What is crypto trading and how do you trade cryptocurrencies?
Discover more about trading the volatile – and risky – cryptocurrency markets. Learn how to take a position with CFDs, and then see an example of a crypto trade on ether.
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
Contact us: 1800 601 799
Start trading today. For account opening enquiries call 1800 601 799 between 9am and 6pm (AEDT) weekdays, or email newaccounts.au@ig.com.
Contact us: 1800 601 799
What's cryptocurrency trading?
Cryptocurrency trading is the buying and selling of cryptocurrencies on an exchange. With us, you can trade cryptos by speculating on their price movements via CFDs (contracts for difference).
CFDs are leveraged derivatives – meaning that you can trade cryptocurrency price movements without taking ownership of any underlying coins. When trading derivatives, you can go long (‘buy’) if you think a cryptocurrency will rise in value, or go short (‘sell’) if you think it will fall.
By contrast, when you buy cryptocurrencies on an exchange, you buy the coins themselves. You’ll need to create an exchange account, put up the full value of the asset to open a position, and store the cryptocurrency tokens in your own wallet until you’re ready to sell.
How do cryptocurrency markets work?
The cryptocurrency market is a decentralised digital currency network, which means that it operates through a system of peer-to-peer transaction checks, rather than a central server. When cryptocurrencies are bought and sold, the transactions are added to the blockchain – a shared digital ledger that records data – through a process called ‘mining’.
What moves cryptocurrency markets?
Cryptocurrency markets move according to supply and demand. However, as they’re decentralised, they tend to remain free from many of the economic and political concerns that affect traditional currencies. While there is still a lot of uncertainty surrounding cryptocurrencies, the following factors can have a significant impact on their prices:
- Supply: the total number of coins and the rate at which they’re released, destroyed or lost
- Market capitalisation: the value of all the coins in existence and how users perceive this to be developing
- Press: the way the cryptocurrency is portrayed in the media and how much coverage it is getting
- Integration: the extent to which the cryptocurrency easily integrates into existing infrastructure such as e-commerce payment systems
- Key events: major events such as regulatory updates, security breaches and economic setbacks
Learn why people trade cryptocurrencies
Cryptocurrencies are notoriously volatile. For traders using leveraged derivatives that allow for both long and short positions, large and sudden price movements present opportunities for profit. However, at the same time, these also increase your exposure to risk. In short, the more volatile the market, the more risk you carry when trading it.
With IG, you can trade cryptocurrencies via a CFD account – derivative products that enable you to speculate on whether your chosen cryptocurrency will rise or fall in value. Prices are quoted in traditional currencies such as the US dollar, and you never take ownership of the cryptocurrency itself. CFDs are a leveraged product, which means you can open a position for just a fraction of the full value of the trade. Although leveraged products can magnify your profits, they can also magnify losses if the market moves against you.
When trading cryptocurrencies with us, you can:
- Access real-time pricing. We derive our prices from several exchanges, and they’re calculated on a continuous basis
- Get prices reflective of the underlying market. Because our prices are based on real markets, in real time, they always reflect actual market sentiment
- Trade with derivatives. With our CFD account, you’ll never own actual cryptocurrencies. This means you get to trade without opening an exchange account or creating a wallet
- Hedge against adverse markets. As CFDs enable you to take short positions, you can hedge against losses on investments you already hold
- Obtain low spreads. We work to keep our spreads amongst the lowest in the market
- Use continuous charting. Our award-winning platform1 offers cutting-edge HTML 5 charts and a selection of advanced indicators and drawing tools
- Enter and exit positions quickly. Owing to tight spreads and our fast execution, CFDs enable you to enter and exit trades quickly
- Trade on leverage and margin. CFDs are leveraged, giving you full market exposure at a fraction of the initial outlay required when buying actual cryptos. However, trading CFDs comes with a high risk of losing money rapidly due to leverage.
- Trade on a secure platform. You can utilise measures such as the two-factor authentication (2FA) to ensure you’re secure when trading online.
Pick a cryptocurrency to trade
With us, you can use CFDs to trade 11 major cryptocurrencies, two crypto crosses and a crypto index - an index tracking the price of the top ten cryptocurrencies, weighted by market capitalisation.
Our selection includes:
- Bitcoin
- Ether
- Bitcoin Cash
- Litecoin
- EOS
- Stellar
- Cardano
- Bitcoin Cash/Bitcoin
- Ether/Bitcoin
- Crypto 10 index
- Cardano
- Chainlink
- Polkadot
- Dogecoin
- Uniswap
Open a CFD trading account
Opening a CFD trading account usually takes minutes. And there’s no obligation to fund your account until you’re ready to trade. We’ve provided traders with access to leading financial markets since 1974 and are a FTSE 250 company.2
Find your crypto trading opportunity
Leading cryptocurrencies
Trade a selection of the world’s leading cryptocurrencies or our Crypto 10 index
Trade wherever, whenever
Deal on an award-winning trading platform and mobile app1
Technical indicators
Discover price trends using our in-platform tools like MACD and Bollinger Bands
Expert analysis
Get technical and fundamental analysis from our in-house team
Decide whether to go long or short
'Going long' means you expect the cryptocurrency's value to rise. In this case, you'd elect to 'buy' the market.
'Going short', conversely, means you expect your selected cryptocurrency's price to fall, and here you'd elect to 'sell' the market.
Take steps to manage your risk and place your trade
Because you’re opening your position on margin, you can incur losses rapidly if the market moves against you. To help manage this risk, you can set a stop-loss level in the deal ticket. If triggered, the stop-loss will automatically close your position and cap your risk.3
To lock in any profits if the market moves in your favour, you can also enter a limit level. Here, your trade will be automatically closed to secure positive returns as soon as the market reaches the price you’ve set.
Remember that, when trading CFDs, each contract will specify an amount per point of market movement. If the CFD is for AUD10 per point, and the underlying cryptocurrency price moves 10 points, your profit or loss – excluding costs – will be AUD100 per contract.
Once you’ve set the number of CFDs you want to trade, your stop-loss and limit levels, you’d open your position by clicking on ‘place trade’.
Monitor and close your position
When you decide to close a position, click on the ‘Positions’ tab on the left menu. Select ‘Close position’ and set the number of contracts you’d like to close. Alternatively, open the market’s deal ticket and take the opposite position to one you have open – for example, if you bought CFDs to open, you’d now sell, and vice versa.
Trading CFDs on cryptocurrencies: ether example
After completing a thorough analysis on ether price movements, you believe the market will trend upwards from its current level of 3200. Consequently, you decide to take a long position using CFDs. Because you’re going long, you open your position by electing to ‘buy’.
In this example, after a spread of 8 points is applied – and excluding other costs – the buy (or offer) price is set at 3204, while the sell (or bid) price is 3196. The CFD you use specifies an amount of AUD1 per point of market movement, and you opt to trade 10 contracts. This brings your total exposure for the position to AUD32,040 (AUD3204 x AUD1 per point x 10 contracts).
But, as positions on ether CFDs can be opened with a margin deposit of 50%, you’ll only need to deposit AUD15,020. At this point it’s important to note that because your exposure is larger than your required margin, you stand to lose more than the deposit if the market moves against you. So, to manage your risk, you can set a stop-loss to close your trade automatically.2 In this case, suppose you add a guaranteed stop loss at 3000.
The market moves as you predicted, up to a level of 3500, at which point you decide to close your position and take a profit. The sell (or bid) price after the spread is applied is 3496. The difference in price between 3496 and 3204 is 292 points. This, excluding other costs, brings your profit on the trade to AUD2920 – a return of 19.4% on your margin deposit.
Suppose, however, that the market instead decreased and reached your guaranteed stop-loss level, closing your position at 3000. Here, the difference is 204 points, meaning that you’d cut a loss of AUD2040 (13.6% on your margin deposit), plus a fee for the guaranteed stop-loss being triggered.
FAQs
How do I start trading cryptocurrency?
With us, you can trade cryptos by speculating on their price movements via a CFD trading account.
To get started, follow these steps:
- Understand what crypto trading is
- Learn why people trade cryptos
- Pick a cryptocurrency to trade
- Open a CFD trading account
- Identify a crypto trading opportunity
- Decide whether to go long or short
- Take steps to manage your risk and place your trade
- Monitor and close your position
If you're ready to trade, open an account.
How much money do I need to start trading cryptocurrency?
Cryptocurrency trading is inherently high risk – the markets are volatile and leveraged derivatives like CFDs only act to amplify these already large and sudden market movements.
You should always ask yourself whether you can afford the risk of monetary loss, and if so, how much? With this said, the margin requirements on cryptocurrency CFDs are comparatively high – currently 50% margin but can be increased in times of market volatility. This means that cryptocurrency trading can have, relative to other markets, higher costs.
To get a better idea of the costs of trading, consider opening a demo account. You’ll get AUD20,000 in virtual funds to trade not only cryptos, but over 18,000 other popular markets.
What is the best way to trade cryptocurrency?
There are two main ways to trade cryptocurrencies. First, you can buy and sell actual crypto coins on an exchange. In this instance, you’d need to pay the full value of the coins upfront, in addition to opening an account on an exchange and creating a wallet for the coins. We currently don’t offer this.
Second, you could speculate on cryptocurrency price movements using CFDs. These are derivative instruments – which means you won’t buy and sell actual coins. Consequently, you won’t need an account with an exchange, and you won’t need a wallet.
Trading with derivatives like CFDs also means that you can a take a position in both rising and falling markets – meaning you can go long (‘buy’) if you think a cryptocurrency will rise in value, or go short (‘sell’) if you think it will fall. If you owned coins, by comparison, you could only profit if you sold your coins for more than you paid for them.
Because CFDs are leveraged, you can open a position by outlaying an initial amount that’s only a fraction of your total exposure to the market. This, however, also amplifies your risk as losses can accrue rapidly – especially in markets as volatile and unpredictable as cryptocurrencies.
In the case of CFDs, your losses could exceed your initial deposit. When trading, it’s important to always take steps to manage your risk.
What moves the cryptocurrency markets?
Cryptocurrency markets move according to supply and demand. However, as they are decentralised, they tend to remain free from many of the economic and political concerns that affect traditional currencies. While there is still a lot of uncertainty surrounding cryptocurrencies, the below factors can have a significant impact on their prices:
- Supply: the total number of coins and the rate at which they’re released, destroyed or lost
- Market capitalisation: the value of all the coins in existence and how users perceive this to be developing
- Press: the way the cryptocurrency is portrayed in the media and how much coverage it is getting
- Integration: the extent to which the cryptocurrency easily integrates into existing infrastructure such as e-commerce payment systems
- Key events: major events such as regulatory updates, security breaches and economic setbacks
Can crypto trading be profitable?
Yes, like any market, trading cryptocurrency can be profitable if you correctly predict the direction and timing of price movements. However, cryptocurrency markets are exceptionally volatile – meaning that they’re high risk. Whereas large price movements in your favour could result in positive returns, sizeable price movements against your position will result in rapid and significant losses.
When trading with leverage, which acts to amplify both profits and losses, the risk inherent in volatile markets is only increased. Before trading, always consider whether you can afford the potential monetary loss, and always take steps to manage your exposure to risk.
Can I day trade cryptos?
Yes, you can day trade cryptos. The volatile nature of crypto markets means that significant and rapid price movements can occur daily. Whereas this volatility increases your exposure to risk, it also presents opportunity. Our tight spreads and high liquidity mean that you can enter and exit positions quickly when trading with CFDs.
How does IG make money from cryptocurrency trading?
We make most of our money through our spreads, with a small portion of our revenue coming from other fees. We aim to build lasting relationships with traders and provide a range of tools to help you on your trading journey.
Spreads are wrapped around the underlying market price. When trading CFDs on cryptocurrencies, you won’t pay commission.
Some of our additional fees (where applicable) include:
- FX conversion fees
- Overnight fees
You can find out all about these on our charges page.
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1 Best Finance App, Best Multi-Platform Provider and Best Platform for the Active Trader as awarded at the ADVFN International Financial Awards 2024.
2IG is part of IG Group Holdings Plc, a member of the FTSE 250.
3Stop-loss orders close your position automatically if the market moves against you. Normal stop-loss orders are free, but there’s no guarantee of protection against slippage. Guaranteed stops will close your position exactly the price you specified, but incur a premium if triggered.
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