How To Trade Cryptocurrency: A Step-By-Step Guide

Successfully speculating the highs and lows of any market may seem like a daunting task, but understanding how to trade cryptocurrency can be broken down into simple steps to help maximize profits and minimize the risks.

How Trading Cryptocurrency Works

In decentralized finance, you trade crypto for the same reason you would trade a stock. The end goal is to either make a potential profit or gain more exposure to the market by buying a stock at the lowest available price. In other words, you are seeking to buy low and sell high.

When it comes to trading crypto, the concept and end goal are similar. However, the volatility of some cryptocurrencies makes the gap between buy-low and sell-high significantly wider. This is why strategy is important.

Strategies For Trading Cryptocurrency

There are many different ways to trade crypto. The list is extensive, and each strategy comes with its own risks and rewards. Let’s take a look at your options.

Day Trading

Man who knows how to trade cryptocurrency looking at his watch

Understanding how to trade cryptocurrency is about more than just blindly attempting to make a profit. A great way to remove much of the complexity surrounding crypto trading is to day trade.

The strategy of day trading has traders exiting positions the same day they enter them. Rather than buying assets and hoping the value increases over what could be a lifetime, day traders speculate assets over the course of a day.

Day trading is a process that requires you to stay up to date on market trends. In order to profit off of what are typically low increases in value, you will often place hundreds of orders each day.

Still, day traders do not have to be masters to build their wealth. Entry and exit points for trades can be predicted using pattern-based signals that consider historical data of the crypto.

Range Trading

Range trading is similar to day trading since market trends are also analyzed to predict the future of crypto values. The main difference is that range trading can be limited within an hour or extend over a month.

Essentially, range trading takes the concept of day trading and expands the time frame. This adds risk to the process, but profitability increases notably as well.


Computer coding and a graph

Those aware of the term “scalper” as it relates to market supply-demand theory will have a good understanding of how scalping works in crypto trades. To make the highest profit, scalpers will exit trades quickly and might maximize their purchasing power by using bots.

If you have ever attempted to buy a limited product online, then you may have heard complaints about bots interfering with the product release. These programs are designed to perform automated tasks to meet the needs of the user.

Using this as an example, think of the limited-product scalper as a crypto trader. They purchase more shares of the product to take advantage of its limited market availability, then resell it based on the increased demand.

Instead of limited-release drops, scalpers in crypto trading are simply purchasing crypto before short-term fluctuations occur or it’s picked up by the media (think Bitcoin) and selling it immediately once the price increases.

How To Trade Cryptocurrency

Cryptocurrency trading graph

The good news is that while strategizing how to trade cryptocurrency is one of the most research-intensive steps, all of the other steps are straightforward.

1) Create A Crypto Exchange Account

Before you can begin trading, you will need to partner with a crypto exchange, like Vauld. You can easily choose which exchange is right by making sure the company has options that work in your interest no matter which crypto endeavor is taken.

Consider features such as lending and borrowing functionality, competitive rates, security, and whether the exchange has a wide range of tokens available to diversify your assets.

2) Fund Your Account

To trade crypto, your account needs to be funded. You can typically connect your bank account, but different exchanges will offer different options, such as funding via wire transfers and debit cards.
3) Select Which Token To Trade
Along with a chosen trading strategy, the assets you decide to trade will also play a key role in profits. A large portion of the market is dedicated to trading popular tokens such as Bitcoin and Ethereum, but a good way to avoid inherent risks is to diversify your assets.

4) Choose Your Trading Strategy

To avoid major risks and overall confusion, you’ll need to consider the endless trading techniques and determine which ones work best for you. While the ways to trade crypto go well beyond the list provided, they can all be broken down into long- or short-term strategies.

Start by identifying the length of time you’re willing to commit to your investments and narrow it down from there. Once you’ve selected a strategy, you can use the features of your crypto exchange to begin trading.

Why Trade Cryptocurrency?

Coins next to a crypto trading graph

Actively trading crypto comes with the general risk of losing assets to the market, but the benefits are what keep users engaged in its volatility.

Available Assets

When you partner with the right crypto exchange, it will offer a wide range of trading options and wealth-building opportunities. This includes an extensive list of available tokens as well as trade-only tokens.

Our trade-only tokens at Vauld can be freely bought, sold, and traded on our platform. Although they cannot be deposited or withdrawn, they are a terrific way to help you diversify your cryptoassets.

Crypto Volatility

In almost every other instance, crypto’s volatility will be listed as one of its primary disadvantages. But when it comes to trading, this fluctuation holds the potential for you to earn higher profits by timing the market just right.

Volatility, in this case, is a double-edged sword of crypto. It can be the best thing for a trader, but it can also be detrimental.

No Time Restrictions

Unlike trading stocks, trading crypto is open year-round and can be done at any time, day or night. Compare this to the Nasdaq, which has limited trading hours between 9:30 a.m. and 4:00 p.m. ET.

The main benefit of this is that trades do not have to sit overnight. As soon as the best opportunity becomes available, you can take advantage of it — whether the time is noon or three in the morning.

Risks Of Trading Cryptocurrency

pile crypto coins and poker chips

The volatility of crypto is only one of a few risks that traders encounter every day due to the relative newness of the market and uncertainty of its future. Here are some others to consider.

Cybersecurity Concerns

Unfortunately, crypto exchanges are the target of many cybercriminals looking to take advantage of their central role in crypto trading.

Selecting an exchange that takes cyberthreats into account and implements various security measures is the difference between protecting your assets and risking their safety.

From biometric and pin-based authentication to user alerts and video verification, we at Vauld do everything we can to ensure that our customers’ assets are protected against bad actors, including partnering with BitGo, a leading digital asset trust and security company.

We provide coverage for our customers by moving funds from the investor’s wallet to a centralized lending pool that’s insured for $100 million in BitGo. Because of this, you can recover your stolen funds even if a major breach takes place.

Dead Coins

Not every token is going to become successful. Some prove to be fads while others fail entirely, resulting in dead coins and discontinuations.

Dead coins are digital assets that have been abandoned altogether for a variety of reasons. These coins usually end up being scams or have low enough liquidity to be dropped completely.

For traders, dead coins mean the value of that asset has essentially disappeared. It is critical to be skeptical of new or fad tokens for this reason and to thoroughly research the tokens you decide to trade.

How To Trade Cryptocurrency With Vauld

Ethereum coin next to a dollar bill

When looking at how to trade cryptocurrency, the benefits and risks change with each strategy, token, and the exchange you partner with. Although many factors may complicate trading, following the steps provided will allow you to approach the process with confidence.

Whether you’re trading crypto each day or decide to HODL, choosing Vauld is the best way to receive some of the greatest benefits in the industry and manage the potential risks associated with crypto trading.

To start earning with your crypto today, sign up with Vauld and make the most out of all your crypto endeavors.

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