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Cryptocurrencies now operate in a multiple-billion dollar arena – with online platforms allowing you to buy and sell digital currencies with ease. Although Bitcoin dominates the space, Ethereum is the second-largest cryptocurrency in terms of market capitalization.
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This means that Ethereum trading sites are home to heaps of liquidity and trading volumes. Most importantly, you will have the choice of trading Ethereum against other cryptocurrencies like Bitcoin, or with fiat currencies such as the USD.
Looking to find out more about how Ethereum trading actually works? If so, we welcome you to read our Learn 2 Trade 2023 Guide On Ethereum Trading. Within it, we cover the ins and outs of how Ethereum trading works, what risks you need to consider, how you make money, which platforms you should trade at, what are some Ethereum price predictions and more.
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What is Ethereum?
Launched in 2015, Ethereum is a blockchain project that allows users to send and receive value without requiring a third-party. Instead, the underlying network is decentralized, meaning that it is not owned or controlled by a single person or entity. The Ethereum blockchain is powered by its native cryptocurrency of the same name – otherwise referred to as ‘ETH’.
Ethereum is also known for being the first blockchain project to bring ‘smart contracts’ to the cryptocurrency industry. This allows users to form agreements in a trustless basis. The underlying smart contract operates on strict, transparent code – so neither party can change or cancel the agreement once it is deployed.
What are the Pros and Cons of Ethereum Trading?
The Pros The Cons
Ethereum Trading: The Basics
Although the underlying technology supporting the Ethereum blockchain is nothing short of revolutionary, the vast majority of people that purchase ETH do so as an investment vehicle. In some cases, investors will buy Ethereum with the viewing of holding it for a number of years. This is with the hope of selling it in the future at a significantly higher price than they paid.
With that being said, some investors prefer to engage in short-term Ethereum trading. This is where you will be trading Ethereum against other currencies. This might be an alternative cryptocurrency like Bitcoin or Ripple, or a real-world currency like the US dollar. Either way, the overarching objective is to profit off of exchange rate movements between two currencies – one of which is Ethereum.
Pairs
Much like in the case of forex, Ethereum trading is based on ‘pairs’. For example, trading BTC/ETH means that you are speculating on the exchange rate between Bitcoin and Ethereum. Similarly, by trading ETH/USD, you are speculating on the exchange rate between Ethereum and the US dollar.
For example, let’s say that ETH/USD is currently priced at 213.45. This means that for every 1 Ethereum token you have, the buyer will pay $213.45. This exchange rate will move on a second-by-second basis, so to make a profit you need to determine which way it will go in the short-term.
In order to do this, you’ll need to place either a buy order or a sell order.
Buy Order
- If you think that the exchange rate will go up, then you are speculating on the currency situated on the left-hand side of the pair increasing against that of the currency on the right.
- In this example, the currency on the left is Ethereum, so you think it will increase against the US dollar. If it does, the exchange rate will go up.
- For example, if you opened the buy order on ETH/USD at 213.45, and then closed it at 219.06, this would represent a successful trade.
Sell Order
- If you think that the currency on the right will increase in value against the currency on the left, then you believe that the exchange rate will go down.
- In this example, this means that you think the US dollar will increase in value against Ethereum, so you’d need to place a sell order.
- For example, if you opened the sell order on ETH/USD at 213.45, and then closed it at 201.96, this would represent a successful trade.
Getting your head around buy and sell orders can be confusing at first glance, so let’s take a look at a couple of examples.
✔️ Example of an Ethereum-to-Fiat Trade
In order to clear the mist, let’s look at what an Ethereum-to-fiat trade would look like.
- You are trading ETH/USD.
- The current price of the pair is 210.50.
- You think that Ethereum is underpriced, meaning the exchange rate will go up.
- As such, you place a buy order at a stake of $1,000.
- Later in the day, ETH/USD increases to 215.30.
- As you are now 2.28% in profit, you decide to exit your position by placing a sell order.
As you can see from the above, you made a successful short-term trade on ETH/USD. At a stake of $1,000, your gains of 2.28% made you a total profit of $22.80.
✔️ Example of an Ethereum-to-Crypto Trade
An Ethereum-to-crypto pair means that you are trading Ethereum against another cryptocurrency. This is slightly more confusing, as the pair isn’t priced in a real-world currency like the USD. Instead, the pair is priced purely in cryptocurrencies.
Here’s how a trade would work in practice:
- You are trading BTC/ETH.
- The current price of the pair is 41.13.
- You think that Bitcoin is overpriced, meaning the exchange rate will go down.
- As such, you place a sell order at a stake of $2,000.
- Later in the day, BTC/ETH decreases to 35.90.
- As you are now 12.71% in profit, you decide to exit your position by placing a buy order.
As you can see from the above, you made a successful short-term trade on BTC/ETH. At a stake of $2,000, your gains of 12.71% made you a total profit of $254.20.
How to Trade Ethereum?
When it comes to the process of trading Ethereum, much of this depends on the underlying make-up of the asset. In this sense, you have two options at your disposal – trading at a cryptocurrency exchange, or at a regulated CFD broker.
Trading Ethereum at a Cryptocurrency Exchange.
In order to trade tokens at a cryptocurrency exchange, you will need to fund your account with a digital currency like Ethereum. Once you do, you can then trade it with hundreds of other coins – such as Bitcoin, Ripple, Bitcoin Cash, EOS, or Stellar. When it comes to withdrawing your profits, everything will be denominated in cryptocurrencies.
Now, if you wanted to trade Ethereum with a real-world currency like the USD, this becomes a bit more problematic when using a cryptocurrency exchange. This is because the platform won’t have the capacity to store USD unless it is regulated. In the vast majority of cases, national regulators are reluctant to issue licenses to cryptocurrency exchanges.
As such, you will likely need to trade your Ethereum against a cryptocurrency that is pegged to the USD – such as Tether. Moreover, unregulated cryptocurrency exchanges are unable to accept deposits in the form of fiat currency, so you won’t be able to get money in with an everyday payment method.
Trading Ethereum at a CFD Broker
We would suggest considering the merits of a CFD broker in your pursuit of an Ethereum trading site. First and foremost, CFD brokers must be regulated. When platforms are licensed by a tier-one body like the FCA, ASIC, or CySEC – you will benefit from a range of safeguards.
By trading Ethereum CFDs, this means that you will not own the underlying instrument. But, does that really matter? Crucially, you still get to trade Ethereum against other cryptocurrencies, while at the same time you’ll also get access to crypto-to-fiat pairs like ETH/USD. As we uncover in the next section, you will also have the ability to apply leverage and short-sell Ethereum against the USD.
Leverage and Short-Selling
When you use a traditional cryptocurrency exchange, not only will you find it difficult to deposit funds with an everyday payment method, but you will also struggle to gain access to more sophisticated instruments. Sure, the likes of BitMEX offer crypto-derivatives, but the platform operates in an unregulated manner and is ‘strategically’ based in Seychelles.
As such, if you do want the option of applying leverage and short-selling Ethereum, you are best advised to use a regulated CFD broker.
Leverage
Leverage is the process of trading with more money than you have in your account. This allows you to amplify your profits, as your gains will be multiplied by the leverage ratio you opted for. For example, if you placed a buy order worth $1,000 on ETH/USD with the leverage of 5x, the trade would be valued at $5,000.
Below is an example of what a leveraged Ethereum trade might look like.
- You are trading ETH/USD.
- You place a $1,000 buy order at 202.50.
- You apply the leverage of 10x.
- Later in the day, ETH/USD increases to 208.40.
- This works out at a gain of 2.91%, so you decide to close the trade in profit.
Ordinarily, your $1,000 stake at 2.91% would have made you a total profit of $29.10. However, as you applied leverage at 10x, this amplifies your total profit to $290.10.
On the flip side, Ethereum trading with leverage can be extremely risky, as you stand the chance of losing your ‘margin’. The margin is like a deposit that the broker requires you from when you apply leverage. For example, if you apply leverage of 4x on a $100 balance, you are trading with $400. As $100 amounts to 1/4 of $400, this means that your margin is 25%.
As you will see from the example below, you stand the chance of losing your margin deposit if the trade goes against you by the same amount.
- You are trading BTC/ETH.
- You place a sell order at 41.50.
- You apply the leverage of 4x, and your margin is $250 (25%).
- This means that you are trading with $1,000.
- If the price of BTC/ETH goes down by 25% (31.12), then your trade will be liquidated.
- This means that the trade is automatically closed and the broker keeps your margin. In this instance, the margin amounted to $250.
The only way that you can avoid being liquidated is to put more money into your Ethereum trading margin account. In most cases, the broker in question will notify you when you are approaching the liquidation point, which then gives you the option of increasing your margin balance.
Short-Selling
Regulated CFD brokers allow you to short cryptocurrencies like Ethereum with ease. In doing so, you are speculating on the value of Ethereum going down in relation to the USD. If it does, you will make a profit.
Below is an example of how this would work in practice:
- The price of Ethereum is $240.00.
- You are extremely bearish on the project, so you decide to place a sell order on ETH/USD.
- Your total stake is $2,000.
- A few days later, Ethereum is priced at $190.00, meaning it has lost nearly 20% against the USD.
- As such, you decide to cash in your profits by placing a buy order.
As per the above, by shorting Ethereum against the USD at a total stake of $2,000 – the 20% loss netted you $400 in profit.
Ethereum Trading Fees
Ethereum trading sites will always charge a fee of some sort, so it’s crucial that you understand how much you will be paying before signing up. Although the specific pricing structure will vary from broker-to-broker, below we have listed the main fees that you need to be made aware of.
🥇 Deposit/Withdrawal Fees
Some Ethereum trading sites will charge you a fee to get money in and out of the platform. For example, the likes of Coinbase charge a whopping 3.99% to use a debit or credit card.
This would amount to a fee of $39.99 on a $1,000 deposit. This is in stark contrast to platforms like eToro, which allow you to deposit funds for free.
Similarly, some Ethereum trading sites will charge you a withdrawal fee, so check this out before opening an account.
🥇 Trading Commissions
Most Ethereum trading platforms will charge you a trading commission. If they do, this is charged every time you open and close a position. For example, Coinbase charges a commission of 1.5% on the total order amount.
This means that a $500 buy order on Ethereum would cost you $7.50. If you then sold your Ethereum when it was worth $800, this would have cost you $12 in commission when you closed the position.
Such a pricing structure is extremely expensive, especially if you are the type of trader that likes to place heaps of orders.
🥇 Spreads
The spread is another trading related fee that you need to assess. For those unaware, this is the difference between the buy and sell price of an asset. The gap between the two prices ensures that brokers and exchanges always make a profit – irrespective of which way the markets go.
For example, let’s say that you are trading ETH/USD. If the buy price if $203, and the sell price is $200, this amounts to a difference of 1.47%. In Layman’s terms, this means that you need to make gains of 1.47% just to break even.
In fact, if your chosen broker also charges a trading commission, you’ll need to make even more to cover the spread.
🥇 Overnight Financing Fees
Overnight financing fees are super-important to assess before joining an Ethereum trading site. This is a fee charged by the broker when you apply leverage or short-sell an asset. As you are technically borrowing funds from the broker, this is charged as an interest rate.
For example, if you are trading with $10,000 worth of leveraged funds, and the overnight financing fee is 0.05%, you’ll pay a fee of $5 for each day that you keep the position open. Ordinarily, this won’t be an issue if you are looking to trade on a shorter-term basis, as the fees are likely to minute.
However, if you keep a leveraged trade open for too long, the costs can very quickly start to add up.
Research Tools
In order to gauge which way the markets are likely to go, you will need to utilize a number of research tools. If you don’t, you are simply trading blindly. There are two main forms of research in the context of Ethereum trading – technical analysis and fundamental analysis.
Technical Analysis
Technical analysis is the process of reading charts. You will be looking at historical pricing trends, and how these trends relate to the current price action of the pair. It can take many months, if not years to fully understand how to read charts effectively. As such, you need to dedicate as much time as you possibly can in learning your trade.
To help you along the way, seasoned traders will make good use of technical indicators. These are tools that give you information about the current trend of your chosen pair. This includes the likes of the RSI, Bollinger Bands, and MACD. Technical indicators look at a range of metrics, such as trading volumes, support and resistance lines, volatility, and whether an asset is overbought or oversold.
With that being said, a major short-cut in the technical analysis department is to make full use of a cryptocurrency signal service. This is where you receive real-time alerts when a technical indicator has highlighted a potential trading opportunity. For example, the Learn 2 Trade automated signal service will provide you with the specific trading pair (for example ETH/USD), the signal that has been identified, and the entry and exit orders that need to be placed.
Fundamental Analysis
The fundamental analysis pays no attention to pricing charts or trends. On the contrary, it is based on real-world news events that could influence the future direction of a trading pair. For example, let’s say that Ethereum formed a partnership with a major blue-chip company.
As this is extremely positive news for the project, it’s likely that the price of ETH would increase in the open market. Similarly, if the SEC approved an Ethereum futures market, again, this would positively impact the price of ETH.
Crucially, fundamental analysis is much easier to understand than technical analysis, as in most cases it’s pretty straightforward to assess whether the news is positive or negative.
How to Place an Ethereum Order?
Regardless of which assets you plan to trade Ethereum against, you will need to place an order with an online broker. As such, there are a number of metrics that need to be considered to ensure the platform knows what it is you are liking to achieve.
Buy/Sell Order: First and foremost, you’ll need to specify whether you want to place a buy order or a sell order. If you think that the currency pair will increase in value, opt for a buy order. Alternatively, if you think the pair will go down in value, place a sell order.
Stake: Next, you then need to enter the total amount of that you wish to risk on the trade. For example, if you want to trade $500 on a BTC/ETH buy order, enter $500 into the respective box.
Limit Order: If opting for a limit order, you get to specify the exact price that you want to enter the market. For example, let’s say that ETH/USD is priced at 206.23, but you want to place a buy order when the price goes down to 204.00. In doing so, your order won’t be executed until the trigger price of 204.00 is met. The order will remain active until this happens, or you cancel it.
Market Order: Alternatively, opting for a market order will see you get the next available price. This is likely to be just above or below the current market price.
Leverage: If you want to apply leverage on your Ethereum trade, this is where you need to do it. Once you select the ratio that you want to apply, your total order size will update. For example, if you entered $500 as your stake, and you select leverage of 5x, your buy order will be worth $2,500.
Stop-Loss: You should always place a stop-loss order when trading Ethereum. This allows you to mitigate your risks in the event the markets move against you. For example, if you set your stop-loss on ETH/USD at 202.12, and the price is triggered, your order will be closed automatically.
Take-Profit: Take-profit orders allow you to lock in your gains automatically. For example, if you set your take-profit price on ETH/USD to 210.00, and the price is triggered, the trade will be closed.
Finally, place your order to complete the process.
Choosing an Ethereum Trading Site
In order to trade Ethereum online, you will need to use an online platform. With thousands of cryptocurrency exchanges and online brokers now active in the space, knowing which site to sign up with can be challenging.
As such, below you will find a range of important metrics that you need to consider prior to opening an account.
🥇 Regulation
As noted earlier, it’s super important to stick with Ethereum trading sites that are regulated. We prefer platforms that are licensed by bodies like the FCA, CySEC, and ASIC. This is because you will benefit from a number of regulatory safeguards – including that of segregated bank accounts.
If you decide to use an unregulated cryptocurrency exchange, your funds are at risk. Ultimately, if the platform in question is hacked, your coins are likely to be stolen. This has happened time and time again in the space, so always choose a regulated Ethereum trading site.
🥇 Deposit and Withdrawal Options
You then need to think about how you intend on getting funds into the Ethereum trading site. Once again, cryptocurrency exchanges typically only support deposits and withdrawals in the form of digital coins. On the contrary, regulated CFD brokers accept a range of everyday payment methods.
This often includes a debit/credit card, bank account, and an e-wallet like PayPal, Neteller, and Skrill. As a side note, you should also check to see what the minimum deposit amount is at your chosen Ethereum trading site.
🥇 Trading Commissions
All Ethereum trading sites charge fees, so assess how much you will need to pay before signing up. As we covered earlier, this can range from deposit/withdrawal fees, trading commissions, overnight financing fees, and of course – the spread. In an ideal world, you’ll be using a broker that offers commission-free trades and tight spreads.
🥇 Supported Pairs
You should also explore what assets you can trade Ethereum against. If you’re looking to trade Ethereum against a fiat currency, it’s best to stick with ETH/USD. This is because you will benefit from much larger trading volumes and liquidity in comparison to other currencies.
When it comes to trading Ethereum against other cryptocurrencies, check to see what coins the broker supports. While most brokers support major digital currencies like Bitcoin, Ripple, and Bitcoin Cash, there might come a time when you want to trade Ethereum against ERC-20 tokens.
🥇 Research Tools
You’ll want to use an Ethereum trading platform that gives you access to heaps of research tools. This should include dozens of chart reading tools and technical indicators, as well as access to real-time fundamental news. It is also useful if the Ethereum trading site offers educational materials.
🥇 Leverage
If you’ve got a higher appetite for risk, you’ll want to choose an online broker that offers leverage. Not only will the specific limits be determined by the broker, but also your location.
For example, if you’re based in the UK or European Union, you’ll be capped to leverage of 2x when trading Ethereum. While you can get significantly more with an unregulated exchange, your funds are at risk.
🥇 Customer Support
You should also explore what customer support channels the Ethereum trading site offers. The easiest way to make contact is through live chat. Other options include email, and in rarer cases – telephone support.
Best Ethereum Trading Site and Platform of 2023
Don’t have time to research an Ethereum trading platform yourself? Below you will find our top-rated site of 2023. The platform is heavily regulated, allows you to deposit funds with a debit/credit card, and offers heaps of Ethereum trading pairs.
AVATrade – 2 x $200 Forex Welcome Bonuses
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- 20% welcome bonus of upto $10,000
- Minimum deposit $100
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Conclusion
In summary, Ethereum trading sites allow you to buy and sell cryptocurrencies with ease. The process works largely the same as forex trading, insofar that you need to speculate whether the exchange rate of pairs like ETH/USD and BTC/ETH will go up or down.
Although much of the industry is dominated by unregulated cryptocurrency exchanges, the good news is that you can now trade Ethereum at a licensed CFD broker.
In doing so, not only will you benefit from the regulatory safeguards of bodies like the FCA, CySEC, and ASIC, but you’ll also be able to deposit and withdraw funds with an everyday payment method. This is why we have recommended Ethereum trading platforms that are heavily regulated.
8cap - Buy and Invest in Assets
- Minimum deposit of just 250 USD to get lifetime access to all the VIP channels
- Buy over 2,400 stocks at 0% commission
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- Deposit funds with a debit/credit card, Paypal, or bank transfer
- Perfect for newbie traders and heavily regulated
