Crypto Trading

Crypto trading means buying and selling digital assets such as Bitcoin and Ether to profit from price changes. It differs from stock trading in three big ways: the market never closes, prices are far more volatile, and much of the trading happens on crypto exchanges rather than traditional brokers. Those differences create opportunity and also make risk control more important.

Where crypto is traded#

• Centralised exchanges (CEXs), such as Coinbase and Kraken, hold your funds and run an order book, much like a broker.
• Decentralised exchanges (DEXs) let you trade directly from your own wallet through smart contracts.
• Brokers and trading apps offer crypto alongside stocks, sometimes with limited withdrawal options.
• Regulated futures exchanges list Bitcoin and Ether futures.

See Centralized vs Decentralized Exchanges for the trade offs, including custody risk.

Spot vs derivatives#

Most crypto volume is in perpetual futures, which explains the sudden cascades of forced selling or buying you see on charts. Beginners should start with spot. See Crypto Spot Trading and Perpetual Futures.

A worked Bitcoin spot trade#

What moves crypto prices#

• Liquidity and risk appetite: crypto often rises when investors take more risk and falls in risk off periods.
• Leverage and liquidations: crowded leveraged positions can unwind violently. See Liquidations in Crypto and Funding Rates.
• Flows: ETF inflows and outflows, exchange deposits and withdrawals. See Wallet and Exchange Flows.
• Regulation and news: enforcement actions, approvals and exchange failures.
• Token specific events: unlocks, upgrades and hacks. See Token Unlocks and Vesting.

Costs#

• Trading fees: usually a percentage per trade, lower for makers than takers.
• Spreads: tiny on Bitcoin at large exchanges; wide on small tokens.
• Funding: on perpetual futures, paid or received every few hours.
• Network fees: to move coins between wallets and exchanges. See Mempools and Gas.

Security and custody#

Keeping coins on an exchange means trusting it to stay solvent and secure; several large exchanges have failed or been hacked over the years. Many traders keep only trading funds on exchanges and store the rest in their own wallets. Never share a seed phrase or private key, and use strong two factor authentication. See Identifying Trading Scams.

Risk management for 24/7 markets#

• Set trading hours for yourself; the market does not need you at 3 a.m.
• Use a daily loss limit and stop when you hit it. See Maximum Trade Risk and Daily Loss Limits.
• Use small or no leverage. A 10% move is an ordinary week in crypto.
• Expect weekend gaps in liquidity, when thin markets can move sharply.
• Keep a journal like any other market.

Crypto prediction markets#

Prediction markets such as Polymarket also run short rounds on whether Bitcoin and other coins will finish a 5 or 15 minute window up or down. They offer capped risk per share but move very fast. See What Are Prediction Markets? and Up or Down Markets Explained.

Frequently asked questions#

Is crypto trading riskier than stock trading?#

Generally yes: prices are more volatile, markets never close, leverage is widely available and exchange risk exists. Smaller sizes and strict rules help.

Which crypto is best for beginners to trade?#

Bitcoin and Ether have the deepest liquidity and tightest spreads, which makes them the usual starting point.

Do I pay taxes on crypto trading?#

In many countries, yes. In the US, crypto is treated as property, so each sale or swap can create a taxable gain or loss. See Trading Taxes and Capital Gains.

Sources#

• U.S. Securities and Exchange Commission, Crypto assets
• Wikipedia, Cryptocurrency