Many people are wondering what ways you can trade crypto professionally and earn money, and whether there are any chances of actually earning money by trading crypto.
The four top methods of trading crypto are trading through a brokerage, trading on your own on an exchange or mobile/web app, trading on peer-to-peer platforms, using professional third-party trading tools, and trading crypto derivatives.
The rest of this article provides details of these proven or tried and tested methods of earning by way of trading digital currencies.
1. Professional Trading Tools
These professional trading tools are third-party apps and are either web, mobile, or PC-based. They can be free or paid. It is recommended to start with free ones as a beginner. For the paid ones, you pay a one-time fee or subscription.
Professional trading tools allow you to connect to the crypto exchange of your choice through APIs.
Most will allow you to connect to more than one crypto exchange to manage your accounts on those exchanges from the app without returning to log in on the exchanges.
You then can deposit money through them and start trading on any exchange account of your choice. The benefits of using these include easier and better management of multiple crypto accounts that you have with different exchanges. After you connect all the exchanges, you can manage all of those accounts on one platform without having to go to log in to all of them.
You also get a better chance to automate your trades but the best way is to combine manual and automated trading. Another benefit is that the tools provide advanced order types or more order types, as well as advanced analytics for traders who want to gain better data-based insights in predicting future crypto prices.
Professional trading tools are also excellent just the same as third-party CFD tools because they allow you to explore several other features when trading crypto and crypto derivatives. For instance, you can connect with trading bots via APIs – either paid, free or own bots or automated trading strategies.
You can also rely on expert trader signals – both free and paid. This practice is called social trading where you can subscribe to other professional traders to receive their trading signals – either paid or free or even sell your trading signals if you are a professional trader. Some allow you to trade raw crypto and derivatives on a single platform.
Some of the tools include Altrady, Meta Trader 4, Meta Trader 5.
2. Contract for Difference
CFDs or contracts for difference are contracts provided by a broker to allow people to gain profits in the crypto industry without having to own, buy and sell the actual crypto.
You simply buy the contract that allows you to speculate on the direction of the future price of given crypto and earn the difference between the predicted price and actual selling price of that crypto when that time is agreed or the contract period expires. Notice you could also lose an amount equal to the difference between the predicted and the actual price.
It is also possible to trade on leverage on some platforms that allow contracts for different trading. The advantages include freeing you from having to manage the digital cryptocurrency itself.
You for instance do not have to have a wallet, understand how to operate it, purchase crypto, open multiple accounts with platforms where you need to first buy and then transfer crypto, or keep hiding private keys. Some people may find it tedious for instance to transfer their fiat money to crypto then start trading on their own. The latter can be technically challenging depending on how well you understand crypto.
You also get to multiply profits if the platform allows you to trade on leverages. It makes it easy to trade because all you need is to open an account with a broker that provides CFD contracts, deposit money via bank or online money transfer platforms, and start trading. With a CFD, you avoid the transaction costs of transferring fiat to crypto and the costs of trading on your own, although CFD platforms charge a commission that is larger obviously than the trading fee you incur trading on your own on an exchange.
Here are platforms on which you can trade digital currencies using CFDs – eToro (minimum deposit of $200), Plus500 (minimum deposit of AU $100), TradeDirect360 (minimum deposit of $0). These allow you to trade Ethereum, BTC, XRP, ADA, LTC, XLM, Crypto10, BAB, EOS, BNB, ZCASH, BCH, and several other cryptocurrencies using popular world currencies like USD and Euro. These platforms offer the possibility of using different order types to limit losses in cases where the bet is against you or not going as predicted.
3. Crypto Derivatives
Crypto derivatives are contracts whose value derives from the value of the underlying crypto. They are products like crypto futures, cryptocurrency bonds, options, perpetual swaps, etc. The user only needs to create an account with the broker who provides these contracts and then buy these contracts by speculating future prices.
The user does not need to buy and manage the actual cryptocurrency in question to benefit from its increase in prices (or decrease in the case of shorting crypto). They, therefore, eliminate the difficulties of dealing with and handling digital currencies. These contracts can be sold on exchanges, special platforms, and even by financial institutions such as banks.
Crypto Futures – Parties agree to buy and sell to each other the contract underlying given crypto – say Bitcoin Futures, at a given price in future specified date (multiple options are available – quarterly, monthly, bi-weekly, and weekly). In other words, you are speculating the price of the crypto (that it will increase or decrease) without buying the underlying crypto. When the contract ends, you get the profit or loss difference between speculated and actual sell price.
Perpetual Futures – These are like crypto futures but do not have a specific date because the contract can be terminated at any time. For perpetual futures, your positions are open for as long as you want.
Crypto Options – The call option gives you the right to buy crypto at a given price when the contract expires. A put option in crypto options allows you to buy crypto when the contract ends. Once you enter into the contract, it is optional to sell or buy or not.
Places to trade crypto derivatives include Bitmex, FTX, Deribit, Bybit, Binance, Huobi, OKEX, etc.
4. Peer to peer trading
Peer to peer just means that – selling and buying from your peers. This can take place on an exchange OTC platform, on a peer-to-peer trading web application, mobile application, or P.C-based applications. You can also sell right from your crypto wallet where you store digital currencies (which may require you to promote yourself to clients). In all cases, you simply sell or buy crypto against fiat currency or other digital currency.
Some platforms to consider in this regard include localbitcoin.com, localcryptos.com, localbitcoincash.com, localmonero.com, and others. On these platforms, you list your orders and other customers can see them and contact, buy from, or sell to you. You can also see their orders and rates and contact them. You can make local arrangements with your clients regarding selling and buying crypto.
The platforms allow you to sell or buy directly from customers but safeguarding you from theft for instance using escrow methods where you still have control of your digital currencies or fiat until the transaction is confirmed as complete and you have received fiat (if selling crypto) from the client. When buying the platform ensures the seller has released the crypto to the escrow. If anything happens, you can always get the crypto back from the escrow.
Just ensure you keep your private keys well for purposes of recovery and you are familiar with how that platform works. These allow you to buy or sell using your local currency and through multiple money transfer methods available in your country.
5. Trading on Your Own on a Crypto Exchange
This method involves signing up with a crypto exchange of your choice, buying a target cryptocurrency either on the same exchange or on an external platform, and then starting to trade by placing sell or buy orders on the exchanges order books. It can be challenging for beginners since they need to understand how the exchange in question works, learn the order types that help minimize and maximize profits, have a stable Internet connection, and learn crypto price mechanisms and how to use professional tools to predict crypto trading, etc to start trading profitably.
Otherwise, it is one of the easiest and cheapest ways of trading crypto without broker commissions and fees. It is transparent. You can start trading profitably with this method within one week of starting from scratch. Take it as financial advice! You require a minimum of under $10 to start trading and there are multiple tools and order types you can use to limit losses in case you are unfamiliar with it yet.
Most cryptocurrency exchanges with which you can trade digital currencies do not allow you to buy crypto instantly using fiat or world currency directly on them. If they do, then they may allow you to buy via bank or SWIFT but charge heftily (mostly 3% for instant purchases) or wait for three days for bank transactions to complete.
A few like Coinbase allow users to directly buy crypto from their platform using easily accessible payment methods like PayPal but you will still need to add a credit card or verify a bank account. You can try those crypto exchanges that allow other methods like Western Union, Neteller, Skrill, etc.
Other exchanges allow you to purchase directly from other people on the same exchange platforms using local currencies (the method is known as OTC or Over Counter trading and can be profitable too) but you can also buy and then can start trading it against another crypto on the same platform.
It is therefore important to differentiate between spot trading and other forms of trading like OTC. Spot trading allows you to buy and sell a cryptocurrency on the spot against another. OTC allows you to sell and buy it against fiat like USD and Euro. Notice most exchanges do not support most of the local currencies beyond the USD, Euro, Yuan, and another popular fiat. So you might struggle to buy with your local country's legal tender.
Because of the inconveniences and sometimes the impossibilities of buying and selling crypto instantly on these crypto exchanges using local currencies, many people opt to buy or sell crypto instantly using USD and Euro and other fiat currencies on platforms that allow them to do so using local currencies and locally accessible payment methods. These platforms include www.localbitcoins.com and www.localcryptos.com.