No matter where you are based in the world, learning how to trade cryptocurrency can be a daunting task for any newcomer – this anxiety is exacerbated by the notorious volatility of the crypto markets.
Before you begin trading cryptocurrency in the UK, you should always do your research. Without prior knowledge, you are liable to make countless mistakes.
In this guide, we discuss how to trade cryptocurrency in the UK.
How to trade cryptocurrency in the UK
UK residents have more options when it comes to trading cryptocurrency than US residents.
This is because the Securities and Exchange Commission (SEC) in the USA has been fighting hard for regulation, prompting many exchanges to ban US residents from their services.
Famously, crypto analyst Tone Vays had his BitMEX account terminated on the suspicion that he was a US citizen. UK residents, however, can freely trade on BitMEX at their leisure.
The first point to note about crypto trading is that unlike traditional stock markets, the crypto market is open 24/7.
You must then decide which type of trading you believe will suit you best and which exchange platform is right for you.
Which exchange you choose will largely depend on what type of trading you wish to conduct. You can find our definitive guide to cryptocurrency exchanges here, which includes a list of some of the most popular exchanges and what to look out for.
Spot and margin trading vs OTC
Spot trading and margin trading are the two most common types of trading, with the exception of over-the-counter (OTC) trading.
Spot trading involves buying or selling an asset with the aim of turning an instant profit.
This might involve selling a certain amount of an asset you already own and then trading with two other assets. The trading will be done on speculation, so you might choose to split your funds equally or go all in on one you feel most confident about.
It is then your hope that you will turn a profit on these assets before selling them and re-buying your original asset, thereby having more of the original asset than you began with.
Margin trading is different because you can trade with leverage. Leverage is borrowed money from an exchange. The amount of leverage on offer to you will differ depending on the platform you are using.
Using leverage means you can generate higher profits because you are staking more funds. If your trade is successful, the exchange will then reclaim the leverage and leave you with the profits.
If the market moves against you, you will be liquidated. This means your original deposit is lost – however, you will not have to pay the leverage back. You can learn more about the risks of spot and margin trading here.
OTC trading involves buying or selling an asset directly with no middleman. Fundamentally, this can be as simple as a friend selling you £20 worth of Bitcoin.
OTC trading offers benefits that exchanges do not in that you do not need to provide as much personal information. However, it does come with its own inherent risks, as does any method of crypto trading. You can read our guide on OTC trading here.
Know when to enter the market
Once you have identified the type of trading most suitable to you, it is time to learn when to enter the market. Learning about key terms, trade patterns, and previous market cycles will help you make the most informed decision about when you should buy in.
The most important thing to remember is that trading is done on speculation – nobody has a concrete idea of how the market will move.
Firstly, you will need to know if you want to go ‘long’ or ‘short’. Going long is when you believe an asset’s price will rise, while going short is when you believe an asset’s price will drop.
Of course, you could also just buy some crypto when prices are low and hold on to it for as long as you want before selling when prices are higher.
Learning about support, resistance, and moving averages will help you understand key levels for when to enter or exit the market.
The same is true for studying graphs showing an asset’s trading history – if you notice a pattern re-emerging, then you might be on to something.
You can also do a quick Google search for ‘trading patterns’ that will bring up illustrations of patterns which also give an indication of what might happen next in the market, such as a falling wedge or Bart Simpson pattern.
Always read the terms and conditions and do your own research
When picking an exchange, it is best to read the terms and conditions. While this might seem tedious, you can never be too careful when it comes to crypto trading, even in the UK.
The crypto market is notoriously volatile and can go in any direction at any given point. On this basis, it is wise to conduct your own research because we do not recommend any crypto, exchange, or service in particular, and ultimately you are responsible for any decisions you undertake.
Hopefully this guide has helped you understand how to start trading cryptocurrency in the UK.
Interested in reading more trading-related guides? Discover more about bid, ask, and bid/ask spread prices with our guide.