How to trade crypto: How to place a trade?

What you'll learn

  • The basic options for executing a trade
  • The terminology of trading execution
  • The input options for making a trade
  • How to combine trading with strategy
  • How to close out a trade

You might assume that learning how to actually place a cryptocurrency trade would be among the first things included in our section on trading cryptocurrency. It isn’t.

We put the emphasis on first understanding what trading is, the concept of risk and what moves price, as well as the common approaches to making trading decisions. 

This article assumes you have given those subjects sufficient consideration and want to go ahead and actually execute trades. 

In order to make things as clear as possible we will use examples from Binance and Coinbase, though other exchanges are available. We have no relationship with either.  

Coinbase is good for beginners because it really simplifies the process but ease of use shouldn’t be your only consideration.

Placing a trade incurs commission and fees, which vary depending on the exchange. These fees are relatively high at Coinbase (and quite difficult to understand) and much lower at Binance, where the interface includes trading options which are more intimidating and assume a degree of knowledge. 

Refer to our article on choosing an exchange to understand more about the different considerations. For the purposes of this article we’ll use examples from both, depending on the context. 

We also assume that you have already created and funded your account; if you want to see a walk-through of those processes, please read this article.

Spot Trading

Exchanges offer a wide range of complex ways to trade which will be covered in later articles, but for anyone just starting out, are inappropriate and will likely cause confusion. So we'll simply focus on the simplest trading option - Spot Trading.

Spot Trading and Spot Exchanges literally enable trading on-the-spot. You simply accept the available price from the Market at the specific exchange at the specific time. You do this via a Market Order.

There is no precision to Market Orders, which is why they are suited to the least time-sensitive approaches to trading as explained previously, such as Cost Averaging and Hodling, which are also appropriate for beginners.

Coinbase Market Order

Coinbase simplifies the process of placing a Market Order to the extent that it doesn’t even really give you any other option. You have a Buy button, which takes you to a window to execute a Market Order - though this isn't how Coinbase describe the process as that specifically remove any trading terminology to simplify things. 

You also have the option to make the trade a recurring - weekly, monthly - which is ideal for Cost Averaging (as discussed previously) and illustrates the kind of user Coinbase is targeted at.

There is no trading interface. Coinbase trades are actually processed via Coinbase Pro which, as it names illustrates, is for experienced traders. 

In essence Coinbase is an entry level exchange where beginners can buy crypto with minimal fuss, powered behind-the-scenes by Coinbase Pro a platform for experienced crypto trader.

By opening a Coinbase account you automatically have access to the Pro platform, but should only migrate to that when you fully understand the trading process.

Here is what a simply Buy (Market Order) looks like at Coinbase:

As mentioned above, Coinbase is simplifying the trading process, which helps beginners, but at the expense of any kind of sophistication and high fees.

You do see a confirmation of Price before you commit to the trade and can also retrospectively access the information through your account, to build a trading P&L (Profit & Loss Report).

Binance offers a no-fuss similar approach, which they call Convert. This refers to converting your Fiat into Crypto, which we are trying to do here, as well converting one Crypto to another, which is getting a few steps ahead.

Once you have logged-in to your Binance account, click on the Trade item in the main menu, you’ll then see Convert, accurately described as the easiest trading option.

Here is what the Convert interface looks like at Binance. Remember, this is simplifying a Market Order.

Moving to a Classic Trading Interface

As you’ll see from the Binance Trading menu, the next option down is Classic Trading. This offers a more traditional trading interface and broader range of Spot options, alongside additional Market Orders types which we’ll explore in the walk-through.

Immediately when you move to the Classic Trading menu you can see that the interface is much busier, with a lot more information to absorb.

Step 1 - Choose the Classic Trading Interface

Click on the “Trade” option, and select “Classic”. It’ll show you the below screen. The difference between this screen and the Convert Interface (or Coinbase Buying process) is immediately obvious.

There is so much more information to absorb because the Classic interface assumes that you want to be far more proactive in the Trading process. We introduced some of these features earlier in the section when talking about exchanges and price discovery, the most important being the Order Book.

An order book is where buyers and sellers can view the offers available on a cryptocurrency. These order books are updated constantly 24 hours a day. An example of an order book could be for the BTC/USD trading pair. The below screen has the current offers available in the market for buying BTC and selling BTC in exchange for EUR.

The image above is of an order book for EUR/BTC pairs. Green color-coded orders show buy orders whereas the orders color-coded in red are sell orders. This snapshot is essential to gauge the seller and buyer interest at certain price levels. Traders can use this data to get valuable information about potential resistance or support level. 

Step 2 - Choose a Trading Pair

On the right side of the website, you can see the list of Trading Pairs. We’ve explained elsewhere what Trading Pairs are, Binance categorise the pairs of assets you can trade by the trading base:. BNB -

  • Binance’s own native currency
  • BTC - Bitcoin
  • Alts - The major Alt Coins
  • FIAT - Fiat currencies such as EUR 

Given this is your first trade you’ll be starting with FIAT so need to choose that option to select the relevant trading pair. We’re assuming you’ve made a Euro deposit and here want to buy Bitcoin so you should select the EUR/BTC Trading Pair.

Step 3 - Decide on the type of trade you want to place

Having chosen your Trading Pair you now need to choose the type of trade you'd like to make. At this point you can see how the simple Market order option offered by Coinbase and in Binance’s Convert trading option expand to include two additional options.

  • Market Order: As previously described this allows users to trade cryptocurrencies at their market rate. This order fills immediately, therefore you cannot cancel it. 
  • Limit Order: It allows you to set the minimum price you want to sell coins for or the maximum price you're willing to pay for them. You'd then have to wait for a buyer or seller to accept the price. If you're planning to HODL, set a limit order at a price above the current market price to take profit when the price goes higher.
  • Stop-Limit Order: It allows you to sell or buy a coin once it reaches a specific price. If you're trading for the short-term, set a limit price below the current price as the first target. You can also set a stop order above the current price to manage the risk.

Step 4 - Input the Amount You Want to Buy

As we are focused on a Market Order you simply need to input the amount in Euros of BTC you want to buy. Here you can see that we are buying €20 worth of BTC. Alternatively you can simply use the slider and choose 25%, 50%, 75% or 100% of your available balance to buy with.

Placing a Limit Order

Having already looked at Market Orders, we’ll now place a Limit Order. Instead of simply executing a trade at the current market place, we’re now specifying a price and an amount that we want to be our entry point. 

As explained in our article on Trading Strategy, an entry point is a key component of any trading plan and starts to move you away from DCA/Hodling toward active trading.

You can set a EUR/BTC limit order at a preferable price and wait for the market to reach that level. If the preferable price is reached, your EUR/BTC order will get executed at the set price.

It should look like this:

Step 1 - Input your Entry Price

This is the price you order will execute at if reached. Here the buy would trigger at an Entry Price of €45,000

Step 2 - Enter the amount you want to buy

This is the amount you'll purchase if the Entry Price is reached, and there are sufficient sellers. Here you would be buying €20 worth or 0.000444 BTC.

Step 3 - Check the Limit Order Before Placing It

Check the Entry Price and Amount you have specified before submitting the trade. Mistakes can be very expensive.

Step 4 - Place the Limit Order

Hit the 'Buy' button to place the Limit Order. You should then check the order in the “Spot Order” tab, available on the right side of the Binance interface. The screen below shows all of your trading history.

Closing The Trade

If your trade has been successful, and you want to realise the profit, you need to close the trade. This process is simply buying in reverse.

On Coinbase or Binance convert you simply sell at the current Spot price. You can sell some or all of the BTC that you purchased. You'll see a confirmation and your Fiat balance will update, which can then be withdrawn to your available payment methods.

Note, you generally cannot withdraw back to a card.

If you are using the Classic Trading View you simply need to place a Market Order Sell, rather than a Buy, indicating the required amount you want to sell. This will execute at the best available price and your Fiat balance will update, which can then be withdrawn to your available payment methods.

Converting BTC to another Cryptocurrency

At this point you’ve learned the simplest way to purchase Bitcoin with FIAT on Coinbase and Binance, using a Market Order. You’ve also explored a Classic Trading Interface on Binance that introduces more trading options, such as Limit Orders and the process for selling.

As you now own Bitcoin you can use the “Convert” to trade a pair with Bitcoin and an Alt Coin. Coinbase also offers a Convert option which functions in exactly the same way as Binance, though Binance offers a much broader selection of BTC trading pairs. On Binance, the “Convert” option is available under the “Trade” tab. 

You can add the amount of BTC you’d like to convert to ETH (Ethereum) or one of the other coins offered. Once you’ve entered the amount, you can preview the conversion to know the amount of BNB you’ll receive after the conversion. 

Beyond Spot Trading

The purpose of this guide is to provide you with enough information to make your first cryptocurrency trade. It is intentionally simplistic because trading options are so wide and varied. As explained Spot Trading relates to the price on-the-spot. There is another dimension to trading called Derivatives.

Derivatives enable you to trade on a derived market for the future price on a cryptocurrency within specific parameters. For example, Futures are a type of Derivative focused on the specific Future price movement. You don't buy the underlying asset, but instead enter into a contract stating conditions of the trade such as whether you think the price will go up or down, and something called Leverage, which is the subject on the next article.

Next step: How to read crypto trading charts & patterns

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