How is cryptocurrency traded? A beginner’s steps
Crypto trades on exchanges that match orders, or on decentralized exchanges against liquidity pools. US exchanges require an ID check before you trade.
Vahe HakobyanEditor-in-chief
Updated Oct 5, 20263 min readFact-checked
On this page
- A trading pair prices one coin in another.
- Record date, amounts, and fair market value after each trade.
- Use two-factor authentication and check withdrawal addresses.
- Keep your wallet recovery phrase offline and private.
A first trade has two parts: setup before you start and records after. Some swaps settle on the Ethereum blockchain, where smart contracts run decentralized applications. A trading cryptocurrency on an exchange guide explains order types in more detail.
What do you need before trading?
For a centralized exchange, you open an account before you can trade. US exchanges usually require identity verification under anti-money-laundering rules. You then link a bank account, debit card, or wire to fund the balance. Trading is not anonymous: exchanges may report to tax authorities, and public blockchains can link activity to you.
How do you trade crypto step by step?
On a centralized exchange, your order joins an order book and matches other orders. On a DEX, you connect a wallet and the swap runs against a liquidity pool. The steps below cover both.
- 1Choose an order typeDecide between a market order and a limit order before you fill in the form. A market order is meant to fill right away, while a limit order sets your price but may not execute.
- 2Pick a trading pairA pair like BTC/USD prices bitcoin in US dollars. Check that you have enough of the quote currency.
- 3Enter the amountType how much you want to buy or sell. The exchange shows an estimated total and any fee.
- 4Review and confirmCheck the pair, the amount, and the fee, then submit the order. On a centralized exchange, it joins the order book.
- 5Swap from your walletOn a DEX, connect your wallet and swap one coin for another. The trade settles from your custody.
What should you do after a trade?
Record the date, amounts, and fair market value at the time of the trade. The IRS treats cryptocurrency as property, so a trade is usually taxable even if you never cash out. Good records make tax reporting easier.
Frequently asked questions
Yes. The IRS treats cryptocurrency as property, so swapping one coin for another is usually taxable. You report the gain or loss that year.
A market order is meant to fill right away at the best available price, though you may get a different price or a partial fill. A limit order sets your price and may stay unfilled.
On a centralized exchange you can usually cancel an open limit order before it fills. A market order fills quickly, and a completed on-chain swap is final.
On-chain transfers are usually irreversible, so a wrong address usually means lost funds. If the address belongs to an exchange, ask support, but recovery is not guaranteed.
