The cryptocurrency market has exploded in popularity in recent years, which has created a range of opportunities for traders to speculate on market prices. But before you open a position, it is important to know how to choose the best cryptocurrency trading platform for your needs – so, we’ve compiled a list of everything you need to know to get started.
There is quite a bit you should know before you dive in. If you want to start cryptocurrency trading, here is a quick guide:
- Try our online trading platform – Take our online trading platform for a test drive – open a free CAPEX.com demo account. It’s quick and easy, and you’ll get $50,000 virtual funds to practice crypto trading.
- Start trading cryptocurrency – Our trading platforms can provide you with a smarter and faster way to trade cryptocurrency CFDs – with personalized alerts, interactive charts, and built-in risk management tools.
- When ready, open a live account – You can set it up in about 15 minutes. Then, once you’ve added money to the account, you can trade cryptocurrency CFD through your web browser, our mobile app, or third-party platforms.
Active traders will want to ensure they choose the right crypto trading platform for their style and strategies, as some may have different fees or requirements. Let’s dig in and explore the different types of crypto trading platforms, and how can be used to achieve your trading goals.
What is a crypto trading platform?
A cryptocurrency trading platform is software that allows online trading on digital assets. It can be used to open, close, and manage market positions via an intermediary like an online broker or exchange. Brokers and exchanges often offer online trading platforms at a discounted rate or free of charge to maintain an account funded and/or make a certain number of trades each month. Best trading platforms combine robust features with low fees.
Therefore, a crypto trading platform allows you to place orders, sell and buy assets and keep track of your crypto portfolio.
The best cryptocurrency trading platforms should also be able to send alerts for assets that might be worth trading, analyze complex options trades, and more. A good trading platform will also offer streaming news, which can help you get the best trade execution and ensure you get the best price.
You can open an account at CAPEX.com and access our trading platforms free of charge, to start trading CFDs on different digital assets on the same account. Besides trading on the spot and futures prices of the major cryptocurrencies, you can also trade the new Bitcoin ETF (BITO).
How do trading platforms work?
A trading platform acts like a network-based marketplace that provides users with unlimited functionalities to place trades, browse catalogs of financial instruments, and monitor accounts.
Some of the best trading platforms include premium research, real-time quotes, and news feeds. Charting tools are also available to help facilitate real-time trading information and technical analysis.
Trading platforms can also be tailored to specific markets such as stocks, futures, options, or cryptocurrencies. These trading platforms provide more options for managing trades and execution by offering capabilities that are specific to each market structure.
As for the software that powers these platforms, these can be divided into two distinct kinds of platforms:
- The broker-developed platforms and
- The platforms (e.g., MetaTrader) are developed by specialized companies.
Let’s briefly define each of these trading platforms.
The proprietary platforms work with that specific broker and have features tailored to the broker. However, if the trader chooses to open an account with online brokers, he might have difficulty getting used to a new platform offered by another broker. That’s because these platforms offer features that are tailored for them and might not exist with other brokers.
Most of the time, online brokers' primary business comes from commissions and fees. They may not have the time or resources to dedicate to building and customizing their platform with high-quality features.
The second type of trading platform is created by companies specializing in trading software like MetaTrader. These trading platforms might look better and may be more user-friendly. Brokers may not be able to customize these platforms, and traders might not fully embrace some of their features, but they provide a solid baseline for long-time traders. Their ease of use and ability to move from one broker to another, which such platforms offer, is unmatched.
Our CFD trading account will give you access to multiple crypto trading platforms:
- Web-based platform
- Mobile trading app
- A third-party platform like MetaTrader 5
These crypto trading platforms can be customized to fit your trading style and preferences. These include personalized alerts, interactive charts, pattern recognition, and daily analyst rating.
Types of crypto trading platforms
A crypto trading platform will allow you to buy and sell crypto. However, these apps can be categorized as follows:
- Cryptocurrency trading platforms provided by online brokers
- Cryptocurrency trading platforms provided by exchanges
Choosing the best crypto trading platform comes down to the needs of each investor or trader.
Crypto trading platforms provided by online brokers
Brokerage accounts give you access to crypto trading platforms and crypto apps with a wide range of financial instruments such as:
Different trading platforms offer different features, such as instant deposits and peer trading, fiat or cryptocurrency deposits, fees, commissions, order books support, credit card payment options, verification procedures, and credit card processing.
Before opening an account, new investors should research the different features of each trading app available. One of the most important aspects is the existence of support for your preferred crypto. Is your crypto offered by that crypto trading platform? While some more popular cryptos are supported by most platforms, some smaller cryptos might not be.
That platform’s fees are another essential aspect. You’ll soon discover that fees vary greatly from one platform to another. But if you want to trade crypto without paying a commission for each trade, that’s possible too. You can trade crypto CFDs for the top cryptocurrencies through CAPEX.com with no commission. Also, you can trade currency pairs, stocks, commodities, and funds from around the world within one trading account.
Crypto CFDs (Contract for Differences) accounts are a popular choice for retail traders that are interested in multiple class assets because these platforms often offer many different instruments within a single account.
For funding your crypto CFDs trading account, you can simply use a bank transfer or multiple online payment methods, just like any online shopping account. Once funds have been added to your brokerage account, you can begin using the broker's crypto trading platform.
CFDs trading allows you to speculate on any price movement of cryptocurrency. Open positions can be modified and/or closed. You can also place and modify take profit or stop loss levels. You can also increase or decrease the size of your positions.
Leveraged trading, or margin finance, allows you to open a trade position with a broker by using a smaller amount of capital to gain exposure to a larger market position. Margin is usually expressed in percentages of total position size. For instance, if you invest $1,000 and open a long or short position with a leverage of 1:20 (margin of 5%), your market exposure would be $20,000. Unfortunately, highly leveraged markets can also lead to large potential losses. The good news is that, depending on the jurisdiction, regulated brokers must provide a negative balance protection policy for retail clients.
Crypto CFD trading platforms offer instant trading, which means that your account will show your open positions and profit and loss in real-time. This can be convenient for day trading, swing trading, and scalping.
Cryptocurrency trading platforms provided by exchanges
Cryptocurrency trading platforms offered by crypto exchanges allow buying, holding, and selling cryptocurrency.
You should know that there are two kinds of crypto exchanges – centralized and decentralized.
Centralized exchanges (CEXs) work similarly to online brokerage platforms. They provide you with all the tools you need for buying and selling digital currencies and tokens such as Bitcoin, Ethereum, Dogecoin, and Ripple.
Decentralized exchanges (DEXs) don’t offer an account. They function in the peer-to-peer type of marketplace and don’t rely on a centralized entity to intermediate the trades. To use a DEX, the trader needs to create a cryptocurrency wallet. The wallet’s owner is also the one responsible for its security.
Decentralized exchanges are the preferred medium of long-term crypto investors but require new users to familiarize themselves with the technology. There is a learning curve on how to use these platforms, and any security breach, fraud, or user mistake cannot be undone by anyone. There is no customer support for such platforms; therefore, they may not be recommended for first-time crypto investors.
Using cryptocurrency exchanges to buy crypto will attract higher fees. Each exchange has different fees, and investors should research them before funding their accounts. You should look at the exact fees for deposits, withdrawals, transfers, and crypto trades. Some of these fees can be percentual, while others are flat fees. There can be also a minimum amount required for deposits and transfers.
Over the years, numerous hackers attacked centralized cryptocurrency exchanges, which caused customers to lose funds. While parts of these funds were later traced and returned to the owners, the threat still exists. Other concerns to pay attention to when using a crypto exchange may be the available liquidity and complicated fee structure. Most crypto exchanges do not have a central office and exist in a legal grey area.
When choosing a crypto trading platform via a crypto exchange, it is crucial to consider factors like supported assets, fees, payment options, and security.
Alternatives to cryptocurrency trading platforms - Cryptocurrency wallets
A cryptocurrency wallet is a software app that is used to store, send and receive cryptocurrency. Because it can be used in the same way as a physical wallet that you use to keep your cash or credit cards, it is called a "wallet."
There are two types of wallets: non-custodial and custodial. A custodial wallet is created by centralized exchanges when creating an account. Noncustodial wallets allow you to take full responsibility for your keys. When talking about crypto wallets, we refer to non-custodial wallets.
There are two types of non-custodial wallets – hot and cold. A hot wallet is connected to the internet or any device with an internet connection. A cold wallet does not have an internet connection. There are three types of wallets: software, hardware, and paper. Each type is either a cold or hot wallet.
Most crypto wallets are:
- Software wallets
- Hardware wallets
- Paper wallets
Software wallets can be used on both mobile and desktop devices. These wallets can be installed on a laptop or desktop computer. They allow you to access your cryptocurrency, make payments, view your balance, and many other functions.
The owner is the only one with the wallet’s private keys, which must be kept always secure. When you create this crypto wallet, you receive a unique key needed to access and retrieve your wallet from any device. To access your cryptocurrency, you need your private keys. Anybody can access your cryptocurrency if they have your private key. Without it, your funds are lost forever, and nobody else can help you retrieve them.
Hardware crypto wallets are very popular for traders who wish to store and retrieve their private keys from your device. Modern hardware wallets are similar to USB drives. Connecting the hardware wallet allows you to perform a cryptocurrency transaction from your computer or other devices. They can sign cryptocurrency transactions without you having to enter the key. This circumvents hackers' ability to record your screen or log your keystrokes. Some of the most well-known hardware wallets are Trezor and Ledger. Because they don't have an active internet connection until they are plugged into, hardware wallets are often considered cold wallets.
The paper wallet was the first crypto user to write or type their keys on paper. These wallets were designed to contain keys and QR codes so that mobile wallets could scan them. Many crypto owners no longer use paper wallets because they can be easily lost or damaged. They can still be used but require owners to keep them in a safe place and not lose them.
Modern cryptocurrency wallets make it possible to access the blockchain from anywhere. These wallets can support multiple assets on different blockchains, but there are crypto wallets that can be created specifically for a type of asset. Investors should do their own research when choosing their crypto wallets.
Using a crypto wallet is a good option for long-term investments, and users are already familiarized with blockchain technology. However, it does offer some limitations for those interested in crypto trading, such as lower transaction speed, potentially higher fees, and the ability to profit only when the prices rise.
How to choose the best crypto trading platform for your needs?
While cryptocurrency trading can be intimidating at first, and although scams have occurred and continue to happen, today's best cryptocurrency trading platforms make trading, buying, and selling simpler and clearer than it has been before.
However, cryptocurrency trading platforms that offer digital assets that can be a bit different, but it all comes down to finding the best crypto trading platform for your needs.
We recommend using a DEMO account on an online brokerage platform to see and test the available features for trading cryptocurrency.
Explore the platform, and you can decide if it appeals to you. If you answer "No," then it is time to look at another crypto trading platform. To be able to use any platform professionally in the future, you will learn a bit about its different features. After opening an account, you should be able to understand the basic buttons and options. Check the graphics to understand how the price of assets fluctuates over time and check the provided resources to define your trading strategy.
In general, some of the most critical aspects when choosing the best crypto trading platform are:
- Existence of a mobile app
- Brokerage license
- User interface and experience
- Trading conditions
The first factor is reliability. No matter how many trades you make, it wouldn't make sense to continue trading if you can't withdraw your profits.
Is there a mobile app for the platform? This allows flexible online trading. Traders need to be able to access their portfolios anytime, even when they are not in front of their computers. Most traders prefer smartphones when it comes to day trading.
The platform's ease of use is another important criterion. However, most trading platforms now use standardized software. A good crypto trading platform should always offer an easy-to-use interface, technical analysis tools, and integrated programming language to display technical indicators.
Do you know what the trading conditions for your platform are? You should also consider the spread and other fees charged by brokerages when you use their trading platforms. These fees can eat into your profits, especially if you're scalping or day trading. Other factors include the leverage and margin requirements.
Crypto trading platforms: exchanges vs. online brokers
Now that we’ve explained the main crypto trading platforms, you might be wondering how to pick the best one for you. The answer may be different for each trader, and we’ll help you navigate the main differences between the two types of platforms.
Firstly, before diving any deeper into how to choose the best crypto trading platform for you, you’ll have to express your desired trading strategy clearly. Then, you should be aware of the mechanisms of these types of trading platforms – one involves active investment, while the other is speculation on price movements. The terms and fees vary for each platform, and they don’t all support the same assets.
Some of the main differences between crypto trading platforms are:
- Number of supported cryptocurrencies
- Fees and minimal deposits/withdrawals
- Security and licensing
On a crypto exchange, investors buy the actual asset and may choose to keep it on the exchange account or store it in a crypto wallet. This is a preferred investment strategy for long-term investors. This means that the investors buy the asset and intend to keep it for several months or even years.
On the other hand, when using a crypto trading platform through an online brokerage account, the investors don’t own the underlying asset but the crypto CFD (Contract for Difference), which is used to speculate on the price movement.
The CFD trader cannot transfer the asset out of his account because he doesn’t own it. But, with a crypto CFD account, the trader may speculate on any price movement of the cryptocurrency. If you believe a cryptocurrency will increase in value, you can buy it (go long), but if you believe that the cryptocurrency prices are falling, you can sell it (go short).
Number of supported cryptocurrencies
For those interested in doing more on a crypto trading platform than buying and holding, it might be important to choose a platform that offers multiple cryptocurrencies.
It’s a known fact that the crypto marketplace is highly volatile and can shift dramatically from one day to the next. Active traders will seek to profit from price movements and might not want to limit to only a few cryptos.
Crypto trading platform fees
All trading platforms will have some fees for users, but these may be different as they might have different business models.
For instance, crypto exchanges charge a percentual fee for the amount of crypto traded. They also charge a fee for deposits. Please note that each crypto exchange has a completely different set of conditions and fee systems that new users may find difficult to navigate and understand.
Crypto trading platforms often rely on the spread (the difference between the bid and ask price) to make a profit, but they don’t charge any fees or other commissions when trading. They also don’t have a fee for deposits but might have a minimum amount for deposits and withdrawals.
Security is one of the most important factors to consider when selecting the best cryptocurrency trading platforms for beginners or more advanced retail investors and traders.
Security is a crucial component of any digital business. Your investment should be safe and not exposed to cybernetic attacks or data breaches. That’s why choosing a crypto trading platform with the highest security protocols is essential.
While some say that decentralized crypto exchanges (DEXs) have the best security, they do have a steep learning curve, and new users find it challenging to navigate all the features. Also, even for these exchanges, there is a history of hacked exchanges and poorly coded smart contracts.
On the other hand, the CFD brokers offering crypto trading platforms are regulated and licensed by financial authorities. The real difference here is that if the crypto exchange is to be hacked, you might lose your funds forever, whereas online brokers may offer insurance for deposited funds.
Traders must decide on their strategy before choosing the right crypto trading platform. If you want to buy and hold cryptocurrency for years, then you should consider using a crypto exchange. But there is a learning curve, and any trading mistake might lead to losing all your funds.
If you want to trade crypto and apply different short- and medium-term trading strategies, you might want to choose a reputable online broker. They offer familiar trading platforms, such as MetaTrader 5, which most retail traders are already used to and know how to use. Besides some of the best crypto trading platforms available today, online brokers offer customer support, leverage trading, negative balance protection, and multiple assets (including crypto stocks, crypto ETFs, and many more) within the same account.