In This Article
- What is Cryptocurrency Trading?
- How do cryptocurrency markets work?
- What moves cryptocurrency markets?
- How does Cryptocurrency Trading Work?
- Cryptocurrency Trading Steps
- Cryptocurrency Trading Examples
- Cryptocurrency Strategy & Education
- What is an Initial Coin Offering (ICO)?
- A Beginner’s Guide to Day Trading
- How to get started with day trading
- What Is a Crypto Exchange and How Does It Work?
- Crypto Exchange Fees
- Why is Cryptocurrency The Future of Finance?
- What is Cryptocurrency Mining?
- What Causes Crypto Price Fluctuations?
- What are the risks of cryptocurrency?
- What are the Risks and Rewards of Cryptocurrency?
- Build a Crypto Trading Plan
- Why Choose Us
What is Cryptocurrency Trading?
Do you want to jump right to the point? The act of venturing into the different cryptocurrency price movements in the market via a CFD trading account or cryptocurrency trading via an exchange.
The majority of the investors like to trade cryptocurrency because it is a highly volatile asset. It is a skill to time the market right; trading crypto has given much higher returns than traditional investments.
Cryptocurrency traders can be classified into having two goals: making a profit in USD via buying and selling or accumulating Bitcoin. If the crypto market is bullish, your portfolio will skyrocket in USD value, but it’s challenging for Bitcoin to reach higher values. Therefore, many traders track their portfolio’s Bitcoin value by trading different altcoins against Bitcoin on various exchanges.
Traders don’t understand that trading their cryptocurrency can risk losing your crypto to the market. Since cryptocurrency prices are so volatile, it’s prevalent for traders to lose money drastically while trading cryptocurrencies. The only reason why many crypto enthusiasts just HODL their Bitcoin.
CFD trading on cryptocurrencies
CFDs trading are derivatives, which help you venture into cryptocurrency price fluctuations, and you can do this with every coin without even owning the coins. You can choose from two options of going long, i.e., buying, if you think the value of the cryptocurrency will rise, or you can go short, i.e., selling if you think it will fall.
Both the options are leveraged products, meaning you only need to deposit a small amount, also known as margin. As a result, it is easy to gain entire exposure to the underlying market. In addition, an investor’s profit and loss are only calculated according to the total size of their position so that leverage will show both profits and losses.
How do cryptocurrency markets work?
All cryptocurrency markets are decentralized, which means they are not backed or issued with the help of a prominent authority such as a government. Instead, they run over the internet across a chain of computers. Cryptocurrencies can be purchased and sold via exchange and stored in ‘wallets.’
Cryptocurrencies are nothing like traditional/ fiat currencies. Cryptocurrencies exist online as a shared digital record of ownership, updated and stored securely on the blockchain. If a crypto transaction has been made, the coin is transferred from one user’s digital wallet to another. The transaction isn’t considered legitimate until it is verified and added to the blockchain through a process called mining. Mining is also the reason why new cryptocurrency tokens are created.
What moves cryptocurrency markets?
Crypto markets move with supply and demand. They do not get affected by the economic and political concerns that mar traditional currencies since they are decentralized. Their prices are significantly impacted by,
The total number of coins and the price at which they get released, destroyed, or lost.
The value of the total number of coins existing and how users are predicting for it to develop.
The portrayal of cryptocurrency in the media and its media coverage.
The extent to which the cryptocurrency smoothly integrates into existing infrastructure like e-commerce payment systems.
Significant events such as regulatory updates, security breaches, and economic complications.
How does Cryptocurrency Trading Work?
The cryptocurrency market is unconventional and operates more distinctly than other financial markets. Hence, it is important to learn crypto trading and the industry jargon before diving into the trading field.
The cryptocurrency market is a decentralized digital currency network, which means that the network operates through peer-to-peer transaction reviews rather than a central server. When a crypto trade is observed (buying and selling), the transactions are recorded on the blockchain. It is a shared digital ledger that records data, where the miners validate the process (mining).
Cryptocurrencies are famous for their volatility, and this virtue makes it very important to keep track of news that can move the market. Anything and Everything has the power to cause a dent in the market blockchain forks and ICOs, government regulation, and breaking news.
Cryptocurrency Trading Steps
Make a cryptocurrency brokerage account
You will need to make an account with a crypto brokerage before trading crypto. You will need to provide some personal identification information as you do when opening an account with a stock brokerage.
Add funds to your account
You will need to connect your bank account after you have signed up with a crypto broker. Most crypto brokers give you options to fund through debit cards and wire transfers.
Pick a crypto
Active traders often allocate most of their capital to Bitcoin and ETH since these cryptos move more predictably than small altcoins, so following the technical indicators prove helpful. Crypto traders also assign a portion of their capital to smaller altcoins which are riskier because they offer higher upside potential. Small altcoins at times rise over 1,000% in a matter of months, making them attractive for risk-takers.
You have the option to choose from a myriad of trading indicators, and many traders consider various factors when buying or selling crypto. You can also take a cryptocurrency trading course. Many people also use stock trading strategies for cryptocurrencies. Elliot Wave Theory is popular among many traders, it focuses on the psychology behind the market sentiment.
Store your cryptocurrency
If you are buying crypto to hold for the mid to long term, get a cryptocurrency wallet. Crypto wallets come in software wallets or hardware wallets. Hardware wallets overtake software ones since they store your crypto offline, on a physical device.
Cryptocurrency Trading Examples
Let’s put you in the driver’s seat and help you understand cryptocurrency trading. Here are two examples of cryptocurrency trades and the possible outcomes.
CFD trading example: selling Ether
You are being updated with news and up-to-date with the crypto market. Now you believe that the price of Ether (the token created by the Ethereum network) is going to fall in value, and you decide to sell Ether against the US dollar (Ether/USD).
The current market price is 400, and you have decided to be short of 10 contracts (each of which is equivalent to 1 ETH) to open a position at this price.
If your prediction is right
If you were right, the value of Ether has fallen against the US dollar, and your trades were a profit. However, the price has fallen to 300 now. To close your trading position, you have to buy back the ten contracts, and the price you are buying at is now 310 (We took a slightly higher price than the market price due to the volatility).
Now that the market has moved 90 points in your favor, your trade profit can be calculated as follows: 10 X 90 = $900.
If your prediction was wrong.
Unfortunately, the value of Ether rose against the US dollar, your position is at a loss now, but you need to close at a loss. Let’s assume that you decided to exit the trade after the market went up by 30 points, and now it is 430. To close the trade, you will have to buy back the 10 contracts at the buy price of 440. It implies that you are at a loss to the position by 10 X 40 = $400.
Cryptocurrency Strategy & Education
Bitcoin and many other cryptocurrencies are innovative because of the technology behind them. And if you want to make big bucks, it becomes important that you understand the foundations of the technology. Find trustable educational sources and take time to learn and enjoy the learning process as well.
Become an improved, independent investor by understanding the industry jargon like premining and consensus algorithms. Blockchain technology is evolving every day and you have to try your best to keep up with it. For some crypto traders, it is hard to determine when to get in and when to hold and the best way to get through such situations is to set a target and stick with it.
When you have gained enough knowledge you start understanding when to HODL, when to buy, and when to sell. The crypto market runs on cycles, where prices rise and fall dramatically and you have to understand the basic math behind trading to trade strategically.
What is an Initial Coin Offering (ICO)?
An initial coin offering (ICO) is the initial public offering (IPO) of the crypto industry. Companies can launch an ICO to raise funds when they want to create a new coin, app, or service. Investors who are interested can buy an ICO and receive the new crypto token issued by the company. The token may have utility related to the product or service the company offers or represent a stake in the company.
Initial coin offerings are popular when it comes to fundraising for crypto-related products or services. ICOs are similar to IPOs but they can also have utility for a software service or product. While some ICOs have incurred massive returns, some have turned out to be fraudulent and performed poorly.
To participate in an ICO, you need to purchase an established digital currency and have a basic understanding of crypto wallets and exchanges. ICOs are largely unregulated, so you should be cautious and diligent when researching and investing in one.
A Beginner’s Guide to Day Trading Cryptocurrency
Day trading is most commonly used when it comes to active trading in financial markets like stocks, forex, commodities, and yes, cryptocurrency markets. Let’s look at what day trading offers.
What is day trading?
Day trading means entering and exiting positions in a single trading day. Also called intraday trading, day trading is aimed at profiting from price changes in a financial instrument. “Day Trader” comes from the stock market, where trading is carried out on business days only. Day traders do not leave positions open overnight as they are looking at capitalizing on intraday price movements.
How do day traders make money?
Successful day traders understand the market deeply and have enough experience to make good money off of it. Day traders typically use technical analysis (TA) to create trade ideas. They identify entry and exit points for trades through volume, chart patterns, price action, and technical indicators. Risk management is paramount here, as it is with any trading strategy.
Day traders do not depend on fundamental analysis (FA) since fundamental events take long to reflect on the market. However, some traders strategize around “trading the news.” Here, you find assets with high volume thanks to a recent announcement or news and make profits off of temporary spikes in trading activity. The goal of day traders is to make money off of the volatility of the market. Volume and liquidity then become important when it comes to day trading. Good liquidity makes executing traders smooth and quick, and also makes exiting easier.
When one trade experiences a large slippage it impacts the day trader’s trading account. This makes day traders trade highly liquid market pairs. While someday traders will trade one popular market pair, some will create a watchlist based on technical or fundamental attributes and choose an instrument from the list.
How to get started with day trading cryptocurrency
Set your mind to trying out day trading? Where to start from though?
First, you will have to get familiar with the basic concepts of day trading. Once that is done, you can start paper trading on a platform and test your trading system without the risk of losing money.
Find a platform that suits you and has everything you need as a beginner.
What Is a Crypto Exchange and How Does It Work?
Crypto exchanges enable investors to trade cryptocurrencies for other assets, say fiat currency. They function as platforms where buyers and sellers come together.
If you buy cryptocurrencies via an exchange, you are buying the coins themselves. Although you need to start by creating an account with a crypto trading platform most of the time, investors need to put up the total value of their assets to open a position. Investors can always store the cryptocurrency tokens in their wallets until they sell.
The beginners do not understand that the exchanges execute their steep learning curves as the investors grasp how the technology works and make sense of the data. As a result, many businesses limit the investors on their deposits while keeping the account fee high and expensive to maintain.
It is important you choose the right crypto exchange that suits your needs when it comes to easing operations, transaction fees, etc., to make you amenable.
Crypto Exchange Fees
Buying and selling crypto requires two types of fees, trading and withdrawal fees.
Trading fees are at times levied as a certain percentage of the amount of crypto you buy or sell while some exchanges may charge differently for makers and takers.
Makers add liquidity to an exchange and do not fulfill standing orders while takers are orders that remove liquidity from an exchange by carrying out orders that are on hold for a trade. Maker fees are usually lesser than taker fees, but it all depends on your exchange.
Beware of crypto investment apps that claim to charge zero fees, they may not charge you outright but they do charge a spread, the difference between the trade at which you buy or sell crypto. This may end up being more expensive than paying a certain percentage of the trading fee.
Exchanges also at times charge to withdraw coins from their platform. This becomes an issue if you are thinking of moving your crypto to a secure third-party wallet or another exchange. These fees differ based on the cryptocurrency.
If you are anticipating moving crypto, choose the platform that has a certain amount of free withdrawals.
When you move onto advanced trading strategies, say margin trading, for instance, there are additional fees you have to bear to borrow money. Some exchanges also offer quick features to make trading easier for beginners but charge higher fees.
Also, when you buy crypto with a credit or debit card, you may be charged a premium by the exchange and your card issuer.
Why is Cryptocurrency The Future of Finance?
Cryptocurrency is a growing ecosystem and is now headed toward the traditional financial systems. The number of users has grown by 66 million between 2018 and 2020. In addition, private and public sectors are welcoming the idea of adopting cryptocurrencies in financial dealings like making payments, value storage, and an investment.
Cryptocurrency technology has brought to the fore the development and evolution of a variety of encryption techniques that make crypto networks secure and reliable to take on various transactions. There are over 5,000 cryptocurrencies in existence at the moment and the market is expanding. Let’s see why Cryptocurrency is the future of finance.
Decentralized Finance Setting In
There is a growing need for transparent, secure, and accessible financial systems, and is allegedly driven by the current centralized financial system’s inability to provide financial freedom and credibility to users. Decentralized Finance or DeFi has a perceived potential to offer more transparency and better transactional security and take the place of some conventional financial processes soon.
DeFi is becoming popular in investing, borrowing, lending, and trading, triggering a revolution in financial services. The increasing demand and accessibility of cryptocurrency exchanges are popularising DeFi systems globally.
Moreover, cryptocurrency exchanges are becoming popular among investors, and cryptocurrency is set to make changes in the financial systems as we know them today. Consequently, DeFi created on a public blockchain is a more viable alternative financial system that offers enhanced access to financial services and transparency.’
Cryptocurrency lacks inherent values but holds value in:
Cryptocurrency can be used to buy goods and services and make transactions.
Most cryptocurrencies have a limited total supply, meaning the shortage influence their value.
Cryptocurrency can be attached to commodities like gold or even currencies, like the USD.
The technology allows users and owners to remain anonymous while making transactions.
Digital Access and Ownership
It allows people with no access to traditional banks to enter the financial system through cryptocurrency.
Cryptocurrencies and gold share similar attributes as money. Both are usable as a medium of exchange, have a store of value, and possess a unit of account.
Cryptocurrency is increasingly becoming a more pronounced financial system with private and public sectors showing interest in it. Now, cryptocurrency is openly recognized across various sectors.
Transactional and Banking Benefits
The use of cryptocurrency is growing each day with acceptability and accessibility at the forefront of it all. The technique and technology of cryptography keep evolving and advancing, leading to the creation of an enhanced and stronger cryptocurrency financial system. At present, the system benefits as a financial system in terms of privacy, security, and efficiency.
The history of cryptocurrency indicates what it holds for the future of finance. Blockchain technology has the ability to disrupt the conventional financial systems as we know them.
What is Cryptocurrency Mining?
Cryptocurrency mining is how new coins are entered into circulation. It is also how the network confirms new transactions and is a critical component of the maintenance and development of the blockchain ledger. Sophisticated hardware that solves extremely complex computational math problems is “mining.” The first computer to solve the problem gets the next block of coins and the process restarts.
Cryptocurrency mining is challenging, costly, and only seldom rewarding. Regardless, mining is attractive for many investors who are interested in cryptocurrency because miners receive rewards for their work with crypto tokens. The entrepreneurial types consider mining as god-given pennies, and all the better if you are technologically inclined.
The bitcoin reward is an incentive that motivates people to assist in legitimizing and monitoring Bitcoin transactions, also ensuring their validity. Since numerous users share these responsibilities, Bitcoin does not have a centralized body, and nor does it rely on any central authority like a central bank or government to oversee regulations.
What Causes Crypto Price Fluctuations?
The perceived store of value versus the fiat currency makes bitcoin prices go up against fiat currencies. It has everything to do with the uncertainty of bitcoin as an acceptable form of currency or store of value. Other reasons for price fluctuations are media coverage, speculation, and availability.
Bitcoin rose to popularity in 2010 when the price rose to $0.09. Its price has increased by tens of thousands of dollars since then, at times rising or falling thousands of dollars n just a matter of days. Understanding what influences its marketplace and why it has such a volatile price history will help you decide if you want to invest in it, trade it, or watch it.
Bitcoin’s demand is heavily determined by supply and demand. Speculation about price movements plays a crucial role in Bitcoin’s value at any point. Media, influencers, industry moguls, and crypto-fans with a following also lead to investor concerns, fluctuating the price.
What are the risks of cryptocurrency?
The risks of cryptocurrency trading boil down to its volatility. Cryptocurrency is prone to risk and is speculative, know the risks before trading,
Sudden changes in market sentiment can move the price sharply. The value of cryptocurrencies drops quickly by hundreds and even thousands at times.
Lack of regulation
Cryptocurrencies are not regulated by governments or central banks. Recently, questions have arisen about the possibility of classifying them as a commodity or virtual currency.
Susceptibility to error and hacking
Technical glitches, human error, or hacking is inevitable.
The threat of forks or discontinuation
On the occasion of a hard fork, there is a risk of substantial price volatility around the event.
What are the Risks and Rewards of Cryptocurrency?
With bitcoin leading the way, many investments are doing extremely well. The cryptocurrency market has created a real buzz, attracting beginners and professionals to spend billions of pounds each year. However, it does not come easy. There are risks involved.
Unlike legal tender issued in England, no government authority backs cryptocurrencies. Meaning consumers cannot access any FCA compensation for money lost to fraud currently. Hence, investors should be thorough with their due diligence and check the nature of all investments. Frauds are currently on the rise, more so in the financial and banking sector. Cryptocurrency is a hot opportunity for fraudsters to make the most of its growing popularity and unregulated status.
Investors should make sure they properly understand the investment since the risk is entirely on them with no formal protection in sight. Financial institutions have to maintain certain protection activities against money laundering and fraud. Investors have not been able to eliminate the legal risks that come with owning cryptocurrencies.
The modern business world is inclined to the success of cryptocurrencies. Cryptocurrencies have massive implications attached to them and the implications ease and enlarge simultaneously with the development of blockchain technology.
Crypto holders will soon start using their crypto wallets on a blockchain platform to buy the product, raise loans, fasten the payments as businesses are progressively accepting cryptocurrency. With the platform conducting a multitude of matters, the need to protect investments gets amplified.
Cryptocurrency is here to stay and doing great at its thing. Banks now have to start preparing for a permanent change when it comes to this type of investment. With all the risks associated and the importance of our banking services for the economy, it is a move that should be taken seriously.
Build a Crypto Trading Plan
If you desire to win a war, you will always need a plan; trading is no less than a war. It makes “having a plan” even more important as a crypto trader. Because the market is highly volatile. The volatility makes the market a double-edged sword, and it makes the market look very attractive but makes it more difficult to trade through. The reason why the trading plan should always have a backup plan, i.e., risk management tools, the framework to achieve your goals, the cryptocurrency you want to trade, and using a specific methodology to enter and exit the trade, also known as trading strategies.
The plan should also have in-depth analyses of the crypto market. These can include two ways: fundamental or technical analysis. Technical analysis only focuses on the price movement of a cryptocurrency and its historical patterns. In contrast, fundamental analysis is different, bending towards external factors and macroeconomics data that impact the digital asset. It doesn’t matter which method you rely on because you have to remain up to date with the global news that has the power to impact the market, as cryptocurrencies are very volatile to the market sentiment.
Why Choose Us
- We provide you with the best platform to buy cryptocurrency, a faster and smarter way to trade cryptocurrencies CFDs
- We provide interactive charts, personalized alerts, and built-in risk management tools.
- Our experts help you with everything regarding trading, buying, and selling, or they will do it for you.
- With Blockchain Tradein, if your trade reaches a certain level, we will protect your trade from unnecessary risks.
- You have the freedom to decide the size of your position when to buy and sell it or hold your position.
Frequently Asked Questions
We at BlockChain Tradein, serve to be the best crypto exchange by aiming for the success of our clients and working hard to grow their portfolio while going against all odds the market throws at our team of experts. Enroll with BTI to explore lucrative crypto trading.