Trading on Coinbase: This is how it works (Crypto Guide 2022)

Coinbase has been one of the leading cryptocurrency exchanges on a global scale and has become the go-to option for a lot of new cryptocurrency investors.

This is because it offers a wide variety of products, such as investing, an advanced trading platform, custodial accounts, a wallet as well as its stablecoin pegged to the U.S. dollar.

It was founded in 2012 and is fully regulated and licensed, which means that it is supported across all U.S. states. While it was created as a Bitcoin exchange, over time it allowed users to trade a lot more cryptocurrencies, and today we’ll be taking a look at how trading on Coinbase works and what you can expect going in.

Quick Summary for Fast Readers

  • To start trading on Coinbase, you’ll need to sign up for an account, fund it with FIAT or crypto, and then begin the trading process.
  • There are many strategies available on Coinbase that you can implement to get better outcomes.
  • Coinbase Pro is an additional service on the exchange which provides you with a lot of benefits including reduced fees.

Trading Tutorial on the Coinbase Platform

As the name might imply, trading on Coinbase revolves around trading one cryptocurrency for another. 

This will typically be done through cryptocurrency pairs. So, for example, if you encounter an LTC/ADA cryptocurrency pair, this means that you can trade Litecoin for Cardano and so on. 

Alongside this Coinbase has popular crypto to fiat trading pairs that a lot of users take advantage of.

Start Trading Today

If you are interested in engaging with cryptocurrency trading, and experience what it’s like to trade one cryptocurrency token for another, and you even have the opportunity to trade cryptocurrencies to FIAT currencies and potentially get high returns, there are a few things that are required from your end first. You need to open an account, fund it, and only then can you begin the trading process. Here’s how it’s done step by step.

Open an Account

Before you open an account, make sure that you are 18 years old or older, have a government-issued photo ID, a pc or smartphone that’s connected online, and a phone number connected with your smartphone. This is all required for you to be confirmed and use the platform.

With that out of the way, visit the official Coinbase website and click on Get Started.

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Here, you will be asked for some information, and you should ensure that it’s all accurate information. This includes your legal full name, email address, and password.

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Make sure that you read the User Agreement and Privacy Policy, check the box, and click on Create Account if you agree with everything. You’ll then receive an email that needs to be verified. 

Note that after this, you might need to verify your phone number, add personal information, verify your identity and only then can you add a payment method and start making a deposit.

Fund Your Account

First log into your account, after which you will need to click on your profile icon and go to settings.

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Here, click on Payment Methods, and open up the tab. 

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Here, you need to click on Add a payment method, followed by either a Bank account, PayPal, Debit Card, or Wire Transfer.

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Now, note that Coinbase uses Plaid to link your bank account.

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Now, enter your bank, after which you will need to enter information such as routing number, account number as well as some other information in regards to your specific bank account. 

Now, you need to deposit your funds from the bank account into the deposit account. To do this, click on Portfolio.

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If you want to deposit USD, go down to your assets and click on US Dollar. 

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Here, click on Deposit.

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Select your bank account and enter the amount, after which you click on continue. Finally, confirm this transaction

Trade Your First Cryptocurrency Token or Pair

The user interface of Coinbase is simple, so if you are on PC, go to the home page, and click on Trade.

Go to the Buy tab, and click on the amount of cryptocurrency that you want to buy.

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In this case, you can click on Buy and select Bitcoin.

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Enter the amount you’d like to spend in USD and click on preview buy, then just confirm it.

Understanding Coinbase Cryptocurrency Trading

Given the fact that by signing up to Coinbase, you are essentially creating an account on a cryptocurrency trading platform, there are some strategies that you can implement to get a better starting point and engage in trading with a little bit more knowledge around the subject. 

Day Trading

Day trading is a strategy where you enter and exit positions within 24 hours. There are numerous day trading strategies you can implement.

Visual Look at Day Trading

Swing Trading

Swing trading is where you follow market trends, have a longer time frame, and the positions are held a few days or months.

Position Trading

Position trading is a strategy that’s long-term, where you hold onto the assets for potentially years.

HODLing

This is a strategy where you hold assets for a long period, regardless of the conditions of the market.

Margin Trading

Margin trading is where a trader is trading funds provided by a third party.

Trading Fees on Coinbase

PRICING TIERTAKER FEEMAKER FEE
Up to $10.04%0.00%
$1 – $10k0.50%0.50%
$10k – $50k0.35%0.35%
$50k – $100k0.25%0.15%
$100k – $1m0.20%0.10%
$1m – $20m0.18%0.08%
$20m – $100m0.15%0.05%
$100m – $500m0.10%0.02%
$500m – $1b0.06%0.00%
$1b – $2b0.05%0.00%
$2b+0.04%0.00%

Orders to Trade on Coinbase

There are multiple types of orders on Coinbase.

Limit Orders

These are orders to buy or sell a specified quantity of an asset at a specified time. 

Market Orders

This is an order to buy or sell a specified quantity of an asset at the best available price of existing orders on the order book.

Stop Orders

This is an instruction to post an order to buy or sell a specific quantity of assets but only when the last trade price on the order book equals or surpasses the stop price.

Matching engine and Order Priority 

Coinbase markets match taker orders with open maker orders on each order book based on price-time priority.

Conclusion

Coinbase is an excellent, beginner-friendly option for newcomer traders. However, if you do not like it for whatever reason, there are alternatives. You can always try DXOne for example, which has some additional features that might interest you.

With that out of the way, Coinbase has a large community, excellent documentation, and competitive fees, with mobile applications that can help you bring your trading experience on the go.