# Crypto Trading

> How crypto trading works: exchanges, spot vs perpetual futures, wallets, 24/7 markets, fees, volatility and risk management, with a worked Bitcoin trade.

Source: https://learn.tradelabsai.com/markets/crypto-trading/  
Track: Markets and Instruments · Level: Beginner · Updated: 2026-10-03  
Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice.  
Cite as: TradeLabs Learn, "Crypto Trading", https://learn.tradelabsai.com/markets/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](https://learn.tradelabsai.com/crypto/cex-vs-dex/) for the trade offs, including custody risk.

## Spot vs derivatives

| | Spot | Perpetual futures |
|---|---|---|
| What you hold | The actual coin | A contract tracking the price |
| Leverage | None, unless using margin | Often high, up to 50:1 or more on some exchanges |
| Shorting | Not directly | Easy |
| Holding cost | None | Funding payments every few hours |
| Risk of liquidation | No, without margin | Yes |

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](https://learn.tradelabsai.com/crypto/crypto-spot-trading/) and [Perpetual Futures](https://learn.tradelabsai.com/crypto/perpetual-futures/).

## A worked Bitcoin spot trade

**Example: Sizing for volatility**
**Account:** $6,000. Risk 1% = $60.
**Setup:** Bitcoin breaks above a range high at $62,000 and retests it.
**Entry:** buy at $62,300. **Stop:** $60,800, which is $1,500 below. **Target:** $66,800.
**Size:** $60 ÷ $1,500 = 0.04 BTC, about $2,490 of Bitcoin.
**Results:** target = $4,500 × 0.04 = +$180. Stop = minus $60, plus fees.
Because Bitcoin moves several percent in a day, stops must be wider than on most stocks, so positions must be smaller for the same risk.

## 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](https://learn.tradelabsai.com/crypto/liquidations-in-crypto/) and [Funding Rates](https://learn.tradelabsai.com/crypto/funding-rates/).
- **Flows:** ETF inflows and outflows, exchange deposits and withdrawals. See [Wallet and Exchange Flows](https://learn.tradelabsai.com/crypto/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](https://learn.tradelabsai.com/crypto/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](https://learn.tradelabsai.com/crypto/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](https://learn.tradelabsai.com/start-here/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](https://learn.tradelabsai.com/risk/daily-loss-limit/).
- **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?](https://learn.tradelabsai.com/prediction-markets/what-are-prediction-markets/) and [Up or Down Markets Explained](https://learn.tradelabsai.com/prediction-markets/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](https://learn.tradelabsai.com/industry/trading-taxes-and-capital-gains/).

## Sources

- U.S. Securities and Exchange Commission, [Crypto assets](https://www.investor.gov/introduction-investing/investing-basics/glossary/crypto-assets)
- Wikipedia, [Cryptocurrency](https://en.wikipedia.org/wiki/Cryptocurrency)

## Continue learning

- Next lesson: [Commodities Trading](https://learn.tradelabsai.com/markets/commodities-trading/)
- Previous lesson: [Options Trading](https://learn.tradelabsai.com/markets/options-trading/)
- Related: [Options Trading](https://learn.tradelabsai.com/markets/options-trading/): How options trading works in practice: account approval, reading an option chain, choosing strikes and expiries, placing orders and controlling risk.
- Related: [Bitcoin](https://learn.tradelabsai.com/crypto/bitcoin/): Bitcoin is the first and largest cryptocurrency, with a fixed supply of 21 million coins. Learn how it works, halvings, what moves its price and how to trade it.
- Related: [Crypto Spot Trading](https://learn.tradelabsai.com/crypto/crypto-spot-trading/): Spot trading means buying and selling actual crypto at current prices. Learn order types, pairs, fees, sizing, custody and how spot differs from derivatives.
- Related: [Perpetual Futures](https://learn.tradelabsai.com/crypto/perpetual-futures/): Perpetual futures are crypto derivatives with no expiry, kept close to spot by funding payments. Learn how perps work, leverage, margin, funding and the main risks.
- Related: [Centralized vs Decentralized Exchanges](https://learn.tradelabsai.com/crypto/cex-vs-dex/): Centralised exchanges hold your funds and match orders; decentralised exchanges trade from your wallet via smart contracts. Compare costs, safety and how each works.
- Related: [Crypto and Prediction Markets Learning Path](https://learn.tradelabsai.com/start-here/crypto-learning-path/): An ordered route through crypto trading and prediction markets: Bitcoin basics, exchanges, perpetual futures, funding, Polymarket and up or down rounds.
- Related: [Stablecoins](https://learn.tradelabsai.com/crypto/stablecoins/): Stablecoins are crypto tokens designed to hold a steady value, usually $1. Learn how fiat backed, crypto backed and algorithmic stablecoins work, and their risks.