What is crypto trading?

Latest technologies and great opportunities of Internet resources have become the basis for creating a completely new currency. It is a cryptocurrency – a monetary unit that unlike others, has no physical variation. It is fully based on blockchain technology.

Trading cryptocurrency is becoming increasingly popular nowadays. Its main advantage is high income in a short period of time if you properly start trading cryptocurrency. You can work in different formats with crypto: from mining to resale. Crypto trading is one of the most attractive options that does not require the purchase of special equipment.

Cryptocurrency trading involves the opening of speculative positions to buy or sell a digital coin. When investing through the exchange, you can earn only on the growth of the cryptocurrency; by trading through a broker, you can increase your financial investments – buy orders and sell orders. Keep reading to learn how to start trading cryptocurrency.

Digital coins are extremely volatile, so it's better to start trading with a demo account. It allows you to get acquainted with the trading instruments and tactics. Then it is better to invest a small sum and, as strange as it may sound, survive the first losses. It will help you understand if you are able to remain calm and make correct decisions in a stressful situation.

 What you need to start trading cryptocurrency?

Everyone can create an account on the crypto exchange and have access to digital assets directly without any intermediaries. But this approach involves considerable investments and is very risky. In recent years, Forex brokers have also added crypto to the lists of their assets, providing high customer service. Digital money is traded in the form of Contracts for Difference (CFDs) on pairs with the US dollar. However, you will not become the owner of a certain cryptocurrency, but you can profit from the difference in quotes. There are many benefits of trading via brokerage company:

  • There is no need to activate a wallet to store currency. There have been a number of hacks recently, and the chance to be attacked by hackers still remains high.
  • A single trading platform allows you to trade all assets at once, both forex and crypto. Exchanges provide the ability to trade only cryptocurrencies. Most brokers provide a simple platform that is very easy to use. You can use a desktop version of the terminal or an app for mobile devices. Besides, you will receive customer support at each stage of trading.
  • The presence of leverage allows you to reduce the starting capital. When you trade cryptocurrencies with Forex brokers, you get the same leverage as you would with regular Forex trading. For example, you can buy 1 bitcoin with only a small fraction of its value on hand.
  • It is much safer to trade cryptocurrencies through reliable brokers than to trade through crypto exchanges. You just need to look through reviews to choose a broker.
  • Almost all forex brokers provide a demo account where beginners can gain experience before switching to a trading account.
  • Many brokers offer a very favorable way to replenish deposit and wide withdrawal funds options. You do not need to top up your deposit with big sums, a lot of platforms have the minimum deposit of $10 only.
  • Brokers do not hold funds as all withdrawals are usually processed within 24 hours.

Do not forget to stick to financial management. This is a method of controlling risks in the process of crypto trading, taking into account the volatility indicator and possible market fluctuations. You need to implement take profit and stop loss strategies. Be sure to diversify your assets - that is, distribute your investments across different cryptographic currencies.

Main tradable cryptocurrency

Bitcoin remains the most tradable cryptocurrency in the crypto market. Most beginners and experienced crypto traders trade this coin. Recently, the price of this tool fluctuates slightly, but after a fall, it again is stable enough. However, the volatility of this instrument is quite high. So at the end of June 2019, its value reached about 12 thousand dollars. At the same time, in the first decade of March 2020, Bitcoin fell to the level of $ 5.300. Just in half a year, Bitcoin was able to grow well, doubling its position. What are the forecasts for this cryptocurrency? Optimists say Bitcoin will reach 50 thousand-dollar value over the next few years.

The most popular coins
The most popular coins

Ethereum (ETH) ranks second in the list of the most popular coins. Ethereum's position allows a cryptocurrency with smart contract technology to dictate its rules to the market, making it similar to Bitcoin. The independence of the project has a positive effect on the stability of the price of its digital asset.

The market capitalization of Ripple's cryptocurrency startup XRP puts it in third place. The absolute record of its value of $ 3.84 was recorded in 2018.

Cryptocurrency Tether (USDT) is the most popular stablecoin in the digital asset market. It ranks fourth in the overall cryptocurrency capitalization rating.

Besides these three leading coins, popular cryptocurrencies include Bitcoin Cash, Litecoin, Stella, Cardano, IOTA, NEO, Monero. However, Bitcoin is significantly ahead of others both in popularity and in terms of capitalization.

The choice of investment must be made based on the characteristics of the digital coins. For example, the stablecoin Tether is not suitable for making money on the difference in exchange rates. On the contrary, manipulations with the XRP rate can attract traders. Usually, most popular cryptocurrencies are the leaders in terms of the total trading volume. Most deals are made with them.

Trade planning

When cryptocurrencies rise in value strongly and for long enough, the market experiences an influx of people willing to trade and we speak about the bull market. And they use the only strategy - they bet on price growth. When the price begins to fall and goes flat, there are much fewer people who want to make money on fluctuations in cryptocurrencies, they leave this bear market. In this case, trading acquires a civilized framework, in particular, traders try to use various strategies to plan sell stop and buy stop deals.

You can analyze cryptocurrencies in two ways:

Fundamental analysis is a non-statistical method of analysis that estimates the value of an asset, based on factors of economic and financial growth. Using it, experts strive to determine the profitability of an asset based on its potential. They analyze the current value of the asset and then predict its further growth

Technical analysis is a purely statistical method involving the study of price charts, trading volumes and other related numbers. Experts believe that an asset's price reflects market state and all the information it needs at any given time, so they focus solely on statistical analysis of the asset's price movements. The main instrument of this analysis is a technical indicator. Usually, it is a graph located against a price chart to show all its changes. It helps navigate signals and trends. There are many of them, let’s review several ones:

Moving average (MA). This indicator calculates the average price over a period of time and also recalculates it over time. The chart helps identify support and resistance levels. Support is the lower barrier that the price will most likely not jump over. Resistance level is the opposite concept.

Litecoin Moving Average Deviation
Litecoin Moving Average Deviation

Exponential moving average (EMA). This indicator is calculated in such a way that the latest price of a coin gives the most accurate picture of the positioning of players on the exchange. The latest value of the product is most important, while the earlier values lose their relevance.

Stochastic oscillator. The idea of this indicator is that the closing prices should mostly move in the same direction as the prevailing trend. The Stochastic Oscillator is calculated in the range from 0 to 100. The parameter of 80 and more signals overbuying. And the position below 20 shows overselling.

Bitcoin Cash Stochastic Oscillator
Bitcoin Cash Stochastic Oscillator

Moving average convergence/divergence (MACD). It is a popular trend indicator based on moving averages. It is a perfect tool for determining the momentum of a trade.

Bitcoin MACD indicator
Bitcoin MACD indicator

Bollinger bands. It is used to determine the range and speed of the volatility of the price, which is especially relevant for the cryptocurrency market. It performs many functions, starting from growing and falling price trends to abrupt price changes.

Ethereum Bollinger Bands
Ethereum Bollinger Bands

Relative strength index (RSI). It is one of the simplest indicators showing whether an asset is overbought or oversold. The RSI uses past data to determine the total demand for an asset. Then it calculates whether people are buying the amount of the asset that could lead to a downward price correction, or the opposite could happen.

Bitcoin Relative Strength Index (RSI)
Bitcoin Relative Strength Index (RSI)

Fibonacci retracement. It is another useful tool for predicting price action. Fibonacci levels do not represent complex and interdependent calculations, but they are still included in the list of indicators for the trader due to their usefulness. When a sudden price change occurs, Fibonacci levels allow you to track such movement and draw certain conclusions about price behavior.

Average directional index (ADX). This indicator not only shows long-term trends, evaluates volatility and the current trend phase, but also does not miss a single reliable reversal moment.

General trading strategies

Strategies for cryptocurrencies can be general since in general the cryptocurrency market is characterized by monotony and stereotyped. But there is still a difference between them based on a trading plan.

A cryptocurrency trading strategy is a way of making deals under specific market conditions. A strategy, algorithm, tactics is a list of rules, established norms and conditions, according to which an investor must act to achieve a profit.

There are two basic trading approaches – long term trading and short term trading. The first one is also known as the Buy and Hold strategy. It means long period investments. Traders purchase coins at a low price and are waiting for the price increase to get profit. It is often used for sell limit and buy limit deals.

Day trading is a strategy of making deals during one day without postponing them to the next day. The traders operate exclusively with intraday transactions, in which the duration of the deal is usually from minutes to several hours

Another long term strategy is swing trading. It is trading within a certain time cycle. This can be a period of a rise in price, a decline in price, or a flat movement. The trader tries to determine the beginning of the movement, trades along the course of this movement and finishes trades at the end of the cycle.

Scalping is a high frequency strategy, and a trader enters into trades at every fluctuation in the rate. There can be dozens of trades within one hour, but most of them are unprofitable. so the trader expects to "beat off" losses and make a profit for a number of very profitable trades.

Position trading strategy means that the trader only trades when the asset is in a specific position. When trading position, a trader enters into deals only when the trend reverses and does not consider other situations.


Is crypto trading safe?

Trading digital assets is extremely risky. The price of cryptocurrencies is volatile, it can fluctuate by 10-20% per day, sometimes by 50% or more. Beginners may get the wrong impression that trading can bring huge profits almost every day, but 90% of them lose their money. To minimize financial risk, it is better to start trading crypto with a demo account. Some exchanges allow you to create an account with a virtual balance.

Day trading is a trading strategy that involves activities with a financial instrument several times during the day. Some traders place more than 25 deals for one day. The idea is to accumulate as many small wins as possible instead of one big trade that may never happen.

If you intend to buy coins directly from crypto exchanges, then you will need $ 100-200 for a start. But if you trade digitals coins via a brokerage company, you can start even with a $10 deposit. In this case, the investment risk is very low.

This trading can bring you very high profits if you approach it responsibly. You should develop and master a reliable trading strategy, know how to use technical indicators and have good skills.

When choosing a coin for trading, you should find out how popular this cryptocurrency is at the moment. Based on the history of trading and volumes, track the total liquidity of the cryptocurrency. It is a way to understanding the profitability of the cryptocurrency, predicting its movement and making a profitable deal. 
The best approach is to diversify your portfolio. This rule works for all assets, and cryptocurrencies are no exception.

The rating of cryptocurrencies is based on their daily trading volumes. Currently, we may say that the leading coins are: Bitcoin, Ethereum and XRP. 
Cryptocurrencies are very dynamic, their position in the top depends on the increase or decrease in the volume of trading funds.

The history of jumps of the bitcoin rate suggests that investing in this type of cryptocurrency term may be really profitable. However, it cannot be said for certain that the price of bitcoin will rise significantly. Any cryptocurrency is classified as a high-risk asset. And their value can drop sharply just as it rose.

Related pages

Trading software on Mac and Windows

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