ethereum making access to these on-chain factors easy. To track both Bitcoin and Ethereum on-chain metrics, you can use Bitinfocharts. This website has loads of crypto-related data and is extremely simple to use and navigate. Off-chain metrics basically include community engagement, exchange listings, government regulations, etc.

TA uses a host of technical indicators to achieve this, including trade volume, moving averages, trend lines, candlesticks, chart patterns, and more. At the end of a technical analysis, a trader should have identified trading opportunities and a potential entry point.

Cryptocurrency technical analysis can work for any trading timeline, from scalping and day trading to long-term investments. FA vs. TA — which is better? It entirely depends on the trader profile. Do you want to be the kind of trader that prefers to get in and out of trading positions multiple times a day i.

Then crypto technical analysis will be your best friend. Instead, do you prefer to research and make informed bets every time i. Then — a mix of both is the way to go. Applying both FA and TA will give you the best chance of identifying the best trading and investing opportunities in the crypto market.

This is because the two techniques complement each other in so many ways. For instance, you may use FA to determine that an asset is worth investing in. What you may not uncover with FA, however, is the right time to invest.

For this, you will have to rely on technical analysis. Conversely, if you are using TA to work out future price movements for a given asset, you can use FA to confirm whether or not the price trend you are witnessing is poised to continue. Therefore, there are advantages to using either technique over the other at various moments in your research, but to have a more complete picture, use both. Cryptocurrency markets When it comes to the available cryptocurrency markets, just like the traditional financial instrument markets, there are two classes: the spot and the derivatives markets.

The spot market is made up of two kinds of traders: Makers — these are the initiators of a trade. As a maker, you list a potential trade on an exchange. For instance, if you want to sell your Ethereum coins, you will open a trade at a particular price point, inviting a potential buyer to fulfill your order. Takers — on the other side of the equation will be the trader that fulfills the order, and these are referred to as takers.

There are makers and takers on either side of the purchase coin. There are makers for both buy and sell orders, and consequently, there are takers for both buy and sell orders. An order book is the ledger on which available orders yet to be fulfilled are recorded. For instance, if you are a buying taker, you could scan through the order book and opt to fulfill take an order that already exists or place an order. The platform will automatically match your purchase order with an already existing sell order.

Note: The derivatives are typically contracts of two or more parties with these contracts deriving their value from underlying assets such as Bitcoin, Ethereum, or other digital assets. Just like their counterparts in the traditional stock markets, there are multiple derivative products in the crypto sphere.

Common crypto derivatives examples are futures contracts , options contracts , contracts for difference CFDs , leveraged tokens , and token swaps. Please note: Derivative instruments should only be used by experienced crypto traders. Cryptocurrency trading strategy To be successful in cryptocurrency trading, you will need an effective trading strategy.

What is it? A trading strategy is simply a plan that you will follow when executing your trades. In this section, we will discuss some of the most common crypto trading strategies. For example Coinbase or Binance. Fund your account. Payment options differ by the exchange. Start trading. You can trade dollars to crypto or crypto to crypto. If you want to trade cryptocurrency you need: Dollars or crypto to fund your account. A cryptocurrency exchange or two to trade on.

For example Coinbase , Bittrex , or Binance. Trade crypto to crypto for example Bitcoin to Ethereum , or Ethereum to Litecoin. Lastly, for storing crypto you need: A cryptocurrency wallet or two. A way to secure it. Please brush up on best practices for securing your crypto account. You can also save even more by holding BNB. Coinbase is a good choice because it acts as a wallet, exchange, and place to trade dollars for crypto and crypto to crypto. In other words, Coinbase is an all-in-one solution for everything noted above!

What Coinbase looks like. To get access to a wider range of coins, a trader or investor may use more than one exchange, doing something like buying Bitcoin on Coinbase using USD, and then sending their Bitcoin to Binance to trade Bitcoin for other cryptos converting back to Bitcoin to sell on Coinbase when they are done.

Watch out for transaction fees though! Gas prices can be expensive. The process is fairly similar for other networks like Binance Smart Chain. Luckily there are some indirect options as well. A cryptocurrency IRA these have drawbacks like fees, but they can be valid choices for long-term investing. A stock that is related to cryptocurrency such as Square, MicroStrategy, Bakkt, or Coinbase these offer indirect exposure to cryptocurrency.

Given the above, this page will focus on getting you started with Coinbase due to its ease of use for beginners and its usefulness for advanced users too. Our Suggestion on where to trade crypto for a newcomer: Use Cash App if you want to keep things simple and just buy Bitcoin, use PayPal or Robinhood if you want a wider but limited selection, use Coinbase if you are ready for real cryptocurrency investing and trading, and lastly once you have mastered Coinbase move onto Coinbase Pro, Binance, and Bittrex to get a wider selection of crypto assets.

Later down the road, if feel like you have mastered trading and risk management strategies, then you may want to consider leverage and derivatives trading, but there is no reason to start there. Trying to do this out of order can lead to real issues, so we strongly suggest learning to walk before you run here. Lastly, at any point in this process, we suggest getting a hardware wallet like Trezor and storing your long-term holdings in your own wallet.

Also, once you learn the ropes, educating yourself on other aspects of crypto like mining and how blockchain and smart contracts work is a good idea too! However, there are a few things to know about trading cryptocurrency beyond what was noted above that can help you go into crypto trading prepared: Trading on an exchange means you need to understand order types.

Unless you are using a broker service like Cash App or Coinbase. If you are trading on an exchange, also make sure you brush up on the concept of slippage. Learn more about order types. Securing your accounts is really important. In crypto if your account gets hacked, or if you lose access to your wallet, you lose everything. There is no way to recover in many situations, so security is super important.

A strong password, 2FA, and other good practices are a must. For exchange protection, I suggest 2fa on a Coinbase account with whitelisting turned on in Coinbase Pro this would force a hacker to not only get past your 2fa, but to spend time turning your whitelisting off to steal your coins.

Lastly, secure password programs like Last Pass help. Learn more about securing your crypto accounts. The cryptocurrency market is insanely volatile, but TA Can Help. You can make a fortune in a moment and lose it in the next whether you trade Bitcoin, another coin, or even a stock like the GBTC Bitcoin Trust. TIP: If you trade only the top coins by market cap that is coins like Bitcoin and Ethereum , or GBTC, then the chances of losing everything overnight are slim not impossible, but slim.

Other cryptocurrencies are riskier but can offer quick gains on a good day. Newcomers likely want to stick to major coins with good liquidity and avoid margin trading. No better way to blow up your account than to leverage altcoins, but some who dive deep into crypto culture will come along the temptation quickly. Derivatives have their own rule sets. The chance to maximize gains can be attractive, but the risk you take and skill you need make derivatives ill-suited for beginners.

Cryptocurrency trading is a taxable event. There are some nasty traps you could fall into when trading coins. Learn about cryptocurrency and taxes. A cryptocurrency exchange is not part of the regular stock exchange. Neither of these is the same as Wall Street and its exchanges same general mechanics, different specifics, and different entities.

In other words, if you understand order types, security, and what you are trading, you are ready to start trading. NOTE: For more tips and tricks, check out our crypto investing tips and tricks page. TIP: There are a few sides to cryptocurrency. With that said, even if you want to do the other things with cryptocurrencies, you still need to be set up for trading as for example most miners will sell at least some of the coins they mine and developers will need to fund their operations.

On cryptocurrency mining: As noted, one way to invest in cryptocurrency is via cryptocurrency mining. That is a valid way to start investing if say you love computer gaming and need a new rig and want to invest in small amounts of cryptocurrency while maybe making back some of the cost of the rig and maybe even breaking even but that is an entirely different subject. The average investor will want to trade USD for cryptocurrency on an exchange and avoid the complexities and investments of mining.

How to Pick the Right Exchange Above we laid out some choices for where to trade, below we will dive a little deeper into those choices to help you pick the right crypto exchange for you. A beginner might prefer to trade cryptocurrency stocks on the stock market. Trading GBTC avoids you having to trade cryptocurrency directly, but still allows you exposure to Bitcoin. Also, cryptocurrency trading is a hour market, where the traditional stock market is not.

For those who want the real cryptocurrency experience, the questions become 1. I think the simplest and best place to buy, sell, and store coins in the US is Coinbase and our tutorial below will help you get set up with that , but you can only buy, sell, and store Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and a small but growing selection of other coins on Coinbase. Coinbase will let you try out simple broker-based trading and real exchange-based trading and will give you exposure to enough coins to get you started.

See our list of exchanges for beginners for a more complete list of options. As you can tell already, even though we have presented a range of choices, this guide is suggesting that Coinbase is a good starting place.