Trade Coins

You can trade crypto on exchanges.

If you store your crypto on an exchange, you can trade via their platform directly. If you store crypto on a wallet, you can transfer your crypto to an exchange, then trade.

Here’s out step-by-step walk-thru for trading on one of the biggest exchanges, Binance.

The five biggest exchanges by volume are:

Before You Trade, Consider….

Crypto can achieve higher returns than traditional investments. No doubt you’ve heard of people who got wealthy, very quickly, by trading crypto.

It can also wipe you out.

The reason crypto attracts a lot of speculative interest is because it is highly volatile, meaning the price can move in significant leaps. Price leaps are less likely in more conservative investment classes, like bonds.

Crypto is classed as a high risk investment.

Diving In

Let’s compare some common investment approaches used in crypto. The approaches can be  broken down to passive vs active trading. 

Not Financial Advice
The following is not investment advice. If you are looking to invest, contact a registered financial advisor before making any financial decision.

Passive

Hodl is an internet slang term. It is a miss-spelling of “hold”. People who Hodl:

  • buy and hold long term
  • accumulate coins, typically during price dips
  • Are “long”. This means they think the price will go up over time

The advantages of this approach is that it does not require the trader to keep a close eye on markets.  Also, they are not paying the regular fees associated with active trading.

Hodl traders need calm nerves  to endure frequent price fluctuations.

Dollar Cost Averaging

Dollar cost averaging means buying in regular intervals. Typically, the same day once per week, or month. This means that sometimes people will buy at a low price, sometimes they will buy at a high price, but the buy price will average out over time.

People who dollar cost average don’t have to try and time their entry to the market. There is low time investment in this approach.

 Hodl, combined with dollar cost averaging, are great approaches for beginners. These passive tactics require little knowledge of markets, have relatively low trading cost and require little time investment. However, given nothing is certain, never invest more in crypto than you can stand to lose. There be dragons!  

Active Trading

Active trading can be short term or medium term.

Short term is commonly known as day trading. Day trading, as the name suggests, is when you open and close an investment position within a day.

A medium term of active trading is called swing trading. Swing traders may hold for a day, a week, or a few weeks or months.

The main difference between active trading vs passive approaches is that active traders attempt to time their entry and exit from markets. They try to buy low and sell high. They can also trade in the opposite direction, known as short trading.

Neither approach is a great option for beginners as both require a sound knowledge of risk management. If you do want to learn more about these styles of trading, we recommend Humbled Trader (day trading) and The Complete Swing Trading Course (swing trading). This course is specific to crypto, and suitable for beginners.

You may also hear the term “leverage”. Leverage is when you you borrow to invest. Leverage can produce significant gains from small investments, however it is also possible to lose your entire holding very quickly if the market moves against you.

Beginners should stay away from using leverage until such time as they have a good grasp of risk management principles. Even with considerable experience, the large swings in crypto values make this a very risky investment approach.