Crypto trading, replicating the trade of fiat currencies, is the price speculation of blockchain assets. If you want to trade, buy or sell orders of cryptocurrency, then you’ll need a set price to transact with. As it’s even done on Wall Street, the price action of a financial asset gives investors an idea of that asset’s value. This is also done with fundamental and technical analysis.
Once you’ve filled out your order, it clears instantly or when its exact price is met in the market.
Here’s an overview you’ll need as a novice or expert trader.
What to Know About Crypto Trading
Even the New York markets of 1792 needed set prices for trades to transact on. We know that prices are how investors enter the market, but determining an asset’s value apart from its listed price is also important. Investors need to know if what they’re buying or selling is worth the prices they see. The tools that old pundits still swear by today consist of these forms of analysis:
Technical: Analyzing the market with charts is widespread and can account for any timeframe the investors wants to hold an asset for. In the shortest time frames, traders hold their positions for as long as a few minutes to a handful of hours.
Fundamental: The principle of economic data here is simple. The assets, including intellectual property, that a business or blockchain owns reflects in its total value. The real-life changes, as it is with stocks, that businesses and algorithms experience can also influence prices.
The risks of trading cryptocurrency
Your money is at risk when trading crypto. How much you fund an account with is, technically, how much you can lose. It’s possible to leverage only a fraction of your deposited funds, but its placement in a trading account makes it accessible to leverage. Market conditions dictate how much risk truly exists and so will volatility. Keep in mind that margin is also risky and unforgiving.
Measure and Handle the Risk of Crypto Trading
The risk of cryptocurrency trading can be managed, rather reduced, the more you understand it. No trader or financial institution can enter the market without risk. What you need, instead, is a realistic measure of your exposure and the tools to make sure it doesn’t grow uncontrollably.
Though zero risk doesn’t exist, the following options will help you to contain your exposure.
- Stop-losses: These order types set a specific price limit for your active buy or sell orders. Instead of having your exposure to the downside unlimited, stop-losses set your highest possible loss for any single trade. Without this in place, your order can run into the negative and lead to a margin call. You don’t want this, for the negative can grow to wipe out your account.
- Diversification: Your crypto portfolio is exposed to more risks when the assets you hold are few in number or all unstable. Having a mix of different assets can help to balance your accounts, for if one investment fails, another could perform enough to eliminate the loss you would’ve had.
As the saying goes, “Don’t put all of your eggs into one basket.”
- Research: The more sensitive you are to market conditions, the more risks you incur and the less likely you’ve done enough research. It’s best to follow drawn out developments rather than spontaneous market movements. By researching, you can strategize an investment plan. When you react without facts or the right data, you could find yourself at a loss for a lack of guidance.
- Risk analysis: Some investors enter crypto trading and fail to first measure risk. You have to know the risk you face and how much of it you can truly handle. This is called risk tolerance, and the amount you determine then sets how much exposure you allow your account to see. If you don’t determine these things, you are, foolishly, saying you’re OK with a 100% loss.
The best way to manage your risk is by starting with an amount of money that you can afford to lose. It’s not that we suggest that you lose that money. You simply need money that would NOT change your life or independence if it all got lost in a bad trade or any number of them.
- Secure technology: Make sure that the equipment you’re using is secure and safe. Use trusted wallets, and manage your crypto between cold and hot storages. You’ll want what you trade put on a hot wallet while your core crypto fund stored cold. No matter what hot wallet you use, however, keep in mind that online access exposes you to the risks of theft.
Market Research and the Part It Plays
Due diligence is necessary in crypto trading because the shifts in market prices are volatile by nature. If you act prematurely, you can find out that what seemed to be a rally turns out to be a selloff. The fear of missing out (FOMO) leaves millions of investors chasing prices but without understanding what’s really happening. When you do your due diligence, you’ll find correlation.
Market correlation occurs when you find price data that agrees within three or more different technical tools. No matter if it’s RSIs or EMAs, finding correlation in three consecutive tools helps to confirm that the patterns you see are more than hunches.
Where Do You Trade Cryptocurrency?
Start with a search for a cryptocurrency trading platform, and endless options will arise. There’s a revolution in crypto trading and the billions held in digital currencies project an impressive market capitalization. Here are the three likely places to buy or sell crypto through:
CEX and DEX exchanges: Decentralized and centralized exchanges provide public users with live prices for the trending crypto of the globe. These platforms even supply their users with enough liquidity to almost guarantee that a buyer or seller exists at their selected prices. You can trade on these platforms with service options for live charts, order types and balances.
Online banks: Some online banks, such as Revolut, give you the option of positioning your account on certain tokens. There are not many such traditional banks with this option, so the fees can be a little higher than what we consider market norms.
Traditional brokers: Brokers have largely gone digital by offering trading services to online users. These platforms track specific cryptocurrencies that you can trade with a traditional broker. In most cases, these brokers offer price contracts that follow the live prices of a cryptocurrency to ensure that your order is bought or sold at your order’s exact price value.
Crypto Exchanges to Start With
There are many different cryptocurrency trading platforms on the market. Here are some examples of popular crypto trading platforms to start with right now:
- Coinbase: Coinbase is a popular cryptocurrency trading platform that offers buying and selling of several popular cryptocurrencies, specifically Bitcoin, Ethereum and Litecoin.
- Binance: Binance is a popular cryptocurrency exchange where you can buy and sell over 100 different cryptocurrencies.
- Kraken: Kraken is a trading platform that gives you direct access to Bitcoin, Ethereum and Cardano.
- Bitfinex: Bitfinex has over 70 different cryptocurrencies to start trading right now.
Top Services and Trading Options
Understanding the tools for trading crypto that are at your disposal is about understanding the various services and options you have. The leading crypto exchanges offer the following:
Buying and selling
Trading platforms all allow you to buy and sell cryptocurrencies. You can generally buy and sell several different cryptocurrencies on the same platform.
Tracking your portfolio informs you of where you stand in terms of capital. You will have access to your balances within the dashboards of each trading platform.
Though it could be listed under “premium services,” exchanges list prices but with analytical tools that take your insights on price action even deeper. These tools start with charts and then spread unto technical indicators with sophisticated controls.
Depending on the settings you want, you can set notifications for when your price is met, when an order activates or when that order closes. Notifications can be sent to smartphones, computers and other communications devices.
Cryptocurrency trading platforms are service businesses. They have technical support in place, which supports investors’ questions, requests and unresolved problems.
Several platforms offer dedicated applications to monitor your investments or buy and resell directly from your smartphone.
Proof-of-stake (PoS) blockchains lock your funds into a blockchain with your consent for it to use your coins for validating exchanges. For doing so, you’ll receive rewards based on the amount of funds you staked and how long you locked them up for.
Trading Strategies Used for Crypto
To limit risks and invest wisely, several strategies can be followed. Here are the key options:
- Buy and hold: Long-term investments into crypto call for you to find an impressive asset and then own it for up to five years or more.
- Swing: Those who strategize their positions to buy or sell in a weekly cycle are swing trading. An asset held for several days or weeks is considered a swing trade.
- Day trading: Here’s when investors hold an asset only over several hours to a day at most. Fast profits are the objective, but the risk and exposure in day trading is the highest.
- Scalping: Scalping is a day-trading strategy with the shortest holding period. It might take only minutes to scrap the price changes of a crypto asset.
If you haven’t decided on which strategy works best for you, consider starting with a demo. You don’t have to trade crypto in a live market. A demo account gives you all of the real-life price data you need but without exposing your live money to loss. Once you’ve practiced your order entries and exits, you can then formulate a strategy to start trading with your real money.
A Conclusion On Crypto Trading
Crypto, as a real financial asset, can be traded like any type of asset. However, it is essential to keep the volatility of crypto trading in mind. All financial markets can move up or down without indications of doing either. You must protect yourself, securing an account with the right strategy. Always do your research, and think twice about following spontaneous changes.
More so, only invest what you are able to lose. It is more common that investors lose all or part of their investments, so as a reminder, the Tokize teams do not offer any investment advice.
- Good quotes and low fees
- Does not hold your cryptos
- Use of limit orders on a DEX