In the post-pandemic world, cryptocurrencies and blockchains are becoming increasingly important, including Ethereum. This has driven up the prices of many coins, including ETH tokens. Due to the current increase in prices, many day traders, along with people looking for a secondary income, are now considering cryptocurrency trading so that they can buy low and sell high.
We have created this exhaustive and detailed guide that will take you through the journey of Ethereum trading. You will be able to learn how to predict ETH price fluctuations and make better trading decisions through fundamental and technical analysis.
The first thing you need to learn about Ethereum investment is that there are two different strategies. The first one involves owning and holding Ethereum in a crypto wallet so you can sell it after months or even years to realise big profits.
The second strategy is day trading, where you bet on the price of ETH through derivatives like contracts for difference (CFDs). Brokers offer these, and if you trade with them, you don't actually own the coins but instead a contract that speculates on the price.
While you can find a wide variety of ETH derivatives, three are commonly used for trading Ethereum on brokerage and exchange websites.
The best feature of trading derivatives is that you can buy and sell them right away without having to jump through any hoops. Compared to buying ETH coins and holding them, this is a much more convenient and quicker method to make money.
When you are choosing a broker, it is highly recommended that you go for a service that's not only registered but complies with national regulations. Trading on regulated brokerage platforms minimises your risk and ensures that you won't have to face any scams or frauds. The type of derivatives and associated features depends on the country the broker is registered in, along with your own country of residence.
Many traders who are just getting into the trading business like to copy high-profile traders’ trades, which is a feature available on many social trading platforms. This is a double-edged sword, as, on the one hand, you are more likely to be successful, but on the other, you don't have the trading volume and safety cushion that's available to large-volume traders.
That's why it is advised that you should copy trades with caution, ensuring that it is suitable for your situation, considering your initial capital, fees, and other factors.
We evaluated multiple popular trading platforms, taking a number of factors into account, and shortlisted some of the best brokers and exchange platforms for ETH trading.
Brokerage websites allow you to quickly trade Ethereum. When you are using a brokerage service, keep in mind that you don't own the cryptocurrency. Instead, you buy a contract that entitles you to the capital you've put in plus any profits or losses you make when the position is closed. Almost every platform offers cryptocurrency derivatives such as futures, options, and CFDs.
When cryptocurrency exchanges first started out, most of them only facilitated buying and selling of cryptocurrencies, including Ethereum. However, that has changed recently as more and more exchanges are now offering crypto derivatives to their users for day trading. If you've made an account on a leading exchange such as Binance and Okex, you probably don't need to use a brokerage service. These exchanges also allow you to engage in leveraged trading to maximise your profitability during the ETH bull run. Having said that, you need to manage your risk when opening leveraged positions.
For your clear understanding and guidance, we have come up with a detailed guide that takes you through the process of trading Ethereum on exchanges and brokerage websites.
When it comes to crypto trading, you need to familiarise yourself with two major types of analysis - fundamental and technical. If you can gather and process the right information, your odds of opening profitable trades become higher.
The first type of analysis involves basic information and is more qualitative. It generally includes:
Technical analysis is all about crunching numbers and finding patterns through statistics and facts. This allows you to make highly evidence-based trading decisions with a higher probability of profit earning. There are a number of technical markers that you can rely on for your trading, but some of the most popular ones include the following:
If you want to become a seasoned trader, you can use a wide range of other technical analysis tools and indicators such as Fibonacci levels, stochastic RSI, and various candlestick chart patterns. To learn more about our ETH forecasts, visit our Ethereum price prediction guide here.
There are no arguments about the fact that every trader is looking to earn profits. That being said, depending on your situation and circumstances, you have to choose the right strategy to maximise your odds.
When it comes to trading strategies, there is a wide range of techniques you can employ including copy-trading and news-based trading. Each strategy has its own pros and cons, and in the end, it's you, the trader, who has to make the final call.
If you want to be profitable, you need to ensure that you are on the right platform for trading Ethereum. The first decision that you need to make is whether you should go for a dedicated broker or an exchange.
Platforms that aren’t registered or don't adhere to KYC and AML regulations can be shut down without any prior notice. They can also turn out to be frauds or scams.
After you have validated your identity, you can set aside the base deposit in either digital currency or fiat cash, subject to the trading service you've picked. Go to your wallet and pick the deposit choice from where you can choose any of the payment methods.
Many exchanges and brokerages will require you to upload a copy of your government-issued ID, proof of address, and a selfie in order to verify your identity fully.
After you have set up your account and deposited your seed capital, you can start trading by going to the 'Trade' section. You will see different types of interfaces on different websites, but there will be a few common components such as the order book, buy and sell, etc.
If you believe that the price of Ethereum is going to increase, you buy ETH coins low and attempt to sell them at a peak to realise your profits. This is called a long position. However, if you expect the ETH price to go down, you can bet on this outcome with a short position. Shorting can be quite risky, as you will lose out if the price of Ethereum increases sharply.
A trade or order that uses Ethereum's market value is called a market order. As you don't set the price, you can only see buy and sell options in the market order section. However, if you want to get a better price, you can start a limit order which asks for the price at which you want to initiate your trade as well as the number of ETH coins. The major difference is that market orders can be executed right away, but limit orders may take time until the market reaches that particular price point.
The total capital you invest in a trade is called the trade position sum. You can maximise this by opening a leveraged position that allows you to make the most of a bullish trend. On trading platforms, leveraged trading is expressed in terms of proportions. For instance, 15:1 means 15x leverage, and if you have invested $1,000, your profits or losses will be calculated as if you have invested $15,000. You should always manage your risk carefully when using leverage.
When the market doesn't respond according to your expectations, you can use the stop-loss feature to minimise your losses. To initiate a stop-loss order, you need to provide two key values: the stop price, at which point the order is activated, and the limit price, which is the price at which you actually close your position.
Your limit price should always be below your stop price to account for the fast-moving Ethereum market. Relying on technical analysis, you can place a stop-loss order under a support threshold when you think that Ethereum’s price is about to increase.
A take profit order does the same thing: it automates your trade to close when a certain profit threshold has been reached. This is convenient for traders who can’t check on the market constantly.
Before you start your order, ensure that you have entered all the values correctly and have selected all the right options. Once you've verified every aspect of your order, click on the ‘sell’ or ‘buy’ option.
If you have conducted thorough technical and fundamental analysis, you are likely to make a profit. You can either close your position on your own or use the take-profit feature, which closes the order on your behalf when a certain price is reached. Using the right combination of take-profit and stop-loss orders can help you minimise your trading risk.
If you're looking for a more detailed guide on purchasing Ethereum then check out our guide here. Furthermore, those looking to specifically buy ETH with a credit card or debit card will find pages dedicated to just that.