How to Become a Crypto Trader

As a traditional stock or forex trader, or as a new trader, you may feel left out of the thriving topic of trading cryptocurrency CFDs. While cryptocurrencies are becoming a major topic in the financial world, now is a good time to set the necessary steps on how to become a crypto trader – and a successful one at that.

If you already have experience trading the markets, regardless of what instruments they are, you are already one step ahead. Many of the standard trading guidelines apply, but given the huge volatility and associated risk involved in crypto CFD trading, you need to align your trading strategy and risk management accordingly.

What is a crypto trader?

From a basic point of view, the definition of “What is a crypto trader?” is quite simple: a crypto trader has the ultimate goal of profiting from short-term changes in cryptocurrency market prices.

A crypto trader can focus on just one coin and one pairing, like the infamous bitcoin pairings – BTCUSD (or BTCEUR). Or he can focus on several important coins and thus pairings, such as Bitcoin and Ethereum paired with either USD or EUR.

You may have heard the term ‘alts’, which stands for alternative cryptocurrencies and is usually considered smaller, which is also reflected in the market capitalization.

It is important to give a brief overview of the two scenarios you need to consider when investigating how to become a crypto trader:

Option 1: Buying and selling cryptocurrencies on the exchange

It is quite a viable option to buy the cryptocurrency of your choice directly from a crypto exchange, which means that you actually own the underlying asset of the cryptocurrency.

This option certainly has advantages, however, these advantages are more relevant if you want to hold the cryptocurrency for the long term – not for short-term trading.

Buying and storing cryptocurrencies directly on an exchange can be risky, as these exchanges can be hacked, are often (not always) unregulated, and there are fees associated with both buying and selling – fees for the exchange.

This option requires the trader to raise the full value of the position and then store the cryptocurrency in a secure wallet until they are ready to sell it at a profit or loss (it is never recommended to store cryptocurrencies directly on the exchange – another reason why this option is suitable for a long-term strategy).

Option 2: Trade crypto CFDs

Your second option is to trade cryptocurrency CFDs with a regulated broker – this option is more ideal if your strategy is short-term (which is the only viable option for trading in the first place).

This type of crypto CFD traders can use leverage, which means that they only need to make a small deposit equal to the full value of the position. You can learn more about the benefits and risks of leverage in the article ‘What is leverage in trading?’.

Crypto CFD traders also have the advantage of being able to ‘short” or ‘sell” cryptocurrency CFDs, which means that they can also profit from a falling market. Considering the upward and downward trends in the Bitcoin to US Dollar chart above, using CFDs could prove to be a successful strategy.

Is crypto trading profitable?

Trading cryptocurrency CFDs (like all trading instruments) carries some risk given the high volatility that is constant in this market sector.

However, if you have developed a well-thought-out trading strategy, trading cryptocurrency CFDs can be very profitable. As the saying goes, high risk can justify 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 in 2021.

How much do crypto traders earn?

Of course, it’s difficult to speculate exactly how much full-time 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 means that many crypto traders CFD do not do crypto trading as their actual job.

However, there is certainly a growing trend of people, especially millennials, quitting their jobs to trade cryptocurrencies.

The basics of how to become a crypto trader

Success as a crypto trader means different things to each individual trader. For some, it could mean making a profit on a live account trading the 30-minute chart. For others, it could mean making a profit shorting cryptocurrency CFDs.

However, at the end of the day, it is all about making a profit on the capital invested.

Choose the right broker
To have the opportunity to trade cryptocurrency CFDs, you first
need a broker to handle the trades.

Choosing the ‘right’ broker can be challenging because there are many options and they all want your business. Above all, make sure the broker is regulated, ideally by multiple jurisdictions. Safety and security are of great importance, which is ensured by the regulatory bodies