Table of Contents
Introduction
There are over 1,000 types of cryptocurrencies in the trading market, including the most popular of them all, Bitcoin. Those who show even the slightest interest in learning the ins and outs of crypto have participated in some form of trading. With the increasing amount of attention it continues to receive, newer players are entering the market, wanting to reap the benefits by engaging in crypto trading.
Cryptocurrency trading typically involves exchanging one cryptocurrency for another, buying and selling coins via an exchange, and exchanging fiat money for crypto. It also involves price movement speculation through a CFD trading account. The question that remains is how trading crypto can be done carefully.
This article will shed some light on how to trade safely and reliably.
Understanding volatility
Setting aside how ground-breaking blockchain technology is, the top priority of tech people and investors is to generate profits from the distributed ledger. Achieving this is done in one of two ways. They can construct businesses on top of the platform (not unlike ICOs) or invest in assorted coins and, in turn make profits from trading and exchanges. However, those who want to make huge profits in a short amount of time should give crypto trading a try.
Possessing a thorough understanding of the concepts and mechanisms that influence a coin’s increase or decrease in value is essential. This particular fluctuation establishes the concept of volatility, a familiar term in the world of crypto. ‘Volatility’ is a concept that gauges the price variance of a certain financial instrument within a specific period. It is typically linked with the risk level of the instrument; highly volatile instruments are seen as incredibly risky, whereas less volatile instruments are less risky.
Thus, understanding Bitcoin and other cryptocurrencies’ volatility is important, especially for those looking to invest or trade in the crypto space.
Becoming familiar with volatility and having the ability to predict to a certain degree whether a coin’s value will rise or fall are both crucial to thriving in cryptocurrency. They are vital elements in generating huge profits with crypto trading in a short period.
Exchange vs. Broker
Directly trading cryptocurrency rather than investing in a fund provides two choices for traders. They use either an exchange or a Forex broker. With the former, they will buy and sell both bitcoins and altcoins directly.
Exchanges are essentially the portals that connect our world to the worlds of crypto. There are a lot of exchanges out there to choose from. However, before investing in one, it would be wise to do some research beforehand. You will want to use a safe exchange, with one notable example being Crypto Exchange.
Now, with a Forex broker, traders are purchasing a Contract for Difference (CFD). A CFD, as the name implies, does not grant ownership of the digital asset. It is because of this that, for portability purposes, a lot of cryptocurrency traders prefer exchanges, occasionally utilizing more than one.
A cryptocurrency trade’s mechanics will ultimately depend on the marketplace or exchange. However, they share similarities with stock market broker trades, with buyers and sellers alike posting their orders at established prices and quantities. Alternatively, they are similar to purchasing from a market maker who buys and sells to traders at a set price that is often close to the market price.
What traders must know
There are two key components when making a profit on a trade: long-term trends and volatility trading.
- Long-term trends: Admittedly, it seems odd to discuss long-term trends in cryptocurrency when the second most popular currency, Ethereum, is still technically in its infancy, roughly five years old. Nevertheless, the overall direction has been on the rise, often skyrocketing. Many cryptocurrency traders do not trade much. Instead, they bet large portions of their position on long-term gains.
- Trading volatility: Cryptocurrencies are among the most volatile investments, which investors can pick up on by watching the short-term price action. Fortunes have the potential to be made or lost in the up-and-down swings of almost any cryptocurrencies, even well-established ones. Those who identify as active stock day traders will find many of the same technical indicators in cryptocurrencies. That being said, they are often intensified.
