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How to Trade Ethereum in 2024
Ethereum trading involves buying and selling ETH at frequent intervals to take advantage of short-term price fluctuations. The most popular way to trade Ethereum is to use a CFD broker, which allows you to speculate on the price of the crypto without buying the underlying asset. However, it is also possible to trade Ethereum through an exchange.
In this guide, we will cover everything you need to know about trading Ethereum including the best platforms to use for trading in 2024.
- What is Ethereum Trading?
- Ethereum Trading Strategies
- How to Trade Ethereum
- What Is the Best Way to Trade Ethereum for a Beginner?
- How to Trade Ethereum Using a Broker
- How to Trade Ethereum Using an Exchange
- Final Thoughts on Trading Ethereum
- FAQs
What is Ethereum Trading?
In simple terms, Ethereum trading is the process of buying and selling Ethereum. Just like traditional stocks, Ethereum’s value changes over time, based on supply and demand. Traders aim to buy ETH when the price is low and sell it when the price goes up, making a profit from the difference.
The main difference between trading and investing is that traders typically execute each trade within a short time frame – often within the same day. This allows traders to make regular income from the market, rather than waiting years for the value of their portfolio to appreciate.
The exact process of trading looks different for each trader, depending on the strategy that they use. It is common for traders to use derivative products and leverage to reduce fees and maximize potential returns.
Although trading is often painted as exciting, it comes with a high level of risk. The price of cryptocurrencies can be very volatile and predicting price movements requires a lot of experience and market knowledge.
Ethereum Trading Strategies
As we mentioned above, there are several ways that you can trade Ethereum.
- Scalping: This strategy involves making quick trades to take advantage of small price fluctuations. Scalpers can make tens or even hundreds of trades each day. This strategy requires excellent technical analysis skills and the ability to monitor price charts around the clock.
- Swing trading: Swing trading is a strategy that takes advantage of ‘medium-term’ price movement. Traders may hold their trades for days or weeks. This strategy is slightly less fast-paced than scalping but still requires strong technical analysis skills.
- Arbitrage trading: This strategy aims to take advantage of small price discrepancies between exchanges. Traders will buy on one platform and sell on another.
How to Trade Ethereum
To trade cryptocurrencies like Ethereum, you’ll need to follow the points below.
What Do I Need to Trade Cryptocurrency?
The first thing you need to consider is what you want to get out of cryptocurrency trading.
For example, if you’re going to buy and hold your coins for the long term, you’ll need a private wallet to store your coins.
If you’re looking to trade on a regular basis, then an account on a regulated trading platform is recommended.
Furthermore, if you’re looking to speculate on the price of the coin without owning the underlying asset, then CFD brokers may be the one for you.
You’ll also need to understand the common terminology and principles within online crypto trading. You should understand how price spreads work and how Ethereum’s price behaves in relation to other international markets, and the importance of smart contract technology in automating agreement enforcement through algorithms.
Where Do You Trade Cryptocurrencies?
Here’s a brief look at some of the most common services you can use when trading:
Exchange:
A cryptocurrency exchange is a trading platform where you can swap different currencies. Either fiat into crypto, or crypto into another crypto. These exchanges can be a little challenging for newcomers to use, but they’re often the most popular choice for both skilled and unskilled traders. Notably, they are also a target for hackers, so you should think about keeping your funds in a separate wallet for additional security, especially if you do not intend to sell them any time soon. Always enable 2-factor authentication as well.
- When you buy crypto through an exchange, you own the underlying asset. This means that you can transfer your tokens to another platform, which is suitable for arbitrage trading.
Broker Account:
A broker is a trading platform where you can open an account and make investments, either in holding shares, cryptocurrencies, or other assets. These platforms are often regulated and provide access to thrid party charting tools such as MetaTrader and TradingView.
- Brokers are popular scalp traders because they provide access to crypto CFDs. These are derivative products that represent the underlying asset. CFDs often come with lower transaction costs and can be sold much quicker than traditional cryptocurrencies.
Wallet:
A crypto wallet is a device, service, or program which holds the keys used to send and receive cryptocurrencies, including Ethereum. If you have your own wallet, your Ethereum coins will be more secure than they would be if you left them in an exchange account.
Should I Trade Cryptocurrencies?
This is entirely up to you. Cryptocurrencies offer plenty of potential gains, especially if you understand the cryptocurrency market. However, there is also the potential to lose money if your trades do not go as expected.
Many platforms let you try a demo account where you can practice trading Ethereum without risking any real money. This is a great way to hone your trading techniques and get acclimatized to the financial markets.
Trading is best suited to people with a high risk tolerance. If you are looking to grow wealth gradually over time, investing may be a better choice for you.
What Is the Best Way to Trade Ethereum for a Beginner?
If you are new to the crypto space and want to make money with Ethereum, you should consider using a broker as you can forgo the process of actually purchasing and holding Ethereum coins.
CFD trading essentially means that you own a contract regarding the value of Ethereum but not the coins themselves. As such, you don’t need to think about finding a wallet or a place to keep them safe. If you decide you want to own Ethereum, you can move to trade on a crypto exchange at a later date, especially if you’re going to hold various cryptocurrencies or trade them for each other.
When you use a CFD platform, you’ll sometimes get the option to execute leveraged trades.
This is when you can borrow funds to make larger trades. The amount you can borrow varies on the platform and the chosen asset – some platforms offer 100x the size of your original stake.
Leveraged trading is an excellent way to maximize profits, but it can also lead to higher losses as well. That’s why it’s a tool that most experienced traders use profitably.
As such, we recommend beginner investors stay away from leveraged trading until they know what they are doing.
How to Trade Ethereum Using a Broker
There are so many brokers through which you can trade cryptocurrency. Here’s a step-by-step guide on how to do it:
Step 1: Open an Account with Your Preferred Broker
The first thing you need to do is sign up with a crypto broker. Luckily, this is a quick and easy process. First, choose a broker that has a secure platform that is easy to use. You’ll also want to make sure they have narrow price spreads. Then, you’ll have to provide personal documentation to confirm your identity, just like you would if you were opening an online banking account.
Step 2: Deposit Funds into Your Account
There are numerous payment methods you can use to add funds to your trading platform account. Typically most brokerages will let you use credit or debit cards and bank transfers. Some will also allow you to use PayPal, but this is less common. Once your payment method is set up, you’re ready to start trading.
Step 3: Figure out Your Trading Strategy
There are many common ways you can trade Ethereum. These include:
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Day trading: This involves opening and closing an Ethereum position on the same day, hoping to make quick gains. If you want to day trade and earn money, you need to learn to read charts, also referred to as technical analysis.
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Swing trading: This is another short-term strategy, but with a more patient timeframe than day trading. Typically, swing traders will hold onto an asset from anywhere between one day to a few days. The aim is to profit from price changes or price swings.
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Scalping: This technique involves capitalizing on market inefficiencies to make repeated gains. These gains will not be substantial, but they add up over time. Two approaches are arbitrage and spread scalping. Arbitrage involves looking for discrepancies between the bid and ask of two brokers, then using that discrepancy to your advantage. Spread scalping is the same sort of thing, but you use the same broker. Many cryptocurrency brokers ban this technique, so make sure your broker allows this practice before trying it.
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Automated trading: This type of trade is done through computer algorithms. Indicators and statistical arbitrage can be used to automate the process. This is sometimes referred to as robot trading. A word of warning, this automated trading is very risky and often results in a loss, especially if you go with an unregulated service. For automated trading, you can use one of the trading robots.
All of these strategies have their own advantages and disadvantages. Consider how quickly you want to place trades, how long you are willing to wait for a profit, and if you wish to place trades yourself or let a robot do all the work for you.
If you would rather purchase and hold Ethereum, this could result in long-term gains, especially if you buy when prices are low and exercise patience before selling.
Step 4: Place Your First Trade
Once you’ve completed your research, chosen an Ethereum trading platform, deposited your funds, and settled on your preferred trading technique, you can go ahead and start trading. Use the search bar to locate the ETH/USD or ETH/GBP market and confirm the transaction.
How to Trade Ethereum Using an Exchange
When you use an exchange, you deal with the market directly and prices are set in real-time by traders all over the world.
If you are thinking about using an exchange for the first time, follow this step-by-step guide:
Step 1: Decide Which Exchange is Right for You
There are many things you need to consider when choosing an exchange. This includes the reputation, the trading fees, and the choices available to you as a trader.
Step 2: Set up Your Account
Once you have selected an exchange that suits your needs, you need to create your account. Typically, you will need to provide some relevant contact information and verify your identity with photo identification. You’ll also have to link a payment method so you can deposit funds.
Step 3: Select Which Cryptos You Want to Purchase
Exchanges usually have a range of coins. When you buy crypto, you typically do so in pairs. This means you can hold different coins or swap Ethereum for any of them – including ripple (ETH/XRP), Bitcoin (ETH/BTC), or a fiat currency (ETH/USD).
Step 4: Place Your Trade
Exchanges offer numerous strategies when it comes to making trades. Some of your options may include:
- Buy order: This is when you simply purchase a number of crypto coins.
- Sell order: This is when you close your trade, either by selling your Ethereum to make a profit or to limit your losses.
- Put/call: When you trade with options, you can bet on Ethereum’s price going up or down. You purchase the contract that gives you the opportunity to buy or sell crypto at a specific price and a specific date.
- Market order: This is when you purchase Ethereum straight away according to the current market value.
- Limit order: This is when you intend to purchase Ethereum, but you only want to pay a certain amount. Therefore, you set that price beforehand and ensure you do not purchase coins for more than the amount you are happy to spend.
- Stop-loss order: This is when you purchase crypto, then set your account to sell the coins if the value falls past a certain point. For example, if you buy Ethereum for $1000 and choose a stop-loss order at $900, you will limit your loss to 10%.
Step 5: Receive Your Coins
Once you have bought your Ethereum coins on an exchange, you can store them in a digital wallet provided by the exchange. However, we recommend transferring them to a personal wallet if you want added security.
Final Thoughts on Trading Ethereum
As you can see, there are numerous things you need to consider when trading Ethereum. Whether you want to use a trading platform, exchange, or some other method, there’ll be a way to trade Ethereum that suits your investment needs. If you are looking for a reliable platform to do trading, we recommend Coinbase for beginners and Binance for more advanced traders. However, there are many services available that may suit you better.
FAQs
Can I deposit money using PayPal to trade Ethereum?
Yes, some trading platforms will let you deposit money using PayPal to trade Ethereum, but you’ll have to research this for your chosen platform, as this is not commonplace.
Can I deposit money using a credit/debit card to trade Ethereum?
Credit and debit cards are some of the most widely accepted payment methods to deposit funds to trade Ethereum.
Can I deposit money using a bank wire transfer to trade Ethereum?
Yes, you can also use a bank transfer to pay for Ethereum directly on many platforms.
Will I lose money trading Ethereum?
Trading always carries some risk. The cryptocurrency markets are very volatile. While you can make a healthy profit trading Ethereum, you could lose it if the market turns against you.
Is Ethereum safe to trade?
This depends on your trading strategy and the platform you choose to trade on. We’d recommend you stay away from unregulated trading platforms and only invest with money you can afford to lose. Also, always activate 2-factor authentication.
What are the trading hours of the Ethereum market?
There are no trading hours. Cryptocurrencies are one of the few assets that can be traded round the clock.
Can I trade Ethereum on my mobile phone?
Yes, many platforms have a dedicated mobile app that can be downloaded for iOS and Android.
Is it easy to withdraw my profits?
Yes, most platforms will let you withdraw your funds without hassle, though you may have to wait a few days for the funds to reach your bank account.
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