How to Become a Crypto Trader
As a traditional stock or Forex trader, or new trader, you may feel left behind from the thriving topic of trading cryptocurrency CFDs (Contracts For Difference).
While cryptocurrency is edging closer to becoming a main stream focus of the financial world, now is a great time to determine the steps needed regarding how to become a crypto trader – and a successful one, at that.
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If you have some previous experience in trading the markets, whichever instruments those may be, you are already one step ahead. Many of the standard trading guidelines apply, however, given the vast amount of volatility and hence risk involved in trading crypto CFDs, you must approach your trading strategy and risk management accordingly.
What separates a successful crypto trader from the rest? More importantly, how can you set yourself up today to become the best crypto trader possible? Find out in this guide on how to become a crypto trader.
What is a Crypto Trader?
From a basic standpoint, defining "what is a crypto trader?" is fairly simple; a crypto trader has the ultimate goal of profiting from short term changes in cryptocurrency market prices.
A crypto trader can focus on only one coin and pairing, like the infamous Bitcoin pairings - BTCUSD (or BTCEUR). Or, they may focus on multiple major coins and hence pairings, like Bitcoin and Ethereum paired with either USD or EUR.
You may have heard the terms 'alts', which means alternative cryptocurrencies and are usually considered smaller, with a market capitalisation to represent that.
Some crypto traders may focus only on alts, and not bother to train the main cryptocurrencies at all. None of the above scenarios are 'wrong' - however it is a matter of determining what is the right strategy for you, your risk tolerance, and your overall goals.
It is crucial to quickly overview the two scenarios you must consider when investigating how to become a crypto trader:
Option 1: Buy and Sell Crypto on the Exchange
It is absolutely a viable option to buy the cryptocurrency of your choice directly from a crypto exchange, which means you actually own the underlying asset of the cryptocurrency.
There are certainly advantages to this option, however those advantages are more relevant to when you want to hold the cryptocurrency for the long term – not short-term trading.
Buying and storing cryptocurrency directly on an exchange can be risky, as these exchanges can be hacked, are often (not always) unregulated, and will incur fees when you both buy and Sell – fees to the exchange.
Using this option, the trader will need to put up the full value of the position and then store the cryptocurrency in a secure wallet until they are ready to sell them at a profit or loss (it is never recommended to store crypto directly in the exchange – another reason why this option is suited for a long-term strategy).
This option is much like an investor buying a physical asset like shares of a publicly-traded company and holding them long-term in the hope that they will appreciate in value.
With cryptocurrencies, however, the volatility of price over the long-term is why many traders or investors prefer to short-term trade (compared to long-term invest).
For example, the chart below shows the volatile hourly chart of Bitcoin vs the US dollar (BTCUSD):
Source: Admirals MetaTrader 5, BTCUSD, Hourly - Data range: from 13 October 2021 to 18 October 2021, accessed on 18 October 2021 at 15:03 CET. Please note: Past performance is not a reliable indicator of future results.
Option 2: Trade Crypto CFDs
Your secondary option is to trade cryptocurrency CFDs with a regulated broker – this option is more ideal when your strategy is short-term (which is really the only viable option for trading, in the first place).
This type of crypto CFD trader can use leverage, meaning they only need to put up a small deposit of the full value of the position. You can learn more about the benefits and risks of leverage in the 'What is Leverage in Trading?' article.
Crypto CFD traders also have the benefit of 'shorting' or 'selling' cryptocurrency CFDs, meaning they could also profit from a falling market. Considering the uptrends and downtrends in the Bitcoin vs US dollar chart above, using CFDs could prove to be a successful strategy.
Of course, there are also cons which come with CFD trading of any kind. General and quick market changes pose a risk to your capital and must be monitored. Liquidity risks also must be considered with CFD trading, as market conditions can change quickly and existing contracts can become illiquid.
A valid first approach is always trying out the markets with a demo account. Crypto CFD traders can test their trading ideas and theories in a risk-free virtual trading environment by using a demo trading account. This means they can place trades on different cryptocurrency CFDs without using real capital.
Want to try it? Admirals offers a demo account for free, and you can open it in just a few minutes. Simply click on the banner below to open yours:
Part of learning how to become a crypto trader is knowing which tools, trading strategies and investment products are right for your individual goals.
In the two options above, there are more benefits to trading cryptocurrency CFDs than buying cryptocurrency through an exchange. However, this is just one differential to consider. Let's have a look at some other concepts to consider when learning how to be a crypto trader.
Is Crypto Trading Profitable?
Trading cryptocurrency CFDs comes with risk (as any trading instruments do) considering the high volatility which is constant in this market sector.
However, if you have a well-designed trading strategy aligned, trading cryptocurrency CFDs can be very profitable. As the expression goes, high risk can merit high reward.
The statistics speak for themselves; so far in 2021, Bitcoin has outperformed every other asset on the market, making it the best-performing asset of 2021.
If you are prepared to do your homework, create a valid strategy, and understand what tools can help you succeed, there is a chance you can become successful as a crypto CFD trader.
How Much Do Crypto Traders Make?
Naturally, it is difficult to speculate exactly how much full- or part-time crypto traders make in profit.
Many individuals who trade crypto CFDs do so in order to grow their portfolio and reinvest the profit into their next moves. This meaning, many crypto CFD traders may not be trading crypto as an actual job.
That said, there is certainly a growing trend of people, Millennials especially, quitting their jobs to trade crypto.
Unfortunately, at this time there simply isn't enough data made publicly available to give you a realistic salary range of full-time crypto traders.
The Basics on How to Become a Crypto Trader
Success as a crypto trader will mean something different for each individual trader. For some, it could be making a profit on a live account trading from the 30-minute chart. For others, it could be making a profit from shorting cryptocurrency CFDs.
Ultimately though, success will come down to making a profitable return on the capital you risk.
As with any business, the tools and information you use will have the most determinant impact on your overall success.
Below we list the basics which you must take note of in order to increase your chances of long-term success as a crypto trader:
Choose the Right Broker
In order to have the possibility to trade cryptocurrency CFDs, you first need a broker in order to conduct the trades – naturally and to no surprise.
Choosing the 'right' broker can be challenging, as there are many options and they all want your business. Most importantly, you want to make sure they are regulated, ideally regulated by multiple jurisdictions. Security and safety are all of high importance, which is guaranteed by regulatory oversight from the various regulatory bodies.
It is always recommended to check the broker's reviews on TrustPilot (you can see our rating and user reviews here).
It is notable to mention that Admirals offers a negative balance protection policy which will protect you from adverse movements in the market, by preventing your account balance from falling below zero.
This is a huge advantage when trading a volatile market such as cryptocurrency CFDs.
Choose a Reliable Trading Platform
Your trading and charting platform helps you to view historical price charts of the instrument you are trading, as well as provide you with the order tickets you need to place and manage your trades.
Some people may have a charting platform that is separate from their brokerage platform. With new and advanced trading technology, however, you can have your charting platform and brokerage platform all in one place with the MetaTrader suite of products.
Admirals offers the following MetaTrader trading platforms:
- MetaTrader 4
- MetaTrader 5
- MetaTrader WebTrader
- MetaTrader Supreme Edition (A custom plugin for MetaTrader 4 and MetaTrader 5, created by Admirals and professional trading experts)
Through these trading platforms, users can access 32 cryptocurrency CFDs and a wide range of other CFD markets such as stocks, indices, commodities and Forex.
The screenshot below is of the MetaTrader 5 WebTrader platform provided by Admirals showing the different range of cryptocurrency CFDs available to trade on:
A screenshot of the MetaTrader 5 WebTrader platform provided by Admirals showing the cryptocurrency CFDs available to trade on and an example of a trading ticket. Accessed on 18 October 2021 at 16:00h CET.
Disclaimer: Charts for financial instruments in this article are for illustrative purposes and does not constitute trading advice or a solicitation to buy or sell any financial instrument provided by Admirals (CFDs, ETFs, Shares). Past performance is not necessarily an indication of future performance.
Did you know that Admirals also provides the MetaTrader trading platform to clients completely free? At the click of a button, you can start your free download of the world's most popular trading platform such as MetaTrader 5 which allows you to trade multiple asset classes. To start your free download, just click on the banner below:
Choose Your Crypto Trading Strategy
Trading is all about making decisions on whether to buy, sell or stay flat on a particular market.
The traders who are successful over a consistent period of time are much more likely to use a trading strategy, or methodology, to aid in their decision-making process.
Trading strategies are used to help streamline the process of information which may include when and when not to trade, what timeframes to focus on, what technical indicators to use, how to enter and exit and so on.
Of course, the tools you use will depend on your chosen style of trading. This is the first thing to establish when learning how to be a crypto trader.
After all, if your goal is to day trade cryptocurrency CFDs from the hourly chart, which involves buying and selling multiples throughout the day for short-term profits and closing out positions at the end of the day, then using the long-term weekly chart for analysis may not prove to be very useful.
Trading styles generally incorporate one or both of the following types of analysis:
- Technical Analysis
This type of analysis involves analysing the movement of cryptocurrency prices to identify patterns of repeatable behaviour. Many traders will also use technical indicators on their chosen cryptocurrency to find clues on which price levels the market could turn. You can learn more about technical analysis in our 'Introduction to Technical Analysis'.
- Fundamental Analysis
This involves analysing news announcements related to cryptocurrencies such as new developments and uses in the technology that underpins cryptocurrencies called blockchain. There are also some unique fundamental events directly related to cryptocurrencies such as the 'halving' which you can read more about here.
Here are a few crypto trading styles to consider:
This style involves buying and selling markets multiple times a day, often exiting by the end of the day. Traders using this style primarily rely on technical analysis tools such as trading indicators and chart patterns in their trading decisions.
Using cryptocurrency CFDs is something to consider when using this type of trading style as day traders need to have the right tools to trade on different types of market conditions such as rising markets and falling markets.
This style involves buying and selling markets with the purpose of holding trades for several days and in some cases, several weeks. Traders using this style of trading often use a mixture of technical analysis and fundamental analysis, such as analysing new developments in cryptocurrency technology 'blockchain', to help with their trading decisions.
This style involves users trying to program a crypto trader bot to take trades automatically. The MetaTrader platform provided by Admirals is the 'go-to' platform for algorithmic traders. Of course, being a crypto auto trader does require some skill set in programming. However, if the aim is to become a cryptocurrency automatic trader then consider reading the 'Ultimate MQL5 Guide'.
Not exactly 'new' but certainly gaining momentum as a trading style, copy trading is not something to be overlooked when considering how to become a crypto trader.
By copy trading, you have the option to 'copy' or mimic the trade positions of the person you are copy trading – however, you still remain in complete control of your Stop Loss and other Settings, if need be. You can learn all about copy trading in our detailed guide.
This is a great option for a new trader or a trader new to crypto, as we do have various copy trading portfolios available to copy trade, giving you exposure to this market.
What do the Best Crypto Traders have in Common?
It's important to remember that no matter what market you are trading, or what style you choose to adopt, trading is all about making a decision on whether to place a trade or not.
Most people don't like to make financial decisions on the spot. In fact, most people like to take their time before they make a big financial decision - analysing the facts, doing their research and so on.
There is nothing more important than what is described above when it comes to trading. That goes especially for hen you are learning how to become a crypto trader.
Successful crypto traders know this and will optimise their trading environment in order to control and regulate the way they make decisions. Here are just some of the optimisation tools you may find the most successful crypto traders have in common:
Defined Crypto Trading Style
As discussed in the previous section, choosing a trading style is important as it will dictate how you make trading decisions and point you towards the information you need to analyse best suited to your goals.
Research and Analysis
The best trading decisions are typically the ones which have involved a good level of research and analysis beforehand. The type of research and analysis you do will depend on how much weight you give towards technical analysis and fundamental analysis.
Live a Happy Life Outside of the Markets!
The decisions you make are only as good as the quality of your life. If you have negative, regretful feelings outside of the markets they will creep into the decisions you make when trading. We go into this more in our Trading Psychology Tips.
It's important to keep your risk small, allow for the learning curve and most importantly - enjoy the journey of learning about the markets and yourself.
Focus on Risk Relative to Reward
Trading is about probabilities as it involves both winning and losing. Risk management is a key principle in not only becoming a successful crypto trader but remaining there! For example, using a stop loss is one way to protect yourself against large losses.
Clients of Admirals can also access advanced trading features such as Volatility Protection for free. Some of the features are shown below:
To learn more about these different features and how they can potentially improve your trading visit the 'Volatility Protection' web page which explains how each of the key features work with instructional diagrams.
Of course, at this point it is important to note the risks that come with crypto trading.
Of course, at this point it is important to note the risks that come with crypto trading. In any form of trading, you must always consider the risk factor in ratio to your risk tolerance.
Risks of Trading Cryptocurrency
The cryptocurrency market is a highly volatile market, making it a high-risk market to trade on. It is important to understand the risks involved before you start trading, such as:
The cryptocurrency market is highly volatile which can lead to wild price moves in a short period of time. As there is no major real-world use for cryptocurrencies prices can move irrationally based on fear and emotion rather than underlying fundamentals or technical trading patterns
The volatility of the cryptocurrency market has led to some huge crashes. For example, over $700 billion was wiped off the overall cryptocurrency market cap in 2018 with all sorts of negative issues affecting cryptocurrencies, such as:
- Money laundering
- Tax evasion
- Cyber thefts
- Exchange outages
- Loose to zero regulation
- Excessive speculation
- Illegal initial coin offerings (ICOs)
There have been a long list of successful hack attempts on cryptocurrency exchanges. This is naturally a solid reason why you should consider trading crypto CFDs opposed to actual crypto on the exchanges.
This includes Japan's Coincheck hack in 2018 where more than $500 million worth of digital currency was stolen, as well as the 2014, shut down of Japanese exchange MtGox which handled almost 80% of all global Bitcoin transactions, with 850,000 bitcoins disappearing from its virtual vaults (worth around half a billion dollars!).
It's also worth remembering that the individual trader also poses a risk when trading crypto. Taking high risk large trading positions, expecting to win all the time is a sure-fire way to lose a lot of money.
At the end of the day, it is the individual trader who decides where to enter and exit and how much to risk so it is important to have a sensible trading plan to allow for the risks of trading.
Why Trade Cryptocurrency CFDs with Admirals?
We hope this article has given you a more in-depth understanding of the life as a crypto trader, and most importantly, how to become a crypto trader.
As you may have realized, you can follow a very similar trading structure when trading crypto, as compared to trading other financial instruments. The same tools apply, many similar standard rules apply, and the most important over all is to consider your risk management.
We at Admirals offer competitive options for trading crypto CFDs, if this is the route you choose to go down. See below as we overview the benefits of trading crypto CFDs with us:
- Use leverage of up to 1:5 for clients categorised as Professional and 1:2 for clients categorised as Retail when trading with cryptocurrency CFDs. This means you can control a larger position with a smaller deposit. You can learn more about the benefits and risks of leverage here.
- Trade with a well-established, highly regulated company including regulation from the Australian Securities and Investments Commission, the Cyprus Securities and Exchange Commission and the Jordan Securities Commission.
- Access free trading platforms from MetaTrader for PC, Mac, Android and iOS operating systems.
- Benefit from our negative balance protection policy for peace of mind.
- Trade crypto pairs with USD, EUR and crypto crosses 24 hours a day, 7 days a week.
If you're feeling inspired to start trading, or this article has provided some extra insight to your existing trading knowledge, you can take your first step with us today.
Register for a demo account, or go straight to a live account, and immerse yourself in the exciting, high-volatility world of crypto CFD trading – always with your risk management in mind and with strict adherence.
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