Altcoins now represent over 50% of the total cryptocurrency market cap, yet most new traders still aren’t sure how to actually buy them. The process involves more steps than purchasing Bitcoin on a mainstream app, but it’s far less complicated than it might seem.
This guide walks through everything from choosing an exchange and executing your first trade to understanding different altcoin categories and managing the risks that come with this volatile market segment.
Your capital is at risk. This content is for educational purposes and does not constitute financial advice.
What are altcoins
To start trading altcoins, register on a reputable exchange like Coinbase or Kraken, complete KYC verification, and deposit fiat currency to buy base pairs like BTC, ETH, or USDT. Once funded, research potential coins using tools like CoinMarketCap, paying attention to project utility, market cap, and 24-hour trading volume before placing your first order.
So what exactly are altcoins? The term combines “alternative” and “coin” to describe any cryptocurrency other than Bitcoin. When Bitcoin launched in 2009, it stood alone. Then Litecoin arrived in 2011, followed by thousands of others, each offering something different from Bitcoin’s original design.
Today, altcoins range from Ethereum with its smart contract capabilities to smaller tokens focused on specific industries like gaming or supply chain management. The variety is enormous, which creates both opportunity and complexity for new traders trying to figure out where to begin.
Types of altcoins you can trade
Before buying anything, it helps to know what categories exist. Altcoins generally fall into five main groups, each serving different purposes in the crypto ecosystem.
Stablecoins
Stablecoins are pegged to fiat currencies like the US dollar, meaning one USDT or USDC typically equals one dollar. Traders use stablecoins to move between positions without converting back to traditional currency. If you sell an altcoin and want to wait before buying something else, parking funds in a stablecoin keeps you in the crypto ecosystem while avoiding price swings.
Utility tokens
Utility tokens grant access to specific blockchain services. Chainlink (LINK) powers decentralized data feeds that smart contracts rely on, while Filecoin (FIL) enables decentralized file storage. The value of utility tokens often tracks with how many people actually use the underlying platform.
Governance tokens
Governance tokens give holders voting rights in decentralized protocols. If you own UNI tokens from Uniswap, you can vote on protocol upgrades and fee structures. AAVE token holders do the same for the Aave lending protocol. For traders interested in a project’s direction, governance tokens offer both financial exposure and decision-making power.
Memecoins
Memecoins like Dogecoin and Shiba Inu started as jokes but developed real trading communities. Price movements in memecoins tend to be extreme, with swings of 30% or more happening within single trading sessions. The speculative nature makes memecoins particularly risky for beginners still learning market dynamics.
DeFi tokens
DeFi tokens power decentralized finance applications including lending platforms, automated exchanges, and yield protocols. Tokens like AAVE, COMP, and CRV often move with overall DeFi market sentiment. When more capital flows into decentralized finance, DeFi token prices typically respond.
Where can I trade altcoins
Three main venue types serve altcoin traders. Your choice depends on experience level, privacy preferences, and whether you want to hold actual tokens or trade price movements.
| Platform Type | Best For | Key Consideration |
|---|---|---|
| Centralized Exchanges | Beginners | Requires KYC verification |
| Decentralized Exchanges | Privacy-focused traders | Requires existing crypto wallet |
| Broker Platforms | Traditional investors | Often offers CFD trading |
Centralized exchanges
Centralized exchanges like Binance, Coinbase, and Kraken act as intermediaries between buyers and sellers. The exchange holds custody of your funds, handles order matching, and provides customer support. For beginners, centralized exchanges offer the most straightforward path to buying altcoins, though they require identity verification and trust in the platform’s security.
Decentralized exchanges
Decentralized exchanges like Uniswap and PancakeSwap let you trade directly from your own wallet without an intermediary. No account creation, no identity verification. However, you’ll already need cryptocurrency in a compatible wallet to use a DEX, which makes centralized exchanges the typical starting point for most new traders.
Broker platforms
Broker platforms often provide altcoin exposure through CFDs, or Contracts for Difference. With CFDs, you trade price movements without owning the underlying asset. Traders familiar with forex or stock CFDs may find this approach comfortable, though CFD trading involves leverage risks that differ from spot trading.
How to buy altcoins step by step
The entire process from account creation to first purchase typically takes 15 to 30 minutes, though identity verification can extend that timeline depending on the platform.
1. Choose a reputable exchange
Look for exchanges with regulatory compliance in your jurisdiction, transparent security practices, and support for the altcoins you want to trade. Proof of reserves, insurance coverage, and two-factor authentication are features worth checking before committing to a platform.
2. Create and verify your account
Most exchanges require KYC verification, which stands for Know Your Customer. You’ll typically submit a government-issued ID and proof of address. Some platforms verify accounts within minutes while others take several days, so starting this process early makes sense if you want to trade soon.
3. Deposit funds
Funding options usually include bank transfers, credit cards, and cryptocurrency deposits. Bank transfers often carry lower fees, typically between 0% and 1.5%, while card payments may charge 2% to 4% but process faster. The tradeoff between cost and speed depends on your priorities.
4. Select your altcoin
Before buying, spend time reviewing the project. CoinMarketCap and CoinGecko provide market data including trading volume, market cap, and price history. The project’s whitepaper explains what problem it solves and how the technology works. Team backgrounds and development activity offer additional context.
5. Execute your first trade
Two order types cover most situations:
- Market orders: Execute immediately at current prices, simple but may result in slight price differences on volatile assets
- Limit orders: Execute only at your specified price or better, offering more control but no guarantee of filling
Many beginners start with $50 to $100 to learn platform mechanics before committing larger amounts.
6. Secure your holdings
After purchasing, consider where to store your altcoins. Exchange wallets offer convenience for active trading. Personal wallets like MetaMask or Trust Wallet give you direct control of your private keys. Hardware wallets provide the strongest security for larger holdings you plan to keep long-term.
Tip: Enable two-factor authentication immediately after creating any exchange account. This single step significantly reduces unauthorized access risk.
How to sell altcoins
Selling works similarly to buying. You can place market orders for immediate execution or limit orders to target specific exit prices. When withdrawing to fiat currency, bank transfers typically take one to five business days. Keep records of all transactions, including dates, amounts, and prices, for tax reporting purposes.
Altcoin trading strategies for beginners
Different approaches suit different time commitments and risk tolerances. Here are five common strategies, ordered roughly from least to most time-intensive.
1. Buy and hold
Buy and hold, sometimes called HODLing in crypto communities, involves purchasing altcoins and holding through market cycles. This approach works for traders who believe in a project’s long-term fundamentals and prefer minimal active management.
2. Dollar cost averaging
Dollar cost averaging means investing fixed amounts at regular intervals regardless of price. If you invest $100 every week, you buy more when prices are low and less when prices are high. Over time, this approach smooths out volatility and removes the pressure of timing entries perfectly.
3. Swing trading
Swing trading involves holding positions for days to weeks to capture medium-term price movements. Swing traders typically use basic chart analysis to identify entry and exit points. The time commitment falls between passive holding and active day trading.
4. Day trading
Day trading means entering and exiting positions within single trading sessions. According to Gemini’s Cryptopedia, this strategy “requires monitoring multiple exchanges simultaneously to act quickly when opportunities arise.” The time commitment is substantial, and most day traders have significant experience before attempting this approach.
5. Scalping
Scalping focuses on making many small trades for minor profits, often holding positions for just minutes. This advanced strategy requires low trading fees, fast execution, and considerable screen time. Beginners typically gain experience with other approaches before attempting scalping.
Technical indicators for trading altcoins
Technical indicators help traders identify potential entry and exit points based on historical price data. Four indicators appear frequently in altcoin trading discussions.
- Relative Strength Index (RSI): Measures whether an asset appears overbought (above 70) or oversold (below 30), potentially signaling reversal points
- Moving Averages: Smooth price data to reveal trends, with the 50-day and 200-day averages particularly watched by traders
- MACD: Shows momentum shifts through the relationship between two moving averages, useful for confirming trend direction
- Volume Analysis: High trading volume typically confirms price movements, while low volume may suggest weaker conviction
What to look for when choosing altcoins
Selecting which altcoins to trade involves evaluating several factors beyond just price charts.
- Market capitalization: Larger market caps generally indicate more established projects with lower volatility, while smaller caps offer higher potential returns alongside greater risk
- Trading volume and liquidity: Higher daily volume means easier position entry and exit without significantly moving the price
- Project fundamentals: The whitepaper, development roadmap, team background, and real-world use case all provide context for evaluating a project
- Community and developer activity: Active GitHub repositories and engaged social communities often indicate ongoing development and user interest
Risks of trading altcoins
Altcoin trading carries substantial risks that warrant honest consideration before committing capital.
Market volatility in altcoins often exceeds Bitcoin’s price swings. Smaller-cap tokens regularly move 20% to 30% in single days, and larger moves happen during periods of market stress.
Regulatory uncertainty continues affecting crypto markets globally. Rules vary by jurisdiction and change frequently, sometimes impacting token legality or exchange access with little warning.
Scams and rug pulls remain a reality in altcoin markets. Some projects are designed specifically to extract funds before developers disappear. Anonymous teams and promises of guaranteed returns are common warning signs.
Liquidity risks affect smaller altcoins particularly. Low trading volume can make selling at desired prices difficult, especially during market downturns when many traders want to exit simultaneously.
Are altcoins worth trading
Altcoin trading offers exposure to emerging blockchain technologies and potential percentage gains that established assets like Bitcoin may not provide. At the same time, the risks are proportionally higher.
Whether altcoin trading makes sense depends on your risk tolerance, available time for research and monitoring, and capital you can afford to lose entirely. Many traders start with small positions in established altcoins before exploring smaller-cap opportunities as they gain experience.
Start your altcoin trading journey with AtoZ Markets
Staying informed about market developments, regulatory changes, and project updates affects trading outcomes significantly. AtoZ Markets’ cryptocurrency news section covers altcoin markets daily, providing context for traders developing their approach.
FAQs about trading altcoins
Is $100 enough to start trading altcoins?
Yes, many exchanges allow deposits as low as $10 to $50, and fractional trading means you can purchase portions of higher-priced altcoins. Starting small lets you learn platform mechanics without significant capital exposure.
Can you make $100 a day trading altcoins?
While possible during favorable market conditions, consistent daily profits require significant skill and experience. Most beginners focus on learning market dynamics rather than targeting specific daily returns, and losses of equivalent size are equally possible.
What is the 1% rule in crypto trading?
The 1% rule suggests never risking more than 1% of total trading capital on a single trade. If you have $1,000 to trade, you would risk no more than $10 on any individual position. This approach helps protect against significant portfolio damage from losing trades.
How do I avoid altcoin scams and rug pulls?
Research team credentials and verify identities where possible. Check for smart contract audits from reputable firms. Examine token distribution for concerning concentrations, and verify that liquidity is locked. Anonymous teams and promises of guaranteed returns are common warning signs worth avoiding.
Do I need to pay taxes on altcoin trading profits?
Tax obligations vary by country, but most jurisdictions treat cryptocurrency gains as taxable events. Keeping detailed records of all transactions, including dates, amounts, and prices, simplifies reporting. Consulting a tax professional familiar with crypto regulations in your region is advisable for specific guidance.