The act of speculating on cryptocurrency price movements via a contract for difference (CFD) trading account, or buying and selling the underlying coins via an exchange is known as cryptocurrency or crypto trading. CFD trading is a type of derivative that allows you to bet on Bitcoin (BTC) price changes without possessing the underlying currencies.

For example, you can go long (buy) if you believe the value of a cryptocurrency will rise, or short (sell) if you believe the value will fall. Both are leveraged instruments, which means that you only need a little deposit, known as margin trading crypto, to have total exposure to the underlying market. However, because your profit or loss is still determined based on the total size of your investment, leveraging trading crypto magnifies both earnings and losses.

Furthermore, cryptocurrency options are used by investors to reduce risk or increase market exposure. Crypto options trading refers to the “derivative” financial instrument that derives its value from the price of another asset — in this case, the underlying cryptocurrency.

Before even thinking about venturing into crypto trading, it is important that one has a comprehensive understanding of the assets and technologies involved. Bitcoin is the soil from which thousands of other cryptocurrencies have grown.

As with stocks and other financial markets, trading cryptocurrency can be complex, involving a variety of components and requiring knowledge. Bitcoin launched in 2009 as the first crypto asset and remains the largest cryptocurrency in terms of market capitalization and prevalence.

Over the years, however, an entire industry of other digital assets has come into existence with the assets being tradable for profit. All other cryptocurrencies that are not BTC are known as altcoins, the largest of which is Ether (ETH).

Many different approaches exist in terms of how to trade cryptocurrencies. In order to start trading cryptocurrencies, one first needs adequate knowledge of the subject. It is also critical to know the associated risks and the laws that may apply based on one’s jurisdiction and decisions should be made accordingly.

The majority of cryptocurrency traders put their money into Bitcoin and Ether. However, trading utilizing technical indicators is possible because these cryptocurrencies move more predictably than smaller altcoins.

You might try automatic crypto trading with software like Coinrule if you’re looking for a crypto trading strategy. Crypto trading bots implement a process designed to provide you with the most significant returns possible based on your investment objectives.

If you’re actively trading BTC, you’ll need to keep your funds on the exchange in order to access them. For example, you should purchase a Bitcoin wallet if you’re buying cryptocurrency to hold for the medium to long term.

Bitcoin’s value is determined second-by-second and day-by-day by a market that never sleeps. As an autonomous digital asset whose value is determined by an open market, Bitcoin presents unique challenges around volatility that most currencies do not face.

A cryptocurrency trade consists of a buyer and a seller. Since there are two opposing sides to a trade — a purchase and a sale — someone is bound to gain more than the other. Hence, trading is inherently a zero-sum game: There is a winner and there is a loser. Having a basic understanding of how the cryptocurrency markets operate can help minimize potential loss and optimize for potential gain.

To the layperson, “the market” may seem like some complex system that only a specialist could ever hope to understand, but the truth is, it all comes down to people buying and selling. How to trade crypto might seem like an esoteric concept at first. Once you begin to understand it, however, the idea becomes a lot simpler.