Crypto Trading Basics


WELCOME TO KAIZEN:


We’re glad you’ve decided to choose us to assist and lead you along your cryptocurrency trading journey. In order to become a successful trader, it is essential for you to have a reliable guide that you can refer to in times of confusion. This document aims to serve as that vital resource, offering a clear and comprehensive understanding of various key aspects of cryptocurrency trading.


In this document, we’ll show you how to understand and follow analyst signals, dive into crypto exchanges and guide you in choosing a solid platform to meet your needs, we’ll address the differences between spot vs futures trading and the risks associated with them, and lastly we’ll explain leverage in detail, emphasizing its potential risks and rewards, ensuring you have a well-rounded understanding of it.


For additional information on cryptocurrency basics, please download and review the 45-page PowerPoint we created in the "education-guides" channel within Kaizen’s server




CRYPTO EXCHANGES:


Before we break down how you can understand and follow the calls we make in Kaizen, first you need to get set up with a crypto trading account.


What is a Crypto Exchange?
A crypto exchange is a platform where users can buy, sell, and trade cryptocurrencies. There are many different exchanges to choose from, and some are better than others. When choosing an exchange, you’ll need to consider the features you want, which country you live in, and what your trading goals are.

For example, if you’d like to enter multiple trades per day/week, then you’ll most likely want an exchange with lower trading commission fees (these can add up quickly), as well as other features catered towards active traders.

However, if you’re a beginner who's looking to just make a trade and forget about it for a few months, then you may be more concerned about how friendly the exchange’s user interface is and how secure and reliable they are in the crypto space. Exchanges are a crucial part of the crypto ecosystem because they provide the marketplace for trading various types of tokens.

There are two types of Crypto Exchanges:
1. Centralized Exchanges (CEXs)
2. Decentralized Exchanges (DEXs)
For the purpose of this document, we'll only be discussing CEXs



KYC REGULATIONS:


As part of anti-money laundering policies, many exchanges are required by federal law to implement something called ‘KnowYour-Customer’ (KYC). KYC requires exchanges to request basic identification from each customer registered on its exchange before they can participate in trading, depositing, or withdrawing funds.

Most major exchanges do require KYC but there are some lower tier exchanges that don’t.

This is important if you’re considering using a trading platform that isn’t available in your country. Since every country has different crypto regulations on what is allowed/not allowed, you will see that some crypto exchanges could be restricted in your country but available in others.

Many people who want to use an exchange that is prohibited in their country utilize a VPN to get around the location hurdle. However, if that platform has KYC requirements, then even if you VPN into an eligible country to use that platform, you’ll most likely be unable to trade, deposit, withdraw, etc.

Let’s take ByBit and BingX for example. Both of these exchanges are restricted in the United States, and ByBit has the KYC requirement whereas BingX does not.

If you’re from the United States and want to use BingX’s trading platform, you could theoretically VPN into a country that allows BingX to operate and use their platform for your crypto trading (this is a common practice in the crypto space).

However, a VPN wouldn’t allow you to use ByBit because you still have the hurdle of that KYC requirement that would prevent you from gaining access to the platform.

DISCLAIMER: We are not recommending or suggesting you to do this as this could be breaking laws within your respective country. We are simply just sharing information on common crypto trading practices and are not here to provide financial or legal advice.

Learn more about KYC here:
What Is KYC and Why Does It Matter For Crypto?



SPOT VS. FUTURES TRADING:


Whether you’re interested in spot trading, futures trading, leverage trading, or leveraged futures perpetual trading, there is an exchange out there for you to meet your needs. And if you don’t know what the difference is between these kinds of trading, don’t worry - we’ll explain it all.

Knowing which kind of trading you’re interested in is important because exchanges can be great at one form of trading but horrible at another - but we recommend that as a beginner, you begin with spot trading and don’t tap into futures or leverage until you’ve gained some experience.

Below, you’ll find summaries of popular crypto trading exchanges so you can determine which is best for you.

Learn more about spot vs futures trading here:
What Are the Differences between Spot Trading and Futures Trading | Binance.



A FEW RECOMMENDED EXCHANGES:


BingX


BingX is a relatively small exchange with over 7 million traders. Despite its lower overall ranking, users shouldn’t be concerned regarding safety. BingX publicly shares its ‘Proof Of Reserves’ to prove customer holdings are backed 1:1.


Some of its advantages include:

  1. BingX’s fees are cheaper than other exchanges, as they charge only a few cents per transaction (you may still be able to find cheaper ways of trading, but BingX is definitely a top contender for cheapest fees).

  2. BingX has a far wider variety of tokens you can buy compared to some of the other larger exchanges in the market.


BingX is best suited for cryptocurrency traders and investors looking for a comprehensive and user-friendly platform that offers a wide range of trading options, including spot trading, futures trading, and copy trading. The platform is particularly advantageous for those who want to leverage advanced trading tools, educational resources, and a community-driven approach to trading. BingX's social trading features enable beginners to follow and replicate the strategies of experienced traders, while its robust security measures and responsive customer support make it a reliable choice for users prioritizing safety and assistance in their trading journey.


DISCLAIMER: US residents can no longer use BingX, even with a VPN, as their exchange requires KYC.

Sign Up For BingX - The first 100 people to sign up using this link will receive a free $100 in USDT (offer exclusive to paid Kaizen members only - upgrade here now).


Coinbase


Coinbase is widely considered as the most reputable, and safest exchange in the market, and possibly the most user-friendly for complete beginners. Many people who are just getting started in their crypto journey choose to trade with Coinbase and then later on experiment with other platforms once they’ve got the basics down.

Coinbase’s spot interface is great, providing users with a simplistic display and also informative pieces for its customers to read. However, if you’re interested in futures trading, you’ll find their trading interface complex and relatively restricted. Experienced traders may find the derivative side of its platform lacking key features, specifically when it comes to leverage.

Some of Coinbase’s Advantages and Features are:

  • Easy user interface for crypto and NFT beginners

  • Supports a WIDE variety of cryptocurrencies

  • Currently one of the largest & and most reputable exchanges in the U.S.

  • Coinbase is FDIC Insured and a publicly traded company

  • Offers passive earning opportunities on over 100 assets

  • Coinbase offers extensive learning resources for crypto basics & and trading

  • Provides a detailed history of your trading activity

  • Coinbase makes crypto taxes EASY for customers through issuing 1099 forms


Who Is Coinbase Best For?
Coinbase is suited for beginners or long-term investors who are not looking to buy/sell frequently or participate in leveraged trading. Also if you’re concerned about safety or exchange reputations, Coinbase is a good choice for you.

Sign up and trade with Coinbase - People who sign up then trade will get $200 in Free Crypto!


ByBit


Bybit, the second largest exchange globally, focuses on advanced trading methods like derivatives and options which in turn makes it less beginner-friendly than platforms like Coinbase.

Unfortunately, Bybit cannot be accessed by US citizens, as it requires KYC compliance. This regulatory requirement follows financial regulations but limits its availability to users in certain jurisdictions.

Who Is ByBit Best For?
Bybit benefits more experienced traders outside of the US who are looking to focus on more complex trading tools such as options, margin, or futures trading.

Join ByBit - Enjoy up to $30,000 in Deposit Rewards



CRYPTO EXCHANCE RISKS:


Now that you’ve decided which exchange you’d like to trade with, it’s time to discuss the risks associated with exchanges as a whole and how you can best mitigate them.


⚠️ #1 Insolvency / ‘Not your keys, not your tokens’

Upon depositing your crypto to an exchange, you’re trusting them to hold your tokens. This leaves you vulnerable to losses if exchanges misuses customer deposits and becomes insolvent as seen with several exchanges in the 2022/2023 bear market.

It's best to use exchanges as their name suggests - simply to exchange crypto and withdraw to your self-custodial wallet. If you don’t know the difference between a self-custodial wallet, hot wallet, cold wallet, etc., then check out the cryptocurrency basics PowerPoint we created. It’s located in the Education Channel within Kaizen’s Server.


⚠️ #2 Account Breach

Since you’re holding your crypto online, accessible with an email/password, this comes with an added risk of account compromisation. If your email or details are leaked, hackers may be able to access your account on an exchange and withdraw your funding. Please ensure 2FA as well as number/email authentication is enabled.

To mitigate this risk, never open phishing links, turn off your DM’s on Discord (WE HAVE MANY IMPERSONATORS!!!!), and stay alert for hacks and scams.



WHAT IS LEVERAGE:


You should now be familiar with the exchanges and the risk associated with them! We’ll now discuss leverage, a popular tool offered by exchanges.

Leverage in trading refers to the use of borrowed capital to increase the potential return of an investment. Essentially, it allows traders to gain a larger exposure to a market with a smaller initial capital commitment.

For example, with a 10x leverage, a trader can hold a position worth $10,000 while only using $1,000 of their own capital. So, on a trade using 10x leverage, if the crypto you’ve bought rises by 5%, the total ROI would be the 5% multiplied by the 10x leverage for a total ROI of 50%.

Learn more about Leverage here:
Leverage Crypto Trading: How Does It Work?



RISKS INVOLVED WITH LEVERAGE:


⚠️ #1 Amplified Losses

Just as leverage can magnify profits, it can also magnify losses. A small adverse move in market prices can result in a significant loss, relative to the initial investment.


⚠️ #2 Liquidation/Margin Calls

If the market moves against the leveraged position, traders may face a margin call, requiring them to add more funds to maintain the position or risk the position being closed at a loss.


⚠️ #3 Market Volatility

Leverage makes a position more sensitive to market volatility. Sharp price movements can result in quick losses.


Using leverage requires a thorough understanding of the risks and diligent risk management strategies. It is advisable for traders to avoid using leverage until you are fully comfortable with making trades and have proven profitability.

DISCLAIMER: When using leverage in crypto trading, it's important to understand that while it can magnify your profits, it also significantly increases your risks, potentially leading to rapid and substantial losses. Always exercise caution and consider your experience level, investment objectives, and the ability to bear losses before engaging in leveraged trading.



SPOT VS FUTURES:


Spot Trading:
- Spot trading and futures trading differ mainly in terms of the transaction timing and the use of leverage.
- Spot trading involves buying or selling crypto for immediate delivery and settlement without the use of leverage. The price used is the current market rate, known as the spot price. If you’re a beginner, this is most likely the kind of trading you’re familiar with. It’s very simple.
- For example, Bitcoin is currently priced at $40,000 (the spot price), and I purchased 0.25 Bitcoin (for $10,000) at its current price.

Futures Trading:

  • Futures trading, is an agreement to buy or sell a crypto at a predetermined future date and price. It involves leverage, which allows traders to use a smaller amount of capital to hold a larger position.

  • While spot trading is a straightforward ownership transfer and relatively low risk, futures trading is often used for higher risk speculation on short term future price movements.

  • Typically, our Kaizen analyst (who are more experienced and profitable) do futures trading, however, that doesn’t mean you have to do that also while following their trades. It’s possible and recommended for beginners to still do spot trading even if the signal they’re following is a futures call.


Click here to learn more 👉 What Are the Differences between Spot Trading and Futures Trading | Binance



DISCLAIMER:


This is not an investment advisory and should not be used to make investment decisions. Information provided by Kaizen should only be considered for informational purposes. Kaizen accepts no liability for any direct or consequential loss arising from any use of information found within this document or any other forms of communication. The reader bears responsibility for his/her own investment research and decisions. Information found here is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Kaizen is not registered as a security broker-dealer or an investment advisor. No information is intended, as securities brokerage, investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, recommendation, or sponsorship of any company, security, or fund. Kaizen cannot and does not assess, verify or guarantee the adequacy, accuracy, or completeness of any information, the suitability or profitability of any particular investment, or the potential value of an investment or information source.

By reading this document, you are agreeing to waive all liability of losses you may suffer; additionally, hereby acknowledge and agree to the terms and conditions provided in this disclaimer. If you do not agree to any portion of this disclaimer, you are not to scan/proceed forward with Kaizen