How Does Cryptocurrency Trading Work?
Since the cryptocurrency market is not watched by any agencies, state bodies, etc., the cryptocurrencies are decentralized. In any case, it’s an important aspect to consider when trading them.
So, trading crypto functions only in two ways: either choosing the so-called CFD trading or selling and buying the coins.
Indeed, CFD trading is more beneficial as it doesn’t include as many risks as selling and buying. Let’s cast a glance at how crypto trading is to be shaped for you with the most prominent advantages. We’ve prepared a quick instruction for you to make it all easy to learn crypto trading.
How to Trade Cryptocurrency: How Do I Start Trading in Crypto?
Are you interested in cryptocurrencies from a financial point of view? So, you have probably heard of margin trading, or the sale of cryptocurrencies with leverage. This practice potentially can bring a lot of income. So, to trade crypto be sure to follow these easy steps.
Open an Account
The procedure for opening an account resembles registration with any social network. Everything is very simple and accessible. At the same time, we would advise not to neglect security. For registration, it is better to create a separate email, come up with a complex password. Be sure to connect two-factor authentication, it is offered at all sites.
If you decide to trade in small amounts, as a rule, it is $2K, then you can immediately start trading. But if you are a big fish and plan to start and withdraw tens of thousands of dollars, then you will need to verify your identity within the framework of AML and KYС. Somewhere you need to provide a passport and take a selfie with it. Some sites require confirmation of your residential address.
Choose a Safe and Legit Trading Platform
Exness is a top option to trade cryptocurrency if you don’t want to experience any losses or unpredicted risks. The company’s managers always keep you updated about the tiniest changes on the market and can make their predictions for your convenience. So, choosing Exness as a trading platform will minimize your risks and ensure higher benefits.
Build a Strategy for Your Trading
The most working strategy for cryptocurrencies is buying breakouts. The price moves in a narrow corridor, and as soon as it goes beyond it, you enter a trade in the direction of movement. More experienced traders trade counter-trend strategies.
When an asset starts to move strongly in one direction, they start going against the price movement, hoping that the price will reverse and a correction will begin. In case of a successful outcome, you can earn 20–30% on one deal.
Many people will think that this is similar to averaging, but this is not entirely true. There are too many nuances in such tactics. The main thing is risk and money management. Without risk control, you will very quickly lose all your money in the super-volatile crypto market.
Active crypto trading is not only dangerous but also very expensive. On average, the exchange commission is 0.1–0.2%. Thrill-seekers will love margin trading. The maximum leverage is usually 1 to 5. That is, you can both earn five times more and lose everything with a slight correction of 20%. The cost of margining a Bitcoin position on the exchange is 0.01% per open and 0.01% for every 4 hours of holding.
Tools to Choose
The most popular trading instruments at Exness are the BTC/USD and ETH/USD currency pairs. This is not surprising since Bitcoin and Ethereum are the largest cryptocurrencies in terms of capitalization. All cryptocurrencies move in risk on / risk off mode, so you will not achieve serious diversification: everything is either growing or falling. But it still makes sense to have some kind of portfolio of crypto coins since it is challenging to guess what could be the next Ethereum.
Tips for Trading Cryptocurrency
The most apparent advantage of margin trading is that it maximizes the opportunity to make more profit. But this is also the most significant drawback — because at the same time the risk of large losses increases.
Even small changes in the market can lead to significant losses for the trader. Moreover, the cryptocurrency market is more unstable than the fiat market — let alone margin trading.
That is why traders who have decided to engage in margin trading should choose the right strategy to minimize risks. The tips include:
- Start with small amounts. If you are new to trading, this is the best thing you can do. It is always recommended to take minimum margins and risk-free orders. You can then increase your bids.
- Set goals and take advantage of setting a stop-limit order. A stop limit is a certain threshold in the price at which your asset is put up for sale or purchase.
- Try not to keep orders for a long time. That is because some exchanges may charge fees at the time of closing the order and in the process. So you risk spending more on the transaction than you earn (especially if the amount of your leverage is so small).
- If you see the price is approaching a loss, you can always stop it with the stop-loss function (without waiting for the liquidation price). In this case, you will be deducted only a certain percentage of the margin from your balance.
- Follow the news. Events such as stock market crashes, regulatory changes, and other external factors can affect the price of some assets.
- When choosing a cryptocurrency asset, consider its volatility. As with regular trading, it is best to start margin trading only during periods when price jumps are not as sharp.
- You can change the amount of leverage (but this only works on a few exchanges). That is, if you see that the price of a crypto asset is going up sharply, you can increase your leverage and thus increase your potential profit. Note that this will also change the elimination level — this threshold increases with increasing leverage, and decreases with decreasing.
By following these essential tips, you will always have a better chance to succeed in trading.
FAQ
What is the Best Cryptocurrency Broker for Day Trading?
To have and use the best conditions for day trading, be advised to use Exness. One of the main reasons this is the best crypto broker is that it possesses a license, which means that all your actions are safe. Besides, the Exness platform ensures that you have access to countless assets to use for trading. In other words, it’s literally impossible to experience any losses.
How Much Money Do You Need to Start Trading Cryptocurrency?
Unlike all the other platforms, to trade crypto at Exness, you don’t have to invest a lot of money at once. The minimum deposit for the cryptocurrency trading with the broker is at least $10. So, the company reduces any possible risks for you.
Which Cryptocurrency is Best for Trading?
Regardless of having numerous crypto assets at its disposal, Exness puts emphasis on the most beneficial deals for traders. That is why, to pick up the best cryptocurrency to trade, follow your manager’s advice. Also, be sure to follow the most recent news related to crypto markets which will help you better understand which options are better for you.
Where Do I Learn Cryptocurrency Trading?
To obtain the most recent and credible knowledge on crypto trading, be recommended to sign up with the Exness Academy. This source unlocks all the perks to use for trading with the best benefit for the traders.