How Crypto Trading Works
Cryptocurrency is the new money! Like every other form of money, it has intrinsic values, one of which is that it’s acceptable as a medium of exchange. If it’s a medium of exchange, it means it is tradable because it could be demanded by users or supplied. This basic truth is why Cryptocurrency trading occurs.
What is Cryptocurrency Trading?
Cryptocurrency trading involves speculating on price movements of coins or buying and selling coins via an exchange. The main task is to buy when the price is low and to sell when it is higher.
It is however impossible to engage in crypto trading without basic knowledge. To that end, we’ll analyze some key points:
- Where can I trade Cryptocurrencies
- How do I store profits?
- What terms should I be conversant with?
Where Can I Trade Cryptocurrencies?
Cryptocurrency markets are decentralized, which means they are not issued or backed by a central authority such as a government but run across a network of computers. To trade cryptocurrencies, you use exchanges.
Exchanges could be centralized (CEX) or decentralized (DEX). The major difference between both is the presence/absence of Central Authority. The CEXs act as an intermediary in facilitating trade activities among parties but the DEXs allow both parties to carry out trading activities without the intervention of any central authority.
CEXs like Binance, Kucoin, or DEXs like Pancakeswap, Uniswap are mostly used. However, it is recommended that you understand the uniqueness of each platform so you can have a good trading experience.
How Do I Store Profits?
The Cryptocurrency market has two market periods. There’s the bullish period and the bearish period. In the crypto bull market, it’s pretty easy for your portfolio to increase in profits. If you like to take all profits, you might want to get a non-custodial wallet. If you prefer to accumulate profits, a custodial wallet will do.
Custodial wallets are provided on Centralized exchanges (CEXs). What this means is that the exchange holds your funds in trust for you. Non-custodial wallets on the other hand are accessed through DEXs (decentralized exchanges). Unlike the custodial wallets, the exchanges do not hold your funds, you access them whenever you want to.
It is important to note though that actively trading your cryptocurrency is risky and you risk losing your crypto to the market. Since cryptocurrency prices are so volatile, it’s not uncommon for one to lose money quickly while trading cryptocurrencies.
What Terms Should I Be Conversant With?
To be a successful trader, it’s important that you have knowledge. Even though it’s impossible to exhaust what you should know in the crypto trading space, some key terms save you from bad choices. Let’s check them out:
Market capitalization: the value of all the coins in existence and how users perceive this to be developing. If you like fundamental analysis, the market cap is a big deal to you.
Total Supply: the total number of a particular coin to ever be produced.
Circulating Supply: The current, existing amount of a particular coin in circulation.
Leverage: Leverage is the means of gaining exposure to large amounts of cryptocurrency without having to pay the full value of your trade upfront. Instead, you put down a small deposit, known as margin. When you close a leveraged position, your profit or loss is based on the full size of the trade.
While leverage will magnify your profits, it also brings the risk of amplified losses — including losses that can exceed your margin on an individual trade. Leveraged trading, therefore, makes it extremely important to learn how to manage your risk.
Margin: Margin is a key part of leveraged trading. It is the term used to describe the initial deposit you put up to open and maintain a leveraged position. When you are trading cryptocurrencies on margin, remember that your margin requirement will change depending on your broker, and how large your trade size is.
Margin is usually expressed as a percentage of the full position. A trade on bitcoin (BTC), for instance, might require 15% of the total value of the position to be paid for it to be opened. So instead of depositing $5000, you’d only need to deposit $750.
Support: A Support zone is a key turnaround zone below the current price where the price is expected to turn around once it gets to that zone. You’re expected to look for buying opportunities when you get to a support zone. It’s a good time for entry.
Resistance: The Resistance zone is a key turning zone found above the current market price. It is usually caused by selling pressure. You’re to look for selling opportunities at the resistance zone.
P2P: Sometimes traders can choose to use OTC methods. Centralized exchanges provide that platform for traders with the peer-to-peer trading option. Peer-to-peer or P2P, simply means trading among peers. Instead of selling to the exchange, you sell to fellow traders, like yourself who use the exchange.
The difference between the buy and sell prices quoted for a cryptocurrency is called a spread. Like many financial markets, when you open a position on a cryptocurrency market, you’ll be presented with two prices. If you want to open a long position, you trade at the buy price, which is slightly above the market price. If you want to open a short position, you trade at the selling price — slightly below the market price.
Also, cryptocurrency markets move according to supply and demand. Higher demand pushes the price upwards and vice versa. The cryptocurrency markets are decentralized, which means they are unaffected by many of the economic and political concerns that affect traditional currencies. This also means that it’s prone to uninvestigated hacks, hence you should ensure to use a secure exchange like HaggleX, and also take protective measures to protect your wallet, measures like saving your private keys, saving your recovery phrase, using a system password to lock your wallet, and finger biometrics lock too.
Download the HaggleX app today and start your crypto savings journey.
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