Trading Crypto Currencies with Leverage
Crypto Trading offers an alternative to trading in securities and binary options. The market is enjoying increasing liquidity and offers good opportunities to make profits with Crypto Trading. In this article, we explain what is needed to get started and how you can get started trading with Bitcoin & Co.
Requirements for Crypto Trading
To start trading Crypto currencies you will need a Crypto Wallet and a trading platform. Once everything is set up and the account has been successfully verified, it is as simple as filling out a form and waiting for the transaction to be processed.
In other words, if you want to trade cryptocurrencies on margin, you need:
- A wallet device for cryptocurrencies (or two)
- Access to a exchange platform for cryptocurrency trading
A Crypto Wallet is the place where you store encrypted passwords and coins (the synonym in the real world is the bank account). A cryptocurrency exchange is like a stock exchange or like a currency exchange at a foreign airport. At these exchanges, cryptocurrencies can be exchanged for other cryptocurrencies and paper currencies such as US dollars and euros. Just like trading shares, you need a bank account and access to the stock exchange. Crypto trading works with the same mechanisms.
What you should know before you start Crypto Margin Trading
There are few things about trading crypto currency to know that go beyond the above. Below are some of the most important things you should know before you start trading Crypto:
A Crypto currency exchange does not take place on the regular exchange. In the following we will explain how Coinbase works. You can also use Coinbase Pro (formerly known as GDAX), the pro version of Coinbase with lower fees and another marketplace.
Risks and Opportunities by Market Capitalization
The cryptocurrency market made a very volatile start to 2018. You can make a fortune in one moment and lose it in the next, whether you trade Bitcoin, other coins or the GBTC Bitcoin Trust. Think about how you can minimize risks and protect yourself. You should also not make long-term investments with all your investable resources.
TIP: If you only trade the top currencies according to their market capitalization (currently these are the Bitcoin and Ethereum coins) or GBTC, then the risk of losing everything overnight is low. Not excluded, but still low. Other cryptocurrencies are much riskier, but can offer quick profits on a good day.
For those who would like to enter Crypto Trading in spite of the above hints:
- A beginner should start Crypto Trading by choosing a company with a good reputation that offers an exchange and a digital wallet. This helps keep the process simple.
- A beginner should also start trading coins with high market capitalization. Currently these are Bitcoin (BTC) and Ethereum (ETH). This may change in the future.
- A good start for Crypto Trader is possible on Coinbase.com. This is currently the only platform that offers a wallet for Bitcoin, Ethereum, Litecoin and a currency exchange at the same time.
- After you have completed the first trades on Coinbase, you can transfer your trading activities to GDAX and other exchanges such as Bittrex, Binance or Kraken.
TIP: A good first step into crypto trading is to buy a large cryptocurrency like Bitcoin, Ether or Litecoin. Then you will probably want to trade EUR or USD against coins on an exchange like the Binance. Once you are familiar with it, you can try to exchange BTC and ETH for other cryptocurrencies and make a profit. Trading crypto pairs can be lucrative. However, this form of crypto trading is more complex and often riskier than buying a single cryptocurrency as an investment.
TIP: As a beginner, you should not engage in margin trading. Cryptocurrencies are very volatile. With margin trading, you risk losing everything in a single moment.
Finally, with crypto trading you also have to consider the tax consequences. Profits from trading transactions are taxable, losses can be offset. The tax authorities are also no exception when trading cryptocurrencies and insist on their profit shares.