Ethereum has continued becoming the market leader as the number #1 performing altcoin. The Ethereum ecosystem is also thriving with thousands of wonderful projects. Ethereum’s current price is $1850, with a market capitalization of $221.3 billion, and ranks #2 by total capitalization. The project came into the limelight through a whitepaper by Vitallik Buterin and some other co-founders. In 2014, the blockchain secured funding through an initial coin offering that helped the team sell over 60 million in Ether. In this article, we will cover trading Ethereum for beginners and give you tips on how to start trading Ethereum.

What is Ethereum? Ethereum is an open-source but decentralized system with its own native currency, Ether or ETH. The ETH works not only as a native cryptocurrency for the Ethereum blockchain but also as a token standard for several other cryptocurrencies, such as Polygon and Chainlink, which are built and deployed on the Ethereum blockchain. Continue reading and learn how you can start buying and selling Ethereum for profit.

How to Trade Ethereum?

What is Ethereum trading? Ethereum trading involves the process of buying and selling ETH with the aim of making a profit from the price differences. Trading Ethereum can be short-term, medium-term, and even long-term. Short-term trading involves taking advantage of short-term price movements, probably a 30-minutes time frame to 1-hour or even 24-hour price trends. Medium-term could be 3 – 6 months, while long-term trading or investing could extend between 1 year to 10+ years.

A long-term Ethereum trader or investor bets on the advancement of the project and stakes a lot of money on the network expecting that the price will grow exponentially. However, in this article, we will focus on short-term Ethereum trading and also outline the major difference between trading and investing in Ethereum. 

Remember, short-term trading can be further split into several other methods of trading. These include swing trading, scalping, and day trading. 

The standard way for starting Ethereum trading is to settle on the right method, create a working strategy, research the market to observe trends and patterns and conduct technical and fundamental analysis as well as put in place a risk management strategy. We will look at all of these steps in the sections that follow. 

Something else to put into consideration before starting your trading journey includes the regulation of crypto within your jurisdiction. Some countries like Nigeria and China have completely banned crypto adoption. This means any involvement in trading and exchanging could easily land you on the wrong side of the law. 

How to Start Trading Ethereum: How Does Ethereum Trading Work?

In this section, we will cover how to trade Ethereum. We are going to outline a simple step-by-step process for people looking for the ultimate guide for trading Ethereum as a beginner. You will also find out how to start trading free Ethereum.

Choose the right cryptocurrency exchange – Research some of the best trading platforms for Ethereum and pick one with high liquidity, high trading volume, and good privacy and security features. Also, remember to make sure the exchange is well-regulated.

Sign up for an account on the exchange, complete KYC, and deposit funds – Register an account on the exchange and complete identity verification to satisfy KYC requirements. Once these first two steps are complete, deposit funds into the exchange wallet, convert the funds to Ethereum and start trading.

Determine how much Ethereum you intend to trade and build a strategy – Create a trading strategy, attach it to another risk management plan, and kick off Ethereum trading. 

Any profits and extra Ether should be stored in a cold wallet, not on the trading exchange – Avoid storing all your cryptocurrency funds on the exchange wallet. Exchanges are prone to hacking, which poses lots of risk to your wallet. Find a suitable cold wallet and transfer any profits and crypto funds you do not intend to use in the near term. 

Create a trading strategy and a risk management plan to guide you throughout the trading journey. Correct mistakes, if any, and if the strategy does not work as expected, just research more and learn from other traders so that you can adjust your plan. Remember, trading is a life-long journey and is mastered over years of experience, trial and error, as well as practice.

Ethereum Trading vs. Investing

Ethereum trading is the buying and selling of ETH to make a profit from short-term price swings while investing in Ethereum involves buying and holding on to ETH for a long time (usually 1+ years) with the expectation of making a profit from long-term price swings.

A good example of this could be John, who bought Ethereum at $170 in November 2019 and sold it in March 2023 at $1800. Along the road to $1800 or to an all-time high, there are so many ups and downs regarding the price of a coin, its technology0, and its growth. But long-term Ethereum investors are betting their optimism on the technology architecture of the coin, the team behind it, its community of both users and developers, as well as its backing ideology. Traders do not have to believe in the ideology of Ethereum to engage in it; however, they need to grasp the technology behind it to understand market patterns. Meanwhile, it is possible to invest and trade Ethereum at the same time. There is no problem with that as long you are strict with your investment goals and trading strategy.

Ethereum Trading Methods

There are three common methods for trading Ethereum. These include day trading, swing trading, or scalping. 

Day Trading – Day trading involves buying and selling an asset, profiting from short-term price movements, and closing your daily trading session at the end of the day. When you close the day, that’s when you count your profits (or losses). 

Swing Trading – Swing traders spot trends and market patterns; the trick is to open a trade at the start of a trend and close it at the end/near the end of the trend. The main difference between day traders and swing traders is that the latter does not spend a lot of time monitoring market patterns. 

Scalping – Scalping involves using extremely short price changes to make multiple profits within a short time. 

Analysis Methods

There are two major methods of analyzing the cryptocurrency market and predicting the future price direction. These two methods are fundamental analysis and technical analysis. Fundamental analysis evaluates an asset’s true value using factors like upgrades, founding team credibility, community sentiments, news, and events. Technical analysis, on the other hand, uses past performance to determine the future direction of a coin. It is important for Ethereum traders to blend both methods when trading ETH. 

Fundamental Analysis for Ethereum Trading

Ethereum’s fundamental analysis involves evaluating the coin’s true value by tracking down news, events, technical development, founding team, regulations, and industry metrics. The fundamental analysis makes the assumption that the true value of a crypto asset should not necessarily rely on price or historical price.

Technical Analysis for Ethereum Trading

Ethereum technical analysis relies on how past historical price performance of the asset determines its present and future performance – and how trends and price movements are likely to remain repetitive in the future. We love to think of technical analysis as a way of visualizing the statistical journey of an asset’s price action using past performance.

Technical Analysis vs. Fundamental Analysis: Which Method Is Better for Trading Ethereum?

Fundamental analysis is easier to put into practice compared to technical analysis. This is because fundamentals only involve evaluating an asset’s development progress, founding team, utility, and current figures to determine the asset’s intrinsic value. The only limitation of fundamental analysis is that the price of an asset will not necessarily reflect its true value. For instance, some cryptocurrencies are highly overrated or underrated when it comes to pricing. On the other hand, technical analysis involves evaluating the current and future price performance of a cryptocurrency using historical price performance. The basic assumption when conducting technical analysis is that a market pattern will always repeat itself in the future.

As you can see, it’s not always possible for trends to repeat themselves, and an evaluation could turn out contrary to your expectation. We recommend a combination of both methods to yield better chances of forecasting the right results.

Ethereum Stock-to-Flow Model

A Dutch institutional trader called Plan B created the Bitcoin stock-to-flow model, which has been adopted across the other altcoins. The stock-to-flow model uses a combination of the total supply, volume metrics, and historical performance to forecast the price action of a digital asset.

Does Stock-to-Flow Ethereum Model Work?

The Ethereum stock-to-flow model is a convenient method for gauging the performance of an asset using its trading volume, supply metrics, and past price action. One problem with this method is that it’s limited to providing contrary results during moments of boom and recession. However, it is worth noting that the model will generate a sell signal whenever the price of Ethereum rises above its estimate. When the price drops below the price generated by the model, consider that as a buy signal. 

Ethereum Trading Terms

In this section, we are going to discuss some important terminologies that you will come across if you want to engage in buying and selling Ethereum for profit. Remember this guide is written with newbies in mind, especially those looking for information on how to start trading Ethereum. 

Order Book – An order book is a list of all orders placed on an exchange. The order book consists of the bids and the asks. Bids are the buy orders, while the asks are the sell orders. 

Brokers – An Ethereum broker sells ETH to customers but benefits by charging a small fee or pricing the ETH slightly higher than the market price. 

Trading Platform – A cryptocurrency trading platform uses an automated system that matches cryptocurrency sellers with buyers.

Market Order – Also referred to as an instant order, it allows a trader to execute a buy or sell order at the market price. Traders just need to place their market order on an exchange, and then the exchange matches the order using the match-making algorithm.

Limit Order – A limit order allows traders to set up a system where they can buy or sell a given asset when it hits a particular price. The trader inputs the maximum and minimum price that a trader is willing to buy the asset at and the price they want to sell at, respectively. Once the price hits that particular point, the exchange executes the trade automatically. 

Stop Loss – The primary advantage of a stop-loss is limiting the potential loss on a trade when the price performs contrary to expectation. Stop losses are a risk mitigation feature for traders who want to minimize risks in their trades. 

Ethereum arbitrage trading – This is a form of trading where the trader takes advantage of price differences across different exchanges so as to make a profit by buying lower from one exchange and selling higher on another exchange. 

Marketplace – A marketplace allows traders to create individual profiles and list the cryptocurrencies they are selling or buying. An interested buyer or seller only has to place an order on a trader’s profile on the marketplace and wait for it to be executed through P2P.

Ethereum margin trading – Ethereum margin trading is the use of borrowed funds to execute a trade on an exchange. This means that a trader can execute a trade without enough funds in his wallet. 

Common Trading Mistakes

Investing more than you can afford to lose will set you up for failure. You will trade with fear or even greed, and these two emotions are not good for a trader. Besides, all investments require a solid risk management plan that does not harm your net worth. 

Not conducting research and analysis will lead to mistakes and guesswork. Trading is not gambling and, therefore, must be guided by a well-informed mind. Follow trends, news, events, and any announcements that might have an impact on the direction of Ethereum. 

Storing all your crypto holdings on the exchange is not advisable. You could end up losing your funds to hackers since exchanges are vulnerable to hackers. The best thing is transferring your holdings into cold wallet storage. Cold wallets are offline-based and not prone to cybercrime attacks. 

Frequently Asked Questions

How Do I Trade Ethereum?

There are only four simple steps to trading Ethereum for beginners. These steps are registering for an account, depositing funds, creating a trading strategy, and conducting analysis. That’s the answer to “How do you trade Ethereum in 2023?” 

Can I Buy and Sell Ethereum the Same Day?

Yes. You can buy and sell Ethereum daily since the cryptocurrency market is usually open 24/7. As you can see, there is a difference between trading crypto and the stock markets since the latter is only open during business hours. 

What Is Ethereum Margin Trading?

Ethereum margin traders utilize borrowed funds on a margin trading account to execute trades without having the actual money in their wallets.

What Makes Ethereum Unique?

Ethereum was the pioneering chain for smart contracts. Smart contracts are pre-built rules that govern an automatic contract between two or more parties across the web. The aim of smart contracts is to remove middlemen from a contract, reduce transaction costs, and save time. Ethereum’s major goal was to build a platform where builders could execute smart contracts on the blockchain in a secure, strong, censorship-resistant, private, and fraud-resistant public distributed network. Additionally, Ethereum is home to a host of other crypto tokens through the ERC-20 standard. Most of the tokens launched on Ethereum are among the top 100 CoinMarketCap coins, including Binance Coin, Chainlink, Polygon, Tether, and so on. 

Where Can I Buy or Sell Ethereum Daily?

Cryptocurrency exchanges, marketplaces, and P2P platforms are open 24 hours a day, 7 days a week. So you can buy or sell ETH on these platforms at any time, at a small cost – the only thing you need to remember is not to store your crypto on the exchanges where you buy them. Find an offline wallet and store them there. If you need help throughout the process, reach out to customer support. And if you are wondering whether ‘Can you buy and sell Ethereum daily?’ The answer is YES.