Introduction to Crypto Trading for Smart People

They always say things like “The Dummies Guide to…” Well, this isn’t for dummies. It’s for smart people who want to learn about crypto trading.

What You’ll Learn in This Article

What crypto, blockchain, TradFi, and DeFi are all about.
The basics about how you trade crypto from spot trading to staking.
The difference between active trading and passive investments (you don’t have to be glued to a screen to make money from crypto).
How to avoid some pitfalls in crypto trading…and some crypto scams.

Already know the basics? Go to our education section and find blogs about different trading strategies.

Introduction to Crypto

If you think crypto is cryptic, you aren’t alone. And if you think trading in general was developed for people with brains like computers, you aren’t alone, either.

Shockingly, trading is not rocket science.

And the smart person learns all about it, then goes out there and slay. And, please, don’t worry. Not all forms of investing in crypto involves spending hours every day glued to a screen to make trades at just the right moment (following every potential news story out there that might affect the price of a certain coin). Nope, you can invest in things for days, weeks, and months at a time. It just depends on your strategy. There are also digital tools that can help you achieve them, such as setting a trade at a specific price and it happens when the market reaches that price.

Now, let’s dive into crypto and all the fun you can have with it!

What Is Crypto?

What are Cryptocurrencies?

Cryptocurrencies are digital or virtual coins that use blockchain technology to function. The most famous cryptocurrency is Bitcoin, but there are thousands more Ethereum, Litecoin, Dogecoin you name it.

Digital Coins: Unlike cash, cryptocurrencies exist only online. No physical coins just digital assets.
Transactions: When you send crypto to someone, the transaction gets recorded on a blockchain a digital public ledger ensuring no double-spending.
Wallets: To store and use crypto, you need a digital wallet. It holds your private keys (a fancy way of saying “passwords”) that let you access your coins.

What Is Blockchain?

A blockchain is like a super-secure, digital notebook. Each “page” in the notebook is a block, and once full, it’s added to the “chain.” The chain keeps growing, creating a timeline of transactions.

Key features of blockchain:

Decentralization: Copies of the blockchain exist on multiple computers worldwide called nodes making it tough for anyone to alter data.
Security: Each block has a special code (hash). If someone tries to tamper with a block, its hash changes, and everyone notices (think: all the nodes have an alarm that gets set off!).
Transparency: Anyone can view the blockchain, ensuring transactions are open and verifiable.

TradFi vs. DeFi

Types of Financial Systems

TradFi (Traditional Finance): The classic system banks, stock markets, and centralized institutions. Think of your bank account, credit cards, and Wall Street. Everything goes through a middleman, like a bank or broker, who approves transactions, sets fees, and holds your assets.
DeFi (Decentralized Finance): Finance without the middleman. Built on blockchain technology, DeFi lets you trade, lend, borrow, and earn interest directly from your crypto wallet no bank approval needed. Smart contracts (self-executing code) handle the rules and transactions, so it’s open 24/7.

Ouinex is a centralized exchange, but we offer both traditional DeFi products (spot crypto) and TradFi (derivatives for traditional assets, such as commodities, stocks, and Forex).

The Basics of Crypto Trading

Imagine you have a collection of digital coins, and you want to trade them like Pokémon cards that’s crypto trading in a nutshell. If you want a more “adult” example, it’s the same as Forex trading (i.e. trading fiat currencies) only you’re trading cryptocurrencies instead. You can buy, let’s say, Etherum using US dollars and hold onto it until the price goes up, then sell it off in return for US dollars. You now have more US dollars than you started off with.

Exchanges: Online platforms where you buy, sell, or trade crypto think of them like digital marketplaces.
Trading Pairs: When you trade one coin for another (e.g., BTC/ETH), that’s called a trading pair.
Market Prices: Just like your favorite sneakers can go up in value based on demand, crypto prices rise and fall based on how many people want to buy or sell.

Types of Crypto Trading

Spot Trading: Buy and sell cryptocurrencies instantly at the current price you own the coins outright.
Margin Trading: Borrow money to trade larger amounts, boosting both your potential gains and losses. For example, if you have $10, and the exchange gives you 10:1 leverage, you can trade for $100. If the price goes up by 10% you’ve earned $10 and now have $20. If the price goes down 10% you’ve lost $10 and now have nothing. Ouinex provides margin trading for derivatives, including crypto perps.
Derivatives Trading: Trade contracts based on the future value of crypto assets without owning the coins themselves. This includes futures and options trading.
- Futures Trading: Contracts to buy or sell crypto at a set price in the future.
- Options Trading: Contracts giving you the right (not the obligation) to buy or sell at a specific price before a certain date.
TradFi with Crypto: Some platforms let you trade traditional assets like stocks using crypto Ouinex even lets you do it without converting to fiat first.

Ways to Earn in Crypto

Trading: Buy low, sell high. Classic.
Staking (Passive Investment): Lock your crypto in a wallet to support the network and earn rewards. Think of it like a savings account for crypto, only the interest rate is usually a lot higher. With Ouinex EARN offering you can stake lots of different cryptos and earn a really high APY (annual percentage yield) with stablecoins. And unlike other exchanges, the APY is stable in the long run, and not just super high for 48 hours (which only really benefits people with large amounts to stake). If you stake $OUIX, our native token, you get other perks, too, like discounted trading fees on crypto and better deals when referring people to the Ouinex platform.
Yield Farming: Provide liquidity to DeFi platforms and earn interest or new tokens.
Lending: Lend crypto to earn interest.
Airdrops: Get free tokens from projects launching or upgrading.
Mining: Use computing power to validate transactions and earn crypto mostly relevant to Bitcoin.
ICOs/IDOs: Invest early in new projects to snag tokens before they hit the mainstream.

Risk Management

Crypto’s thrilling, but smart traders don’t go in blind. Protect yourself with these strategies:

Diversification: Don’t put all your coins in one basket. Spread investments across different assets.
Stop-Loss Orders: Automatically sell if the price drops to a certain level, limiting losses (i.e. it’s a pre-set order that executes automatically when the price of an asset drops to the level where the stop loss order is set).
Take-Profit Orders: Lock in profits by selling when the price reaches a set target. (You can pre-set these orders when trading and when the price reaches the set target, they are executed.)
Automated Alerts: On Ouinex you can set automated alerts, for example getting pinged when Bitcoin goes down by a certain percentage, or Ethereum goes up. You can set as many variables as you like (such as both ETH and BTC going up for you to get pinged).
Risk Assessment: Never invest more than you can afford to lose. Simple, but crucial.

Tools and Analytics

Technical Analysis: Use price charts and indicators to predict future movements.
Fundamental Analysis: Evaluate a crypto project’s tech, team, and use case.
News and Sentiment Analysis: Monitor headlines and social media news can pump or dump prices fast.

Common Strategies

Day Trading: Buy and sell within the same day great for fast-paced markets.
Swing Trading: Hold for days or weeks to catch medium-term trends.
HODLing: Buy and hold long-term, ignoring short-term volatility.

Crypto Pitfalls and Scams

Where there are valuable assets, there are scams. Watch out for:

Pump-and-Dump Schemes: Groups artificially inflate a coin’s price, then sell off, leaving others with losses. Ouinex vets all the coins/tokens we launch on the platform. However, crypto exchanges have been known to get in bed with big financial institutions and bought up huge amounts of a newly listed token, then “pumped” the price further by using influencers and PR to make everyone believe the token will take off, so retail traders (i.e. the everyday traders like you and me) start buying up the token. Once enough people have bought it, the exchange and the big institutions sell off their tokens and the price tanks. This is why, with Ouinex’s native token, $OUIX we ensured that all early investors have a vesting period (i.e. a period when they cannot sell off the token).
The CLOB Execution Model: Most exchanges today use Central Limit Order Book (CLOB) model where institutional traders have an unfair advantage and you, the retail trader, will never get the best prices. Institutions also employ unethical trading tactics to manipulate the market. This is why Ouinex developed a no-CLOB execution model. Here, retail traders are top dogs.
Phishing Scams: Fake websites or emails tricking you into giving away private keys.
Ponzi Schemes: Promises of “guaranteed returns” if it sounds too good to be true, it is.

Final Thoughts

Crypto trading isn’t just for geniuses it’s for anyone willing to learn the game. Get the basics down, pick a strategy, and start trading.

Ready to learn more? Check out our blogs about crypto trading strategies, or head to our Glossary where we define trading terms in a way that helps you understand trading a lot better.

Happy learning (and, hopefully, trading)!