Crypto Trading Guide

Introduction

Crypto has a reputation for minting and destroying traders faster than any other market. That reputation is earned. The combination of 24/7 price discovery, embedded leverage through perps, retail dominance, and a constant stream of narratives produces more volatility than most traders can handle with good risk management - let alone without it.

This guide is about the mechanics (spot, perps, funding, liquidations) and the discipline (sizing, rules, self-custody) that distinguish a trader from a gambler in the fastest market on the planet.

Spot vs Derivatives

Spot

Buying the actual asset. If you buy 1 BTC, you own 1 BTC. No leverage, no expiration, no liquidation.

Futures

Contracts with an expiration date, like traditional futures. Less common in crypto retail than perps.

Perpetual swap (perp)

A futures-like contract with no expiration. Most of retail crypto leverage lives here. Settles continuously via funding.

Options

Calls and puts on crypto. Less developed than TradFi options markets, concentrated on Deribit and a few challengers.

Perpetual Swaps (Perps)

A perpetual swap tracks the underlying spot price but trades forever. Binance, OKX, Bybit, Hyperliquid, dYdX - this is where the action is. Typical leverage caps range from 20× up to 125× on majors.

Why they track spot

Funding. Every 8 hours (or continuously on some DEXs), longs and shorts exchange payments to push the perp price toward spot. If perp trades above spot, longs pay shorts; if below, shorts pay longs.

What makes them dangerous

• Leverage is one click away. It’s easy to flip from 2× to 20× without thinking about effective risk.
• Liquidation is mechanical and fast - no broker phone call, no grace.
• Wicks on cascading liquidations can hit stops that look “safe.”
• Funding accumulates silently. Bad direction + bad funding = double drag.

Funding Rates Explained

Funding is the mechanism that pins perp price to spot. It’s paid periodically (every 1, 4, or 8 hours depending on exchange) based on the difference between perp and spot.

What to watch

• Positive funding (longs pay shorts) = market is over-long. Potential squeeze risk.
• Negative funding (shorts pay longs) = market is over-short. Potential short squeeze setup.
• Extreme funding (>0.05% per 8h or < -0.05%) often signals a mean-reversion edge - but don’t front-run structural trends.
• Funding eats into swing trades. Holding a leveraged long at +0.03%/8h for a week costs ~0.6% just in funding.

Liquidations & Margin Modes

Two margin modes

Isolated margin

Only the margin allocated to this specific position is at risk. If the trade liquidates, the rest of your account is safe. Default this for new traders.

Cross margin

Your entire account balance collateralizes all positions. Better capital efficiency, but one bad trade can drain the account.

How liquidations work

Your liquidation price is the price at which the exchange force-closes your position to prevent the account going negative. It’s calculated from entry price, leverage, and maintenance margin. Cascading liquidations during flash crashes can produce wicks to your exact liq price - this is not a coincidence; it’s how liquidity gets vacuumed out of the book.

CEX vs DEX

CEX (Centralized Exchange)

Binance, Coinbase, Kraken, OKX, Bybit. Custodial - they hold your coins. Liquid, fast, familiar UI. Exchange risk is real (see FTX).

DEX (Decentralized Exchange)

Uniswap, Curve, dYdX, Hyperliquid, GMX. Non-custodial - you hold your coins in your wallet. Harder UX, higher gas fees on most chains, but no exchange counterparty risk.

Which to use

• CEX for active trading on majors: best liquidity, fills, and tooling.
• DEX for tokens not listed on CEXs, for self-custody purists, or for longer-term holdings you don’t want sitting on an exchange.
• Never keep more than you’d miss on a single exchange for more than necessary. Move to self-custody on idle capital.

Custody & Security

Unique to crypto: you are responsible for your own funds in a way no other market requires. Self-custody failures lose coins permanently.

The basics

• Hardware wallet (Ledger, Trezor) for anything you’re not actively trading.
• Seed phrase stored offline, ideally on metal plates. Never typed into a computer, never photographed, never uploaded.
• Multiple wallets: one for DeFi interaction, one for cold storage. Limit exposure from approvals.
• Check approvals quarterly (e.g. revoke.cash). Malicious token approvals are how wallets get drained.
• 2FA with authenticator (not SMS) on every CEX. Unique password per exchange.

Order Types in Crypto

Standard order types apply, with a few crypto-specific variants.

Market order

Fills at next available price. Fine on BTC/ETH, dangerous on thin alt pairs - can walk the book.

Limit order

Fills at price or better. Default for entries. Most CEXs also offer post-only for maker rebates.

Stop-market / Stop-limit

Same as other markets. Exchange-side stops are safer than app-side stops for active traders.

Trailing stop

Follows price in your favor. Supported on most major CEXs.

Conditional orders

&ldquo;Place order if BTC &gt; X&rdquo; - useful for breakout setups when you can&rsquo;t be at the screen.

TWAP / Iceberg

For executing large size without moving price. Retail rarely needs these.

Technicals in a 24/7 Market

Crypto charts work with standard TA, but the 24/7 nature changes what’s meaningful.

• Session anchors still matter - US, Asia, and Europe open/close show in volume and volatility. The “Friday afternoon ET” dump is real.
• Weekends are thin. Breakouts on Saturday often fail Monday. Size down.
• Range-based indicators (VWAP anchored to daily open, prior high/low) are more durable than oscillators.
• Multi-timeframe: pick bias on the daily, execute on the 4H or 1H. 15-minute chart is for managing, not deciding.
• Correlations shift fast. BTC-ETH correlation oscillates; BTC-SPX ties in and out of sync with macro regimes.

Macro & Crypto-Specific Drivers

• Fed policy - rate decisions and Powell speeches move BTC as a macro risk asset. CPI prints too.
• DXY (Dollar Index) - inverse correlation with BTC most of the time, but not always.
• Halvings - every ~4 years, BTC block rewards halve. Narrative driver, not a literal trading signal.
• ETF flows - spot BTC and ETH ETFs. Weekly inflows/outflows affect price.
• Stablecoin supply - USDT/USDC net issuance is a demand proxy for crypto.
• Exchange inflows/outflows - coins moving to exchanges often precedes selling; outflows often precede accumulation.
• Geopolitics & regulation - SEC actions, tax changes, and exchange restrictions move markets hard.

Account Management

• 1% max risk per trade, 0.5% on perps until you’ve proven an edge.
• Max leverage: 5× until you have 100+ logged trades. Higher is casino.
• Never all-in on a single alt. Size alts as 1/3 to 1/2 of your BTC/ETH position size - they move harder.
• Tranche profit-taking on spot: 25% at 2R, 25% at 3R, let 50% run with a trailing stop.
• Don’t average down into a falling alt without a pre-planned mechanical rule. That’s how people end up bagholding.
• Withdraw realized gains monthly or quarterly. Keep trading capital separate from wealth capital.

24/7 Psychology

The market never closes. That’s the single biggest psychological trap. Your attention and sleep are finite resources - treat them that way.

• Trading window: set defined hours. Outside of them, the chart is closed. Force yourself to step away.
• Max 3 trades per day. Force quality.
• No checking during dinner, in bed, on weekends unless you’re in an active position with a plan.
• Hard stop on losses: hit 2R in the red for a day, platform closed.
• Weekly review: Saturday morning. Honest self-audit.
• No trading drunk, tired, or on FOMO. The market will be here tomorrow.

Common Pitfalls

• Chasing pumps. By the time it’s on your Twitter feed, the move is done.
• Revenge trading after a liquidation. Next trade always loses more than the first.
• Over-allocating to alts. 80% of alts underperform BTC over 2-year windows.
• Trading tokens you don’t understand. If you can’t explain what the protocol does in one sentence, don’t trade it.
• Leaving everything on an exchange. “Not your keys, not your coins” is not a meme - it’s operational security.
• Signing random approvals. Every “airdrop claim” link in your inbox is a scam.
• Ignoring funding on long holds. -0.1% per 8h × 30 days = ~10% drag you didn’t budget for.

Taxes

• Every sale is a taxable event in most jurisdictions. Swaps too (ETH → SOL = sale of ETH + purchase of SOL).
• Short vs long-term: held < 1yr = ordinary income (US). Held > 1yr = long-term rates.
• Staking / yield income is taxed as ordinary income at the time of receipt.
• Airdrops are taxed at fair market value on receipt.
• Track every trade. Exchanges don’t always produce clean 1099s. Tools: Koinly, CoinTracker, TokenTax.
• Set aside 25–35% of realized profits for taxes.

Glossary

Next Steps in TradeSimple

• Journal every trade. Crypto is the market where journaling pays the fastest because the volatility makes patterns show up in weeks, not quarters.
• Use the Position Sizer. Calculator handles leverage math - enter account, % risk, stop distance, get position size.
• Build a playbook of 2–3 repeatable setups. BTC range fade, ETH breakout, alt relative-strength pop - whatever it is, grade yourself against it.
• Backtest the setup on historical candles before risking real capital.