Last update: 17 December 2020
13 min read

Cryptocurrency 101 – A Beginner’s Guide to Crypto Trading in 2024

If you’re wondering what cryptocurrencies are and how cryptocurrency trading works, you’ve come to the right place.

Before we get started, though, you must understand that trading cryptocurrencies can be a risky proposition. Like any other type of financial trading, you can increase your odds of success through time and effort, but the first step is to educate yourself.

Luckily, we’ve created this beginner’s guide to cryptocurrency trading. Unlike other guides you may find online, we don’t use jargon and we don’t promise that you’ll make profits in seconds. Instead, we’ve started with the very basics.

After reading our expert beginner’s guide to crypto, you’ll know:

  • What cryptocurrency is, how it works and why it’s so popular
  • How cryptocurrency trading works and whether it’s right for you
  • The most popular cryptocurrencies to trade with
  • How to get started with trading and which broker to choose
  • The secret to trading cryptocurrencies successfully


What is a cryptocurrency?

A cryptocurrency is a digital form of money that you can exchange online for services and goods. Unlike traditional currencies, like the U.S. dollar or the euro, cryptocurrencies aren’t controlled by a specific government. They don’t have central issuing authorities or regulatory bodies.

Instead, cryptocurrencies rely on peer-to-peer networks and cryptography to perform those same functions. These include validating transactions to avoid double-spending, securing transactions to prevent fraud, and deciding when and how many units of currency to issue.

One of the most popular cryptocurrencies is Bitcoin, which was also the first cryptocurrency to be formally established in 2009. It was created by an anonymous entity calling themselves Satoshi Nakamoto. Every bitcoin transaction is registered on a massive global ledger called the blockchain, which is decentralized. It is stored on multiple computers and servers across the world with lots of people keeping track of the transactions to ensure their accuracy. This makes it very difficult to commit fraud because it would require changing the entries in all the “copies” of the ledger on all these servers.


What is cryptocurrency trading?

Cryptocurrencies have multiple uses. Some people choose to exchange their currencies to crypto so they can actually use them, be it for buying goods or services. Purchasing with cryptocurrencies is beneficial as it allows for quick international transfers, no transaction fees, and a level of anonymity. You may also have heard of cryptocurrency investors. These are people who purchase cryptocurrencies in the hopes that they’ll be worth more in the future. These people may purchase emerging types of cryptocurrencies and hold on to them for a long time.

There’s one more type of cryptocurrency user and this is the cryptocurrency trader. Crypto trading is perfect for beginners and often how people get into the market.

Cryptocurrency trading differs from investing; your goal is to make a profit quickly from price fluctuations. With cryptocurrency CFDs (contracts for difference), you don’t own the crypto-coin. You only “own” the difference in price. You predict what direction the price will go in and, if you’re right, the difference in price will be your profit. If not, it will be your loss. The amount you make or lose is equal to the difference in price multiplied by the quantity.

Why should you start trading cryptocurrency?

If you’re reading our cryptocurrency for beginner’s guide with the hopes that you’ll find new and exciting trading opportunities, then you’re in luck. One of the biggest benefits of trading cryptocurrency is that it’s a very fast-paced market that can be highly profitable.

Cryptocurrency trading also offers beginners plenty of other advantages. Below, our experts have listed some popular reasons to start trading cryptocurrency:

  • High volatility – As we’ve just explained, the cryptocurrency market is fast-paced. It experiences periods of high volatility due to short-term speculative interest. As cryptocurrency is often in the news or touted as ‘the next big thing’, every so often there’s a surge of investors and the prices of cryptocurrency coins move erratically. As a trader, quick intraday price movements provide you with a wealth of opportunities to profit.
  • Choose between going long or short – If you choose to buy cryptocurrency, you only make money if the value of your coins increases. In contrast, as a beginner cryptocurrency trader, you’re able to profit if the price falls too. You can choose to take a short position, which means that you believe the value of the asset will decrease. If that happens, you still make money.
  • Leveraged products – Cryptocurrency CFDs are leveraged products that you trade ‘on margin’. This means that you pay for a fraction of the full value of the trade and the broker allows you to open a much larger position. For example, in Europe, cryptocurrencies often come with 1:20 leverage. So, if you want to trade with $200, you can actually take a position worth $4,000. The profit or loss of the trade reflects the full value, so you can make large profits from small investments. Remember, however, that trading on leverage also amplifies your losses.
  • Get started with cryptocurrency quickly – To buy cryptocurrencies, you’ll need to sign up to an exchange and also buy a storage wallet for your coins. This can be a slow, and pricey, process. In contrast, as a beginner cryptocurrency trader, you can sign up to a broker in a matter of minutes. It can all be done online, and you’ll have access to the cryptocurrency markets from the moment you make your first deposit.

How do cryptocurrency markets work?

The cryptocurrency market is similar to the forex market in that you can make a profit by speculating on the price movements of a cryptocurrency. In both cases, price is driven, at least in part, by supply and demand. This means that if you’re studying cryptocurrency for beginners, but you’re already familiar with forex trading, you’re in a good position.

It’s worth noting that there are significant differences between the two markets, however. The forex market is much larger than the cryptocurrency market. It has greater liquidity and depth and is also more stable. But that isn’t to say the cryptocurrency market is small or full of opportunities for profit. In 2019, the cumulative market capitalization of cryptocurrencies was 237.1 billion U.S. dollars.

Crypto-coins are also limited, unlike fiat currencies. Bitcoin, for example, is capped at a maximum of 21 million units, which is expected to be achieved in 2140. The limited supply increases demand, which increases value.

Cryptocurrency markets are also decentralized and not subject to a government or country, unlike forex markets. As such, you can trade cryptos 24/7, no matter your time zone. That said, it also means they are sensitive to different factors than traditional currencies.

Cryptocurrency beginners need to know that the following factors can affect the price of different types of cryptocurrencies:

  • The number of units currently available and the rate at which they are created
  • The value of all the coins available and user perception in terms of the evolution of said value
  • The media’s take on cryptocurrencies in general, or a particular crypto at the time
  • How easily a specific crypto-coin can be integrated into e-payment systems and other infrastructure
  • Important events related to the coin, such as adoption by big companies, new regulations, publicized hacks, celebrity endorsements and so on

Which are the best cryptocurrency trading platforms for beginners?

A cryptocurrency trading platform is a software application that allows you to trade cryptocurrencies. It lets you open and close trades, but also provides you with a host of tools so you can more effectively analyze the market, such as charting software, a variety of indicators, and even economic news.

There are a lot of trading platforms on the market. An increasing number of forex brokers are offering cryptocurrency trading, and they usually require you to use their platform to trade with.

As not all platforms are created equal, we’ve done the work and found the best platforms for cryptocurrency trading for beginners. We’ve also made sure that the brokers we recommend use these platforms because they are highly efficient.

  • MetaTrader 4 (MT4) – MetaTrader 4 is the most popular trading platform on the market. It features powerful charting software with a wide range of analytical tools. It also allows for custom indicators and expert advisors.
  • MetaTrader 5 (MT5) MetaTrader 5 offers advanced trading functions and analytical tools. It also allows you to trade stocks, futures, and CFDs, unlike MT4, which is designed specifically for forex trading.
  • WebTrader – WebTrader is a browser-based cryptocurrency trading platform that you can use on any device with internet access. It features a variety of analytical tools and everything a professional trader might need. It is also very flexible and can be personalized for a better trading experience.


How to start trading cryptocurrency

If you’re wondering how to start trading cryptocurrency, the good news is that it’s relatively simple if you work with one of our trusted brokers. Here’s a step-by-step guide to getting started with cryptocurrency trading:

  1. Learn as much as you can
    Like with any form of trading, you need a solid foundation to start trading cryptocurrencies. The more you know, the better your chances of making a profit.
  2. Understand what you can trade
    Most brokers allow you to trade either US dollars against cryptocurrencies or cryptocurrencies against other cryptocurrencies. In other words, you can trade USD/BTC or BTC/LTC, for example.
  3. Choose a cryptocurrency to trade
    As a cryptocurrency beginner, it’s a good idea to start with the most prominent cryptocurrencies available, like Bitcoin or Ethereum. You also research other altcoins but remember, cryptocurrency markets can be very volatile, so stick to a coin that aligns with your risk appetite.
    You should also choose a single cryptocurrency to focus on, at least at first. This way, you can learn its quirks and will be better able to predict how the price could move.
    Before you even consider opening a trade, make sure that you know the coin inside out. Learn what factors affect it and how, delve into its long-term performance, and understand all the challenges associated with it.
  4. Pick the right Cryptocurrency forex broker
    When choosing a forex broker, you first need to make sure they are legitimate, regulated, and reputable before you open an account. Also, they must offer cryptocurrency trading.
    Choosing a cryptocurrency broker is easy with our list of recommended companies. Our team of forex brokers has conducted in-depth evaluations of all the brokers on our site. We use an extensive list of criteria and only recommend the best and most reliable brokers to ensure that you can trade safely on secure platforms without being scammed. Some of the factors we check include whether or not they are regulated and by whom, the trading tools they offer, the quality of their educational materials, the quality of their customer service, and much more.
  5. Open a trading account
    Opening a live trading account will require a little time as most brokers will pose a series of questions to determine your level of trading knowledge. You’ll also have to submit some documents to verify your identity. You can then fund your account and start trading.
    When opening a demo account, though, you usually only need to submit your email and a password. It’s quick and easy. Starting with a demo account is the best option if you want to know more about cryptocurrency trading for beginners. You’ll be able to practice your trading and determine what risk strategies work best for you.
  6. Start trading
    Once you’ve done your market research and analysis and chosen the cryptocurrency broker you wish to trade with, you can decide on whether to open a Buy or Sell position. Cryptocurrency trading carries risk due to the volatility of the market, which means protecting yourself is essential.
    Use effective risk management strategies and trade within your budget. Also, never trade with money you can’t afford to lose. If you are prepared to lose it, you are less likely to make problematic decisions based on emotions. Your account should also have enough money in it to cover all your open positions.
  7. Monitor your position
    Though cryptocurrencies aren’t as sensitive to manipulation as fiat currencies, they are still very sensitive. The markets are very volatile, which is why you should always keep a close eye on any events that could affect your trades.
    The top cryptocurrency brokers will provide you with all the educational resources and information you need to develop an effective trading strategy.

Now that you know how to trade cryptocurrencies, you can choose to sign up with one of our top partners so you can start cryptocurrency trading.

The best crypto brokers for 2020

Min Deposit
Summary:Trade 16 crypto pairs and 6 crypto coin CFDs via an award-winning proprietary trading platform.
Min Deposit: $250
Summary:Enjoy leveraged cryptocurrency trading and explore 14 crypto options. Availability subject to regulations.
Min Deposit: $100
Summary:Trade 17 crypto coin CFDs and crypto/currency pairs. Access the eToro CopyTrader social trading platform.
Min Deposit: $50

Frequently Asked Questions (FAQs)

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New Cryptocurrency Rules for UK Traders As of January 6th 2021, brokers operating under regulation from the UK Financial Conduct Authority can no longer offer their clients crypto-derivatives, including crypto CFDs. We advise all UK traders to avoid any brokers who offer crypto-derivatives and claims to have an FCA license. To avoid scams, check out our top UK brokers instead.