How to trade cryptocurrencies

Because cryptocurrencies are such new assets, less is known about how they respond to the wide range of common market conditions which affect other, more established assets. Investors are also still waiting to see how cryptocurrencies might perform in a major financial crisis.

With this in mind it is important that you put in place a careful cryptocurrency trading strategy that is based on sound risk management. Our guide to trading cryptocurrencies at ETX will help you decide on which market you might want to to trade, how to trade it and how to monitor your position once you’ve opened it.

Getting started with cryptocurrency trading

Pick a cryptocurrency to trade

Visit our full market page for a list of the cryptocurrencies we currently offer. Remember, all cryptocurrency markets are relatively volatile so choosing a market that is right for your risk appetite is important. Ensure you understand how the cryptocurrency works, the challenges it faces and how it has performed over the medium and longer term before you open a position.

Decide whether to spread bet or trade as a CFD

You can trade all of our cryptocurrency markets as either a spread bet or a CFD. The trade type you choose will be dependent on tax considerations, how long you intend to keep your position open and pricing type. When you choose to spread bet on cryptocurrencies, you won’t pay any Capital Gains Tax*.

Go long or short

Your research, analysis and market knowledge will help you decide on whether you want to open a Buy (going long) or Sell (going short) position. Deciding which direction to open your trade in is crucial, make sure you let your research and analysis guide your market entry point for maximum benefit.

Making your trade

Because cryptocurrency markets are so volatile it is important that you protect yourself against excessive price movements by using smart risk management tools like stop losses and limit orders. Trailing stops can help you lock in profits and limit losses while we also offer Guaranteed Stops on some of our most popular markets. Remember, always trade within your budget and ensure that your account has enough margin to cover your position.

Monitoring your position and exiting the market

Crypto markets can move quickly so staying on top of market moving events is crucial to the success of your trading. As more cryptos have moved into the mainstream so information about their price movements has become more widespread. Always ensure that you follow the news about the cryptocurrency you have traded very closely. It may help to visit coin forums and to stay on top of potential regulatory moves which could result in big price swings.

Deciding which cryptocurrency to trade

Like any market that you trade, a good working knowledge of the asset you’re choosing to invest in is crucial. As cryptocurrencies are relatively new assets there is much less information available around how they behave, and far less historical trend data, to help guide your trading decisions.

Before you enter the market, do your research and make sure that you have a complete understanding about the cryptocurrency you are interested in and how and why market prices move.

Many newer traders see cryptocurrencies as a particularly high yield, fast growth market and rush in with little or no research. While it is true that there have been many success stories with cryptocurrency traders, it is far more prudent to trade such a volatile market with a solid trading plan in place.

Choose a cryptocurrency that you feel confident in and one that offers you plenty of research possibilities. Remember the newer cryptocurrencies may experience greater swings of volatility as the market struggles to peg their value.

Always factor in your risk appetite when deciding what to trade.

Decide whether to spread bet or trade as a CFD

You can trade any of the cryptocurrencies at ETX as either a spread bet or a CFD. The type of trade that you choose will depend on your overall trading strategy, how long you intend to hold open the position and tax considerations. In the UK spread betting profits are free from Capital Gains Tax* while CFD profits are not.

Whichever trade type you decide on, both allow you to trade using leverage. While this can help you maximise profits, it will also magnify your losses. Make sure you understand the risks involved with leveraged trading before entering the market.

The table below will help you decide which account type is right for your cryptocurrency trading.

Placing your trade

When you have decided on a trading strategy and the direction of your cryptocurrency trade, you can quickly and easily place your order on our award-winning TraderPro platform.

You’ll find a number of smart risk management tools available directly in the trade ticket. To attach a stop loss, limit order or Guaranteed Stop to your position, simply select the relevant option and enter your chosen price points.

Our Guaranteed Stops are available on many of our most popular markets and allow you to fix your risk and avoid the impact of market gapping or slippage. You can lock in the exact risk level that you feel most comfortable with and trade with greater peace of mind.

Monitoring your position and exiting the market

Our powerful iOS and Android apps let you monitor your position closely, even when you’re on the move. When you trade on a volatile market like cryptocurrencies, it is important that you make use of advanced charting tools like indicators and oscillators to track market movement as it reaches key support and resistance levels.

Our advanced charting and drawing tools are available on our desktop platform, as well as on our mobile apps and will help you map out a clear strategy for when best to exit the market.

* Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.