By Benjamin Roure L'Hermitte
Crypto trading means buying and selling digital assets like bitcoin or ether to try to profit from their price movements, on markets that run continuously, with no closing day or hour. It's a world that looks like forex or stocks on the surface, but several mechanics (a market that never sleeps, the funding rate, custody risk) make it structurally different. This guide explains the basics of crypto trading and what really sets it apart from other markets.
- Spot and futures/perpetuals are the two main ways to trade crypto, with very different risk profiles.
- The market never closes, which profoundly changes the psychological load compared to a market with fixed hours.
- Crypto volatility dwarfs that of European stock and bond markets, according to the European Central Bank (2022).
- Where you hold your funds matters: leaving crypto on an exchange isn't the same as holding it yourself.
Crypto attracts for good and bad reasons: a young, highly volatile market, accessible with little capital, and an entirely digital infrastructure. The very features that make it appealing are also what make it demanding, especially for a trader used to more traditional, more regulated markets.
This guide covers the two main ways to trade crypto, how the funding rate works on perpetuals, the psychological impact of a market that never closes, the volatility level specific to this asset class, the question of custody, and what that concretely changes for a trader keeping a serious journal.
What crypto trading is
Crypto trading means buying and selling cryptocurrencies, like bitcoin, ether or other digital assets, aiming to profit from their price swings. Unlike a stock, a cryptocurrency doesn't represent a piece of a company, and unlike forex, it's not backed by any national economy: the European Central Bank writes that crypto-assets lack intrinsic economic value or reference assets, and are frequently used as an instrument of speculation. Their price therefore depends on supply and demand, the perceived utility of the underlying network, and market sentiment.
This market grew up outside traditional financial channels, via specialized trading platforms, exchanges, which let you buy, sell and sometimes borrow cryptocurrencies with leverage. The protections are not those of traditional markets. In the European Union, the MiCA regulation covers these services, but it provides no investor compensation scheme comparable to the one that applies to traditional investment services, warns ESMA in its warning on crypto-assets, published in late 2024. And when you deal with a firm that is not authorised in the EU, you are not protected by MiCA.
Spot vs futures and perpetuals
Trading spot means directly buying the digital asset itself: if you buy bitcoin spot, you actually own that bitcoin, which you can then hold, transfer or resell. It's the crypto equivalent of buying a stock: no leverage by default, risk limited to the amount invested, and real ownership of the underlying asset.
Trading futures or perpetuals, on the other hand, means opening a contract that tracks the asset's price without ever actually holding it, generally with leverage. Classic futures have a fixed expiration date, while perpetuals have no expiry (Kraken's perpetual contract specifications). Leverage depends on the platform and on where you live: in October 2026, Kraken shows up to 100x on its bitcoin perpetual, but 10x at most in the European Economic Area (Kraken's contract specifications for the European Economic Area). For comparison, on CFDs, ESMA capped retail leverage from 1 August 2018 at 30:1 on major currency pairs, 5:1 on individual equities and 2:1 on cryptocurrencies. The higher the leverage, the smaller the adverse move needed to trigger liquidation, which happens as soon as the account value falls below the maintenance margin (Kraken's liquidation FAQ).
| Trading mode | Actual ownership | Typical leverage | Main risk |
|---|---|---|---|
| Spot | Yes | None or low | Decline in the asset's price |
| Futures | No, contract with expiry | Depends on platform and country | Liquidation before expiry |
| Perpetuals | No, contract without expiry | Depends on platform and country | Liquidation + funding rate |
The funding rate, a mechanic specific to perpetuals
Since a perpetual contract has no expiration date, it needs a mechanism to stay aligned with the underlying asset's spot price: that's the role of the funding rate. At regular intervals, a payment is exchanged between long and short positions: when the rate is positive, longs pay shorts, and the reverse when it is negative (Kraken's perpetual contract specifications). The schedule depends on the platform: Kraken settles it every hour, and Hansen, Kim and Kimbrough noted in 2021 funding times at 00:00, 08:00 and 16:00 UTC on Binance.
This mechanism has a concrete consequence for a trader keeping a position open for several days: the funding rate represents a recurring cost, or sometimes income, added to the pure result of the price movement. In a strongly trending market, a high and persistent funding rate can significantly reduce the profitability of a long-held position, even if the trade's direction was correct, somewhat like swap on a forex position held overnight.
A market that never closes: the psychological toll
Crypto trading stands out for a feature few traders anticipate before dealing with it: the market never closes. Cryptocurrencies trade 24 hours a day, seven days a week, which sets them apart from most other markets, as Hansen, Kim and Kimbrough point out. For comparison, Wall Street's core session runs from 9:30 a.m. to 4:00 p.m., New York time (NYSE trading hours). A major move can therefore happen at any hour, including while you're asleep.
This constant availability can weigh on the trader: the urge to check positions constantly, the difficulty of truly disconnecting, and the risk of making tired decisions at hours when a trader on a fixed-hours market would simply be offline. This dimension deserves to be taken as seriously as financial risk management: a market that never sleeps requires the trader to set their own time and availability limits, or fatigue becomes a risk factor in its own right. Building a fixed trading window for yourself, and genuinely logging off outside it, is a simple guardrail against this specific pressure.
If you plan to open and close positions within the same day, our guide to day trading crypto takes this point further: setting your session, sizing leverage, avoiding liquidation.
Volatility far above traditional markets
Crypto also stands out for its volatility: the European Central Bank wrote in May 2022 that the historical volatility of crypto-assets dwarfs that of European stock and bond markets, and that bitcoin's volatility, though it has declined over the years, is still significantly higher than that of gold or silver. Prices are subject to sudden and extreme fluctuations, also overnight, ESMA warns. To give a sense of scale: during the FTX bankruptcy, in November 2022, bitcoin, ether and other crypto-assets fell by over 20% in a matter of days, notes the Bank for International Settlements.
This high volatility cuts both ways: it creates more movement to capture, but it also demands stricter risk management, with position sizes generally smaller than you'd use on a more stable market for the same level of capital risk. A stop calibrated like on a regular stock can turn out far too tight on a crypto asset, getting hit by normal market noise before the anticipated move even has a chance to develop. One way to handle this is to size your stop from the asset's recent volatility rather than from a fixed distance copied from another market.
Where to hold your funds: exchange vs personal wallet
A question specific to crypto is custody of funds. Leaving your cryptocurrencies on an exchange, the trading platform itself, is convenient for active trading, but exposes you to the platform's own risk: bankruptcy, hacking, or restricted access to funds in the event of a technical or regulatory problem. It has happened: in November 2022, the FTX platform collapsed following a run sparked by concerns about its liquidity and solvency, then filed for bankruptcy, reports the Bank for International Settlements. And if your platform is unable to return your crypto-assets, there is no safety net, ESMA warns.
The alternative is transferring your cryptocurrencies to a personal wallet, where you hold the access keys yourself, which eliminates platform risk but transfers full responsibility for security to the user: losing your private keys results in the permanent and irreversible loss of access to and ownership of the crypto-assets, as the 2025 joint warning of the European Supervisory Authorities points out. This topic, custody of your assets, deserves dedicated treatment given how many technical implications and security best practices are involved; just remember that for an active trader, keeping the bulk of funds meant for trading on the exchange used daily, while avoiding leaving disproportionate dormant capital there, is basic caution.
Once your cryptocurrencies are split between an exchange and a wallet, you need to be able to say what you hold in total and what it cost you: the article on tracking a crypto portfolio in Excel gives the columns of a sheet that answers it.
What it changes for a trader keeping a journal
For a trader used to forex or stocks, crypto requires a few adjustments in how trades are journaled, detailed in our guide to the crypto trading journal. Higher volatility means potentially more scattered R-multiples, which requires a larger sample of trades before drawing reliable conclusions about your edge. The funding rate, on perpetual positions held for several days, must be factored into the net result calculation, or you'll systematically overstate a strategy's real profitability.
Finally, the absence of a fixed session changes how you analyze performance over time: segmenting your trades by hour or day of the week is still relevant in crypto, but with an important nuance, namely that 'outside market hours' doesn't really exist, which makes personal discipline around trading hours even more decisive than on a market where the market itself forces a pause.
On a market that never closes, it's up to you to set the hours. No one else will do it for you.
Bitcoin, altcoins and correlation
Bitcoin holds a particular place in the crypto ecosystem: despite the multiplication of projects, it remains the reference asset, and other cryptocurrencies, called altcoins, largely move with it. From January 2021 to December 2023, ESMA measures return correlations of around 0.50 to 0.80 between six large crypto-assets, including bitcoin, ether and Solana, a sign in its view that investors tend not to distinguish between those assets. In practice, a major bitcoin move, up or down, often comes with a move in the same direction on the other large assets.
This correlation has a direct consequence for diversification: holding or trading several different altcoins at once doesn't provide the same risk diversification as holding several stocks from different sectors, since these assets tend to rise and fall together. Altcoins are also less liquid: on Binance, from May to December 2023, ESMA measures extremely low bid-ask spreads on bitcoin and ether, and on all the other assets compared significantly lower trading volumes and wider spreads, which adds execution risk to watch on top of market risk.
How Tradoshi helps you with crypto
Tradoshi connects directly to nine major crypto exchanges to sync your trades automatically, and helps you watch for signals specific to this market: fatigue from constant availability, dispersion in your results due to volatility, the funding rate's impact on positions held for several days.
- Automatic sync with nine major crypto exchanges, read-only.
- Statistics adapted to crypto volatility, in R-multiple rather than raw value.
- Emotional check-in to spot fatigue from a market available 24/7.
- Configurable stop rules to protect you where the market itself never stops.
Frequently asked questions
What is crypto trading?
It's buying and selling cryptocurrencies, like bitcoin or ether, aiming to profit from their price swings. Unlike a stock, crypto doesn't represent a piece of a company, and unlike forex, it isn't backed by any national economy: its value rests on supply, demand and speculation.
What's the difference between spot and perpetuals?
Spot means directly buying the asset, which you actually own. Perpetuals are leveraged contracts that track the asset's price without holding it, with no expiration date, continuously adjusted through a funding rate. Risk and leverage are generally much higher on perpetuals.
What is the funding rate?
It's a periodic payment, every hour or every eight hours depending on the platform, exchanged between long and short positions on a perpetual contract, to keep its price aligned with the spot price. It represents a recurring cost or income that must be factored into the net result of a position held for several days.
Why does the crypto market never close?
Because nothing imposes a session on it: exchanges process orders continuously, 24 hours a day and seven days a week, whereas a stock exchange has an opening time and a closing time. This constant availability can weigh on the trader: the urge to check positions continuously and the difficulty of truly disconnecting.
Is crypto more volatile than forex or stocks?
More than stocks and bonds, yes: the European Central Bank wrote in May 2022 that the historical volatility of crypto-assets dwarfs that of European stock and bond markets. We have not read an equivalent measure against forex. Either way, this volatility requires more cautious risk management and position sizing than you'd use on a more stable market.
Should you leave your crypto on an exchange?
It depends on the use case: keeping funds meant for active trading on the exchange is convenient, but exposes you to the platform's own risk (bankruptcy, hacking). Transferring the rest to a personal wallet eliminates that risk, but shifts full responsibility for security to the user. Avoiding disproportionate dormant capital on an exchange is basic caution.
What is a stablecoin and why does it matter for a trader?
A stablecoin is a cryptocurrency that aims to keep a stable value, pegged to a reference asset, most often the US dollar. For an active trader, it serves to move into and out of other crypto-assets and as a quoting base: according to ESMA, around 70% to 80% of secondary market transactions take place between crypto-assets or stablecoins, with no traditional currency involved. That does not make a stablecoin risk-free: after the TerraUSD crash and the Tether de-peg, the European Central Bank wrote in May 2022 that stablecoins are not as stable as their name suggests.