How do you trade cryptocurrency?

You might have grappled with the idea of investing in crypto, buying bitcoin, Ethereum and the altcoins. Perhaps you know to #HODL until they soar in value and then cash out in order to retire in Costa Del Wherever The Heck You Want at 32. But what’s all this ​“day trading” about?

You’ve already learnt how to invest in crypto. As above: you buy, you hold, it rises, you sell. Trading is exactly that… except way more frantic. Trading means you’re constantly in and out, as opposed to watching an investment slowly ticking over across the decades. Have you ever looked at the value of, say, Loopring? Then you’ll know there are charts for days, weeks, months – and day one is proper manic, full of ups and downs. With trading, there’s more of a gradual pattern. That’s the difference.

Traders are looking to buy when the value is low, and sell when it’s high, but across all those micro-peaks throughout the day. The idea is that you constantly add profit each time, so your balance goes up and then you sell it, turning a profit. Up and up and up.

That’s the theory. Whereas a long-term investment is taking a punt on the future of the cryptocoin by guessing each day. In crypto, it’s often by the minute.

So that’s trading. It’s the same with OG stocks and shares.

Wall Street. Nah, kidding. Apps and online crypto exchanges. Ideally, you want an exchange that has low fees, but is also secure enough that your account isn’t going to get hacked. The most popular options include Coinbase and Binance. You can trade some crypto on more traditional platforms such as eToro also. You just deposit money on these exchanges and you’re good to go.

Yes, of course, but there are no guarantees. You can just as easily lose money. However, there are plenty of people who trade crypto for a living. Some might do a few hours here and there, others will work nine-to-five shifts. There are ample blogs detailing how you could, in theory, earn £74 a day starting from an investment of £850, without a lot of effort. That’s £27,000 a year. So you’d assume the numbers can go drastically higher if you’re good at it, or put more money in to begin with.

But there are other ways of potentially making money in crypto that are less time-intensive.

You need to be able to predict the market and buy assets before they go up in price, and sell them before they dip in price. This could be over the course of a few weeks or a few hours. You have to be constantly monitoring what you have. Deciding when it won’t dip lower and clicking buy, deciding it’s at peak value (at least for a while) and clicking sell.

That’s the game. Get it wrong, you won’t earn much profit and therefore it’s not going to pay the landlord’s mortgage, especially after trading fees (a small percentage you pay to the platform each time you sell assets). Get it very wrong and you’ll actively have less money.

But get it right, and it can pay off in a big way.

There are strategies you can try to follow (though they all really come from traditional stock trading), like ​“breakouts”, ​“scalping” and ​“range trading”, and there are charts you can learn to read – such as candlestick charts – to predict the next rapid rise (or fall) of value. There’s even automated bots you can programme to do the buying and selling for you (though you’ll still need to programme them to do what you want).

It can be a full-time job. In fact, to trade crypto fully you’d have to be at the computer all the time, as the market never closes, unlike traditional stock markets. The London Stock Exchange, for instance, opens at 8am and closes at 4.30pm without a lunch break.

You’ll probably need to decide how deep you want to go. If you want to trade for a couple hours on a Sunday evening instead of soaking in the Corrie omnibus, then you might earn a little money but not enough to live off. The full-time effort tends to be called day trading, because you’ll generally be buying and selling various coins and tokens throughout the day.

Yes. There are pro investors for a reason, and that’s in stocks. Crypto is even riskier, because it’s far more volatile.

The thing is, there’s a mindset battle here, too: if you time everything well (although this is difficult to do even when you know your shit), the volatile swings can be even more rewarding than stocks and shares.

Probably. The more traditional stock market has entire businesses consisting of employees who trade other people’s cash and stocks. They’re called stockbrokers. Crypto doesn’t, though some are starting to, and you’d imagine eventually there’ll be quite a few of them.

BC Bitcoin is one of the more established ones. It’s based in Hertfordshire, and has been going since 2017.

Fairly, yeah. You’ll find crypto comes up often on trading subreddits such as r/​Daytrading which has 812k members, and there are smaller crypto-dedicated platforms, though they’re a lot less active. Twitter’s #cryptotrading hashtag is always buzzing with activity, too.

You’ll also notice if you check the information about an asset on Coinbase. It’ll tell you how long it’s typically held for. Most coins are held for less than three weeks before being sold on – bitcoin and Ethereum have hold times of 74 and 73 days respectively, but altcoins like Solana (the third most popular crypto coin) has an average of 18 days.

Many people #HODL crypto forever, or at least for long-term periods, so this suggests an equally large set of people are day trading for the data to average out at two months.

And there you have it, trading crypto in a nutshell. It’s is a risky game and you should research the market thoroughly before starting – if starting at all. You should also start small, being sure to only invest the money you’d throw on clothes and pints, as opposed to hoping you can make a billion quid with next month’s rent.

Speak to a Financial Conduct Authority-registered financial adviser before taking financial advice, and think carefully before making any decision.