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Cryptocurrency trading — How to develop a sustainable strategy
The cryptocurrency space is incredibly popular among investors and traders alike. Many of the most popular crypto assets have grown a lot in recent years. Let’s take Bitcoin. If we look at its growth over the last three years, we will see that its price has increased 13X. The closest Bitcoin’s competitor is just as successful. The Ethereum value has grown from $10 in November 2020 to $190 in November 2020. Cryptocurrencies have made people a lot of money so far. But that’s a long-term perspective, which is usually leveraged by investors. And what about traders?
It is important to trade cryptocurrency as intelligently as possible. If not, you potentially risk losing it all. Most cryptocurrency assets are incredibly volatile, much more so than standard investments. This volatility can lead to both a lot of yield and a lot of loss. Seeing an asset go from increasing by 7% in one day to losing 11% of its value the next is not uncommon.
Thus, be sure to have a sustainable strategy in place for your trading in order to manage your risk. Develop a trading approach that works over time, and won’t leave you broke in a single day.
This blog post highlights a few tips to help you devise and develop a sustainable strategy for cryptocurrency trading.
Trade at a Comfortable Pace
In order to trade sustainably, you need to do it successfully over time without losing everything. One of the best ways is to trade at a pace you are comfortable with.
Some people may trade cryptocurrency daily, but if they do so unsuccessfully, they could lose their entire investment in an instant. It doesn’t sound very sustainable, does it? The market hours for cryptocurrencies are long (24/7 actually), so you have a lot of flexibility when you decide to trade. Find the optimal market times, and trade at a comfortable pace within them.
Use a Stop-Loss at Some Point
When dealing with cryptocurrency, you are bound to experience some loss from time to time. The assets change value frequently throughout the day, often by large amounts. Sometimes this can be in your favor, but that isn’t always the case. As a result, you want to do all you can to reduce the effects of these losses.
One of the best ways to do so is to use stop-losses. A stop-loss is an order to buy or sell your cryptocurrency once it reaches a certain price. This will ensure you never lose too much or experience a massive catastrophe. Where you place the stop-loss will depend on your unique situation and how comfortable you are with risk. Without a stop-loss, there is no saying how much of a hit your investment may take if things go south.
Keep Your Eyes on News Related to the Asset You are Trading
Unlike most types of fiat investments, there are no centralized bodies, financial institutions, or reports that come out to influence the price or value of cryptocurrency. The value is affected by the behavior of traders, and news. A piece of news can often have a large impact on price fluctuation. So you need to keep up with updates relating to whatever type of cryptocurrency you’re trading. If not, you may miss something and miss a good investment opportunity or a chance to sell high. Hacks and bans could hurt the value of a crypto asset, while added support or increasing adoption could help the value.
Now, this isn’t always the case, but you would be doing yourself a disservice if you weren’t following the cryptocurrency news while investing. There are many websites, social media accounts and other types of publications that are certainly worth a follow.
Avoid FOMO and Other Emotion-Based Decisions
One of the best ways to develop a sustainable strategy is to always keep a sound mind when trading. Base your trading decisions on facts and real information, not emotions.
Unfortunately, there has been a lot of hype about cryptocurrency at different times. This has led to many people investing because of FOMO (fear of missing out). Sometimes, this works out. But, there are people who dive in when an asset is at its peak, only to see it crashing back down. As a result, they lose most of their investment in a matter of days.
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Don’t start trading simply because something is being talked about a lot, and you don’t want to miss out. Trading based on emotions is quite common but isn’t often fruitful. So, be sure to avoid it if possible.
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This article will provide traders with a guide to trading cryptocurrency CFDs. It will explore: significant cryptocurrencies (and not just Bitcoin), reasons why you should consider trading CFDs on cryptocurrencies, an explanation of how to purchase Bitcoin, Litecoin trading, Ethereum investing, and much more!
What is Cryptocurrency? – A Brief History
Cryptocurrency is a type of ”digital asset” or ”digital currency”. It does not exist in the physical sense (as is the case with regular fiat currencies such as the Dollar and the Euro). Cryptocurrency not regulated or managed by any financial authorities or banks in the same way as traditional currency, but is mostly self-regulated, through the use of various encryption techniques. Furthermore, this process is powered via the internet, with users within associated networks providing the verification that enables the transactions to occur.
The genesis of what we now know as cryptocurrencies transpired back in 2009, and it all began with the launch of Bitcoin, the proto-cryptocurrency. Bitcoin was originally proposed as an electronic payment system based on cryptographic proof. The cryptographic proof came from the emerging technology of the blockchain — a kind of list of digital signatures that provide computational evidence describing the entire transaction history of each Bitcoin.
This public chain of ownership allows peer-to-peer transactions, without any need to entrust a third-party with the task of processing the payment. This lack of any kind of third party operating in a single, supervisory role means that Bitcoin is a decentralised digital currency. Back in 2009, some market commentators dismissed this new, virtual currency as a mere fad, a transitory reaction to the subprime crisis that had racked the global economy back in 2008.
But as Bitcoin has grown in value and credibility over the years, interest in this new type of currency – and the technology framework that underpins it – has blossomed. As more investors have embraced Bitcoin over the years, its value has been driven higher, which in turn has driven greater interest in this asset class. This has led to a breathtaking increase in value and volatility.
As a consequence of all of this, a large number of alternative digital currencies have arrived on the scene (and on some occasions have departed just as quickly), based on the innovation of the blockchain or such similar concepts. In early 2020, the combined value of all cryptocurrencies was estimated to be around $8 billion; by March 2020 this had ballooned to around $25 billion.
2020 proved to be a remarkable year for Bitcoin, and the cryptocurrency market in general. Having never been above $1,000 before 2020, Bitcoin broke above $6,000 in October of 2020 and by early December had rocketed above $10,000. By the end of that month, it set a record level of $19,783, climbing rapidly ahead of the launch of CME and CBOE futures contracts in the cryptocurrency.
The launch of these Bitcoin contracts on mainstream exchanges ushered in a new era, offering the first chance to trade cryptocurrencies on regulated platforms in the US — but it also generally coincided with a marked decline in the fortunes of Bitcoin.
Though volumes of the Bitcoin futures contracts grew steadily in the months after their launch — offering greater and greater and liquidity to traders — the price of Bitcoin fell into a persistent downtrend. By February of 2020, Bitcoin had plunged to below $6,500. By December 2020, that value had shrunk to below $3,500.
Also in December, the crypto market’s market cap plummeted from just under $180 to $152 billion within a 24 hour period, with many spectators comparing the major crash to the infamous dot com crash of the early 2000s.
What Are the Other Significant Cryptocurrencies?
Bitcoin was by far the earliest cryptocurrency, arriving more than two years ahead of the second cryptocurrency, Namecoin. The success of Bitcoin has led to a massive proliferation in digital currencies in recent years, and today there are literally hundreds of cryptocurrencies in existence. One of the most interesting aspects of these new currencies is the lack of control by any single body. Traditional fiat currencies are governed by central banks that may operate independently of a national government, or at the behest of the government.
The FED (Federal Reserve) has the power to increase the supply of US Dollars, for example. The degree of decentralisation can vary from one cryptocurrency to another – as we shall see – but, in general, there is no central authority that plays an analogous role to a central bank with regards to cryptocurrencies. We’re now going to take a look at four of the other major cryptocurrencies available.
Ethereum (or Ether), is the largest rival to Bitcoin, based on percentage share of total cryptocurrency market capitalisation. Other significant players in the field include Bitcoin Cash, Litecoin, and Ripple, to name a few. Cryptocurrencies are quoted against the US Dollar (USD) and the Euro (EUR) – two of the world’s most widely-used currencies.
The following list shows you the codes used to represent these major cryptocurrencies against the US Dollar:
- Bitcoin against the Dollar – Code: BTC/USD
- Ether against the Dollar – Code: ETH/USD
- Bitcoin Cash against the Dollar – Code: BCH/USD
- Litecoin against the Dollar – Code: LTC/USD
- Ripple against the Dollar – Code: XRP/USD
Similarly, the list below shows the codes for the major cryptocurrencies against the euro:
- Bitcoin against the Euro – Code: BTC/EUR
- Ether against the Euro – Code: ETH/EUR
- Bitcoin Cash against the Euro – Code: BCH/EUR
- Litecoin against the Euro – Code: LTC/EUR
- Ripple against the Euro – Code: XRP/EUR
Why Trade CFDs on Cryptocurrencies?
Cryptocurrencies are made possible via the emerging technology of the blockchain – the public ledger that keeps a record of all transactions (or similar consensus ledger systems). Since the outset, the potential of both this new type of asset and the technology in general, has engendered interest in specialist quarters.
In recent years, cryptocurrencies have begun to attract attention from a much wider audience, as Bitcoin has been accepted as a means of payment in increasingly more places. Cryptocurrencies have also begun to generate a lot of interest as an alternative investment. A large part of this is down to headlines generated by the huge leaps in Bitcoin’s value. The price of Bitcoin began in 2020 with a worth of around $1,000, rocketing to more than $19,000 by December of that same year.
This new asset space gained further credibility when established exchanges like the CBOE and CME launched futures contracts in Bitcoin. Many people gain an exposure to cryptocurrencies by simply putting money into them – that is, buying the actual digital currency. There are downsides to this, however. Processing times for buying a cryptocurrency are slower than the instant fills that typify a regular Forex (FX) trade; they are unregulated; and there have been some scare stories of compromised Bitcoin and Ethereum wallets.
You can easily sidestep all these concerns by trading cryptocurrencies via CFDs. Using CFDs allows very fast transaction times, which is useful for such a volatile market. For instance, Admiral Markets UK Ltd is authorised and regulated by the Financial Conduct Authority (FCA), so that Bitcoin CFD trading with this broker is regulated in the same manner as normal FX trading.
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How to trade Bitcoin CFDs
Bitcoin is the eldest child in the cryptocurrency family. Dating back to 2009, this makes it substantially older and more established than its nearest cryptocurrency rival in terms of capitalisation. Because it is the most mature cryptocurrency, it shouldn’t come as much of a surprise that it generates the most headlines. In 2020, those headlines were plentiful, on account of Bitcoin’s remarkable growth in value. You can track Bitcoin’s 2020 gains in the chart below:
Source: MetaTrader 4 platform – BTC/USD daily chart – Data Range: 11 Apr, 2020 – 7 Dec, 2020
One way to profit from such increases in value is to actually purchase Bitcoin and store it in a Bitcoin wallet, with the aim being to sell it later at a higher price. A much simpler way to speculate on the value of Bitcoin is to trade BTC/USD using CFDs. All that’s required then is to open a live trading account, and you can then readily trade BTC/USD from a chart using a trading platform such as MetaTrader 4 (MT4) or MetaTrader 5 (MT5)
It’s worth stressing how volatile Bitcoin can be. Valuations in early 2020 pulled back substantially from the highs seen at the end of 2020, and this correction has been accompanied by some wild swings in price. Some traders might approach such volatility with caution, while others might interpret it as a trading opportunity, and others might see potential in shorting the price and looking for further falls. The choice, of course, is yours.
Learn to Become a Bitcoin Cash CFD Trader
Bitcoin Cash is what is known as an altcoin — a virtual currency that works fundamentally in the same manner as Bitcoin. In fact, Bitcoin Cash is simply an offshoot of Bitcoin, resulting from a hard fork in the blockchain. A hard fork is effectively a divergence in the transaction record into two separate and incompatible chains, each governed by a different set of rules. The hard fork in Bitcoin that created Bitcoin Cash arose from a bottleneck within the Bitcoin network, caused by the size of the blocks.
This constraint on capacity created a problem of higher fees and delays in transactions, and led to a section of the Bitcoin community seeking to increase the size of each block in order to ameliorate this scalability problem. Another section of the community wanted to keep things as they were, and in August 2020, the blockchain split. Bitcoin Cash adopted larger blocks in a new branch of the blockchain, and mainline Bitcoin continued with the original chain.
The clash is as much an ideological one as it is a technical one, with issues of decentralisation and security at the core of the argument. To keep tabs on how the price of Bitcoin Cash has changed over time, people trading with Admiral Markets simply need to follow these easy steps:
- Login to their MT4 or MT5 trading platform with their Admiral Markets trading account
- Right-click on the ‘Symbols’ window
- Select ‘Show All’
- Search for BCH/USD in the list
- Right-click on this and select ‘Chart Window’
Source: MetaTrader 4 – BCH/USD Daily Chart – Data Range: 26 Dec, 2020 – 7 Feb, 2020
Now that you understand the process of purchasing crypto CFDs, you might want to know the history of some leading coins. Litecoin began in 2020, when it was created by Charles Lee, whilst he was still an a employee at Google. Litecoin was, for a while, the second-largest cryptocurrency, gaining a reputation as being the silver to Bitcoin’s gold. It has in recent years been eclipsed by other newer cryptocurrencies though. Litecoin’s core aim was to provide an alternative to fiat currency for payment.
Though Litecoin is technically very similar to Bitcoin, it does offer faster transaction times and lower transaction fees, meaning that it is more suitable for smaller transactions. At the time of writing, Litecoin is the sixth-largest cryptocurrency in terms of market capitalisation. Aliant Payment Systems, a US-based payment services merchant, announced in February 2020 that they were adding Litecoin to their range of services, alongside Ethereum and Bitcoin.
What is Ethereum? Ethereum (also interchangeably referred to as Ethereum and ETH) is a decentralised, blockchain-based computing platform. Which is to say, where Bitcoin is a currency pure and simple, Ethereum is a whole lot more. It takes the technology at the heart of Bitcoin – the tamper-proof public ledger known as a blockchain, and run by a network of nodes – and uses it as the infrastructure for a system that proposes to turn the way the cloud works on its head.
Rather than apps, payment services, and cloud storage being operated by single parties, Ethereum proposes a network wherein no single entity governs these processes. To use this network, you need Ether. Ether is a cryptocurrency that allows you to pay for transactions and services within the Ethereum network. You can therefore think of Ether as being the fuel that powers the platform.
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Ethereum vs Bitcoin
Ethereum offers substantially faster transaction times compared to Bitcoin, owing to its shorter block time – which is the mean amount of time for the network to generate another block within the blockchain. This also means lower transaction fees compared with Bitcoin.
Perhaps most interesting of all is that Ethereum offers smart contract functionality – a new technology that has been opened up by blockchains. Basically, a smart contract enforces the terms of a relationship with cryptographic code. Ethereum has quickly grown in popularity, and is currently the second-largest cryptocurrency by market capitalisation ($17 billion at the time of writing).
Ripple and XRP
What is Ripple? Ripple (sometimes also called Ripples or XRP) is a payment protocol that enables peer-to-peer money transfer. Like Bitcoin, it uses a public ledger for security that is constantly validated by a network of independent servers. Ripple is also the name of the company that runs the protocol, headquartered in San Francisco. Ripple is also used interchangeably for the native digital currency of the protocol.
The Ripple system was conceived as having a wider scope than Bitcoin, purporting to allow fast, secure financial transactions of pretty much any type. It doesn’t just support XRP, but all currencies in fact. Ripples are the tokens that support the payment system, and they are the third-largest cryptocurrency by market capitalisation (at the time of writing).
Users need to have a small reserve amount of XRP on their account to act as an obstacle for hackers attempting to flood the network with fake accounts. For similar reasons, each transaction incurs a tiny XRP charge to preclude a flood of fake transactions. Ripple does not use mining like Bitcoin to create new tokens (see the mining section below for more information).
Instead, the founders created 100 billion XRP at the beginning and stated that no more would be created, based on the rules of the protocol. Somewhat controversially, a large chunk of that XRP remains in the hands of the founders. There are questions of how decentralised the protocol actually is, but at the same time, this cryptocurrency and payment system has garnered attention from mainstream financial institutions in a way that has eluded other rival virtual currencies.
How Does Mining Fit into All of This?
If you have a passing familiarity with either Bitcoin or cryptocurrencies in general, you have likely come across the concept of ‘mining a digital currency’. In this context, what is mining exactly? To answer that question, we need to examine the creation of cryptocurrency. The terminology originated from Bitcoin and stems from the fixed number of Bitcoins that will ultimately exist (21 million) according to the Bitcoin protocol. Only a certain number of these have been ‘unearthed’ so to speak. Mining involves unearthing new cryptocurrencies, and this actually happens as a reward.
This ‘reward’ is an economic incentive given to a miner for the work completed in terms of creating new blocks of validated transactions, and therefore contributing to the upkeep of the network. It was also designed as an initial mechanism for distributing coins in the intentional absence of a central authority.
Cryptocurrencies rely on nodes. These are computers or servers that work together to exchange transactional information around the network. A mining node is effectively trying to win a race to solve a computational puzzle — an exhaustive search of possible inputs that when combined with data in the current block and passed through a cryptographic hash function, will give an acceptable solution.
The first node to do this ‘wins’ the race and adds a new block to the blockchain. This provides a new hash for the next block that defines the upcoming puzzle to be solved. The reward is a certain number of the cryptocurrency in question. For Bitcoin, this is currently 12.5 Bitcoin (at the time of writing). Solving the puzzle is made intentionally difficult to prevent someone going back to alter information in older blocks.
Modifying a past block in this way would also require you to redo the puzzle solving for all the newer blocks chained after it. The difficulty involved makes it extremely unlikely that such an attacker could keep up with the addition of new blocks by honest nodes. Boiling it all down to the nuts and bolts, the process was designed to issue a steady stream of Bitcoin, while also maintaining the credibility and security of the transactional history – without relying on oversight from some central authority.
The original Bitcoin proposal by Satoshi Nakamoto actually introduced the mining term, stating that: ”the steady addition of a constant amount of new coins is analogous to gold miners expending resources to add gold to circulation”.
Trading CFDs on Cryptocurrencies
Is the mining of Bitcoin profitable? Or should you instead mine Ripple or another cryptocurrency?
The short answer is: it’s not profitable for most people anymore. The Bitcoin protocol aims to yield a steady flow of tokens (one every ten minutes). It follows that the more people mining, the greater the difficulty of success. So back in the early days of Bitcoin, it would have been possible for an individual to profitably mine Bitcoin.
The competition now is so fierce though that extremely powerful, dedicated computer hardware is a necessity, running 24 hours a day. As you can imagine, this comes with an attendant cost in electricity that is substantial. Rather than mining as individuals, people pool their resources to set up ‘mining farms’. These are data centres running thousand of machines, located in areas with low electricity costs.
As an individual, it is actually much more convenient to trade the valuation of a cryptocurrency by using CFDs. Trading CFDs offers a quick, simple, and versatile way to speculate on the price of a variety of major cryptocurrencies. Now that you’re up to speed with the big names, let’s move on to actually getting started with trading cryptocurrencies.
How to Connect to a Cryptocurrency CFD Trading Account in MT4 or MT5
- Open a Live Trading Account
- Download MT4 or MT5 to use as your cryptocurrency trading platform
- Open the platform and click on the ‘File’ tab at the top left of the screen
- Select ‘Login to Trade Account’ and enter your trading account details
- Open the cryptocurrency CFD chart of your choice
- Click ‘New Order’ when you want to buy or sell
You can read more about opening an account and logging in to MetaTrader with article on How to Open a MetaTrader 4 Account.
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Where Do I Find Cryptocurrency CFDs in the MetaTrader 4 Trading Platform?
If you can’t see the cryptocurrencies you want immediately in MetaTrader, just go to the MarketWatch window on the left-hand side of the platform. In that window, you should see a list of market symbols. This may not be an exhaustive list of all the markets that are available for you to trade with Admiral Markets, however. To see this list, just right-click in the ‘MarketWatch’ window and select ‘Show All’. You should now see cryptocurrency CFDs in the list of prices, as shown in the image below:
Source: MetaTrader 4 – BTC/USD hourly chart – Market Watch – Date Accessed: 8 February 2020
To launch a cryptocurrency chart, just click on the symbol and drag into the chart window on the right. Alternatively, right-click on the cryptocurrency of your choice and select ‘Chart Window’.
How to Open and Close a Position in the Ethereum Cryptocurrency CFDs
Placing an order on a cryptocurrency is very easy with MetaTrader 4. Let’s run through an example of how to open a cryptocurrency position using Ethereum. For this example, we used an enhanced version of MT4 by downloading and installing the MetaTrader 4 Supreme Edition (MT4SE) plugin. The MT4SE plugin is free to download, and gives your platform a big boost in terms of the available number of indicators and expert advisors.
Cryptocurrency Invest Example: Opening an ETH/USD Position
For this we used the Mini Terminal EA. Once you have installed MT4SE, you should see this listed as ‘Admiral – Mini Terminal’ in the list of expert advisors within your ‘Navigator’, as shown in the image below:
Source: MetaTrader 4 platform with the Supreme Edition plugin installed – A Mini-Terminal order ticket for ETH/USD – Date Accessed: 8 February 2020
First we opened a chart for the ETH/USD, and then double clicked on Admiral – Mini Terminal to launch the EA. As you can see, this gives you a small order ticket. We then chose ‘1 lot’ as the order size, and then by pressing ‘CTRL’ and then clicking in the S/L field (that is, the stop-loss field), we then opened up the S/L calculation dialogue box that you can see below the mini terminal in the image above.
This function allows you to specify the amount of risk you want to take on board with this this crypto position. You can define this as either as a flat amount in your account’s base currency, or as a percentage of your account’s free equity. The mini-terminal will then calculate the stop level for you that best matches your specified amount of risk.
Then, it’s as simple as clicking ‘Sell or Buy’ to take a position in your chosen cryptocurrency CFD. Optionally, you can also set a take profit level and/or a trailing stop. So, once you have taken a position in the cryptocurrency of your choice, how do you then go about closing the position? There’s more than one way to go about this. Let’s first look at closing just part of the position:
Example: Partial Closing of a ETH/USD Position
Sometimes, it can be beneficial to reduce your exposure by closing off a portion of your open position. You might, for example, want to realise some profit on a winning position, or perhaps lighten your size on a losing trade. Either way, by partially closing, you retain some exposure to future price moves. When you have opened a position you will see lines marked on the relevant cryptocurrency chart that represent your trade, and any associated stop-loss or take profit orders.
Source: MetaTrader 4 – Price data from Admiral Markets – ETH/USD hourly chart – Date Accessed: 9 February 2020.
In this example, a ‘Buy’ trade was placed, and our position is shown with a green box. Had we chosen to sell, this would be a red box instead. Clicking in this box opens a web dialogue window which offers you a variety of options, such as to amend any stop-loss or take profit orders you may have. We clicked on ‘Partial Close’, and you can see in the image above the dialogue that this option presents. We entered 0.5 into the Volume field, which would allow you to close off half of the 1 lot open position.
Example: Total Closure of ETH/USD Position
Closing your whole position is no more complicated than making a partial closure. All you have to do is make sure that your trading size is the same as the open position, and then deal in the opposite direction. We originally bought 1 lot of the ETH/USD to open the position. To close this, we would need to sell 1 lot of the ETH/USD. Just as in the example above, traders could click on the green box that represents their open position and this time, just click on the red ‘Close Order’ button, without first clicking ‘Partial Close’.
Source: MetaTrader 4 – Price data from Admiral Markets – ETH/USD hourly chart – Date Accessed: 9 February 2020.
An Easy Way to Get Started
So, now you’ve read about the different cryptocurrencies available to traders and how to trade them with CFDs, how do you take your first steps into the world of cryptocurrency trading? One smart way is to do so via a risk-free demo trading account. This allows you to explore the functionality of your chosen trading platform, and place orders on live cryptocurrency CFD prices, but without risking any money, until you feel confident enough to open a real position with a live trading account.
Trade Cryptocurrency CFDs With Admiral Markets
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Admiral Markets enables professional traders to trade 24 hours a day, 7 days a week with the EUR and crypto cross, as well as the ability to go long or short on any cryptocurrency CFDs, with no actual crypto assets required for trading. Trade CFDs on BTCEUR, ETHEUR, XRPEUR, BTCUSD, and many more! Click the banner below to open an account and start trading!
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.
Binary Options Guide: The Truth About Binary Options
Trading binary options can seem deceptively simple, but leaning too far into that notion can blind people to some of the risks that often accompany this type of trading.
Before I go any further, I want to make it clear I’m not a binary options trader. I trade penny stocks and teach day trading. I’d love to see you join the Trading Challenge — it’s the result of over two decades of trading and a decade of teaching. It’s awesome.
If you’re interested in taking the binary options path, it’s critically important to understand exactly what you’re getting into and set appropriate expectations. And you should get a mentor who trades binary options. Seriously. Preparation is key.
Again, I don’t trade binaries. For the most part I think they’re scams. Can you trade them successfully? There are successful traders in every niche. But most traders lose. That’s the reality of the industry.
It doesn’t matter if you’re trading forex, penny stocks, options, big caps, or … binary options. Most traders lose and most trading teachers don’t want you to know about it. So I’m going to tell you about binary options in this post. But I don’t trade them and I don’t recommend it.
Will trading binary options enable you to buy a villa in the South of France next year? Probably not. Will they allow you to quit your full-time job and finally start on that novel you’ve always wanted to write? Don’t count on it.
Here, we’ll take a look at what binary options trading is all about and you can decide whether it’s right for you. As you read, keep in mind that binary options are getting outlawed in more and more countries. Companies are getting shut down. Or they’re based overseas in places where you can’t sue them. More on that later.
Table of Contents
What Are Binary Options?
Before we dive into specific binary options trading strategies, let’s review exactly what binary options are. According to Investopedia’s definition:
A binary option, or asset-or-nothing option, is a type of option in which the payoff is structured to be either a fixed amount of compensation if the option expires in the money, or nothing at all if the option expires out of the money. The success of a binary option is thus based on a yes or no proposition, hence “binary”. A binary option automatically exercises, meaning the option holder does not have the choice to buy or sell the underlying asset.
At the core, binary options are based on a yes or no proposition. You must decide whether you believe an underlying asset will be above or below a specific price at a specific time.
Binary trades are ruled by expiry times. These time constraints indicate how long you have to make your predictions regarding whether you believe an underlying asset will be above or below a specific price at a specific time. Once the expiration limit occurs, your predictions determine whether you gained or lost money.
Expiration times vary from binary option to binary option. Some of these minimums are known as short expires, which means the expiration date is actually within mere minutes of the buy-in.
There are medium and long expiries, as well. For medium expiries, the deadline could be anywhere from two to five hours. Long expiries typically last between two and 24 hours. Many experts believe that longer expiration times can help make predictions easier.
What Are the Underlying Assets of Binary Options?
In order to participate in binary options trading, you must first have ownership of an asset that can be optioned for a fixed amount. The types of assets common in binary options include stocks, indices, commodities, and currencies. Many binary traders chooses to trade with stocks, as this option can allow them to get high returns within a short span of time.
Along with indices and commodities, currencies are another popular binary option vehicle. Since currencies are liquid and often subject to dynamic price fluctuation, many traders choose to analyze their binary options across the complex — and often shifting — global currency market.
A quick aside since we’re talking about forex. Be aware that the forex market is among the most difficult to trade. Why?
Because it’s the biggest and most liquid market in the world. You’re up against the smartest, richest, and often most experienced traders in the world. Personally, I don’t want to compete against that. Plus, the forex markets move so fast on news you don’t have access to, that there’s no edge whatsoever.
And now, a new asset has emerged: cryptocurrency. I don’t trade crypto, either. I’ve traded the random crypto-based stock. But this is a whole niche unto itself and I’m happy with penny stocks. Crypto has its own version of binary options — which is why I’ve included it here.
Led by Bitcoin, this new, digital currency class is intriguing investors around the world who see the digitization of finances as the way of the future.
According to Options Advice, there are two prominent ways you can capitalize on Bitcoin binary options. The first strategy is by trading on what you think the imminent fluctuation of Bitcoin might be, and the second is trading regular options with Bitcoins as your currency.
If you’re interested in taking the cryptocurrency binary options route, I strongly suggest familiarizing yourself as much as possible with the trends dictating the ebbs and flows of the altcoin market.
An entire niche financial industry has been built up around educating consumers and future investors of digital coins and tokens. From resources like Cryptoslate to ICO listing sites like Coinschedule, there are many resources available to help you make the most strategic crypto trading moves possible.
There are also a lot of scams. And strange happenings. Like when a crypto exchange CEO died with the ONLY key to $137 million in crypto. Ouch. More than 100,000 cryptocurrency holders learned a very hard lesson. Back to binary options …
What is a Call and What is a Put?
Two of the most common terms you’ll hear throughout the binary options world are call and put. These two labels represent the market positions of binary options.
You typically choose to call if it looks like the value will rise within the confines of the expiry time.
Options also have a strike price, which is the price at which the security would be bought or sold.
If you choose to call, you’re signifying your confidence that a stock will rise within the time limitations. If the stock valuation moves upward at all, you’ll receive both your initial investment as well as the return.
On the opposite end of the spectrum, a put signifies your confidence that the valuation of a stock will drop within a certain time limitation. So if you predict that a stock valuation will decline before the expiration date, and the stock does dwindle, you will have succeeded at that trade and will receive your initial investment — as well as the trade — back.
What Are Other Types of Binary Options?
Beyond call and put options, there are other distinguishing factors that separate binary options from one another.
This guide from Binary Tribune delves more specifically into binary options types based on the number of interactions a trader must initiate with the trade. The levels include one-touch, no-touch, double one-touch, double no-touch, and paired options.
Let’s take a look one-touch and no-touch options …
Essentially, a one-touch binary option indicates that in order for you to receive a payout, a trigger (or predefined barrier) must be reached. Traders often choose one-touch if they feel confident that a stock will move in a certain direction at a minimum amount.
The option only has to meet the predefined trigger level once (hence the “one-touch” term). However, as indicated by Binary Tribune, this strategy is often accompanied by some risk.
Beyond simply calling or putting, you also must feel confident that a certain valuation threshold will be crossed. However, with greater risk often comes greater reward.
In contrast, a no-touch binary option essentially depends on a trigger level not being reached.
Rather than hedging your bets that the valuation of a stock will rise above or dip below a specified amount, you’re betting that the trade will not dip above or below an amount.
Because you’re making the trade with the intention that a threshold will not be crossed in either direction, it’s referred to as “no-touch.” Like their one-touch counterparts, these trades come with greater reward — and risk — potential.
I liken one-touch and no-touch calls and puts to something like an electronic stop-loss. The problem is, you don’t have control. You’d better be damned sure you’re right. Which is impossible.
What Are the Pros and Cons of Binary Options?
Now that you understand binary options basics and the different factors between them, you might be wondering whether this type of trading aligns with your goals. Let’s weigh the pros and cons.
We’ll start with the benefits …
Low Barrier to Entry. You don’t need a masters in economics to engage in this kind of trading. For this reason, many first-timers enter the trading arena through buying and selling binary options. Comparatively, binary trading is relatively simple. When compared directly to other types of trading, including quantitative or arbitrage, trading binary options is straightforward.
Fast Returns. Many traders are eager to see fast results and liquidate within a specific time frame. Those who play the long game (investors) are typically most concerned with growing their money steadily over long periods of time. Many opt to invest in index funds, IRAs, or bonds. Trading binary options is fast paced.
Thing is … you can get all the speed you need trading penny stocks. So, while binary options might be a fast game, the reward might not be worth the risk.
High Rewards. Binary options trading is touted by those who promote it as high reward. It’s possible to receive up to a 70% return on their investments if your binary trades reach your expiration dates in the money. This high average return is what makes this type of trading vehicle attractive to many novice and expert traders.
As explained by Investopedia, the risk on binary options is capped off, so while the rewards could yield high returns, you can’t lose more than the cost of a trade.
Low Cost. If you’re just getting started with trading, there’s a good chance you don’t have excess capital lying around to snatch up shares of the fastest-rising stocks on the market. Binary trades offer an alternative to other types of investments that require high-capital buy-ins.
In theory, you can experiment with a binary trade for any amount you’d like, whether it’s $5 or $50. Starting small and working your way up to bigger trade amounts incrementally is a great way to learn the lay of the land.
As you familiarize yourself with expirations, strike prices and — if you’re interested in one- and no-touch options — triggers, it’s best to gamble with an expendable amount that won’t derail your entire financial status. Notice I used the word gamble — just sayin’.
Accessibility. Binary trading platforms make it easy to trade on any day and at any time. When it comes to binary options, traders aren’t necessarily beholden to standard market times and broker availability.
Now, let’s explore some of the disadvantages of binary trading …
Scams. Conduct any Google search on binary trades and one of the first things you’ll likely notice are the abundance of hits warning against binary scams and shady binary brokers.
Remember when I said I’d get back to the part about shady companies? Here goes …
… and I say this to protect and warn you.
Like I said, these companies are often based overseas. Places like Cyprus. (I have nothing against Cyprus. It’s a beautiful country with amazing people.) Anyway, these companies are based in places where you can’t sue them if they screw you.
Then you sign away pretty much your entire life in the forms they make you fill out. Your odds of winning are so low the brokers who do it are pretty much laughing at you. They’re laughing that so many people fall for this crap. It’s like going to the casino.
So, if you come across a binary broker that sounds too good to be true, it’s because he or she most likely is. And if you come across a binary broker who doesn’t let you liquidate your investment, run in the other direction.
Short term. Binary trades have expiration dates that are often fairly short windows of time. Given this, it’s impossible to use binary options as mechanisms for long-term investments. Which, of course, I don’t mind because I day-trade and teach day-trading. But if you’re looking for buy-and-hold investing, binary options aren’t the right solution.
Can You Really Make Money with Binary Options?
Short answer: It’s possible, but you MUST know what you’re doing. Like I keep saying. Most traders lose. Doesn’t matter the niche. I would never trade binary options. Ever. Your choice, I’m just tryin’ to keep it real.
If you’re serious about binary trading, start small. By making small trades and working your way up, you give yourself breathing room to assess market trends and develop the necessary skills.
As is the case with many types of trading, history is sometimes the best predictor of the future. Many successful binary options traders experience trading wins and financial growth because they’ve spent time studying and familiarizing themselves with market movements.
Wait. Does this sound familiar? Yep. You guessed it: you can’t cheat your way to success. Doesn’t matter the niche. I don’t trade binary options. I don’t recommend you trade them. But if you decide it’s for you then prepare yourself. Study your ass off.
Learning common candlestick patterns can make it easy to spot recurring trading patterns. If you want to understand candlestick patterns — and you do if you are serious about trading — I recommend you get a copy of the classic “Japanese Candlestick Charting Techniques” by Steve Nison. Doesn’t matter which niche you trade, this book should be on your bookshelf.
Of course, trading patterns are never 100 percent accurate, so don’t fool yourself into thinking of them as absolute stock predictions. However, the more you can learn about patterns and begin to recognize them yourself, the more likely you’ll be comfortable making your own options decisions.
Is it Safe and/or Legal to Trade Binary Options?
Naturally, binary options contain risk. And by now you know my take. I pretty much think they’re scams. But there are differing opinions and some even consider them safe trading routes. I’m not gonna tell you not to trade them. I recommend you don’t. I’ll be interested to hear back from you. When you’re ready to trade the way I teach … apply for the Trading Challenge.
While it’s legal to trade binary options within the United States, they’re only available to trade on Commodity Futures Trading Commission (CFTC) regulated exchanges within the country.
Binary options traded outside the U.S. are structured differently to those traded here. You can learn more in this article on Investopedia: What You Need To Know About Binary Options Outside the U.S.
The Bottom Line
The good: Some traders like binary options because they are traded at fixed costs. You know where you stand.
The bad: Binary investments are too much like flipping a coin, there are too many scams, and your odds of winning are so low you might as well go to the casino.
The bottom line: Educate yourself like crazy. Avoid sketchy brokers. Start small and work your way up. Remain vigilant. Stick with these rules, and someday you might reach your trading goals. Will you do it with binary options? I doubt it. But you might prove me wrong.
Want to Try Binary Options Trading?
At this point, I hope I’ve shed enough light on binary options trading that you don’t do it. But … you might be thinking about giving binary options trading a shot. If you do, study your butt off. Get a mentor. Don’t screw around. The best of the best in every niche work with a mentor.
Trading — any type of trading — can quickly become complicated. Like any other sector of trading, it’s important to seek out an education before you attempt to invest in this way. I can’t help you trade binary options. But I can help you learn to trade penny stocks …
Is the Trading Challenge for You?
As a teacher I want to help my students forge long-term, sustainable careers as traders. The Trading Challenge can help you reach your goals through risk-averse, conservative trading.
Plus, my best students — those who have become millionaires themselves — join me in coaching you.
What do you get?
- Wednesday morning live trading webinar. I show you live trades so you can see how it’s done. And it’s not only wins. These are true live trades. Sometimes I lose. But you’ll see how fast I cut losses and why I get out so fast when things turn against me.
- Wednesday evening live lesson and Q&A. No matter where I am in the world. This is killer stuff.
- Thursday live trading & review with Mark Croock. @thehonestcroock is at it every Thursday. You don’t want to miss this. Mark is one of my best students/teachers. He’s constantly in the challenge chat room alerting students.
- Annual Penny Stocking Silver Membership. You need this. Thousands of hours of video lessons and archived webinars. Immerse yourself. This is how to get good fast.
- PLUS: Two monthly bonus webinars by my top student Tim Grittani. It won’t take long to understand how Tim went from $1,500 to where he is now when you see how meticulous he is about his trades. Learn from a master.
WAIT! There’s more …
I always wanted to write that. Anyway, there is more, but you have to apply for the Trading Challenge to get it. Simple.
Will you be my next success story?
As you’ve now learned, if you study hard, start small, keep your scam radar on high alert, and stay educated, then becoming a successful trader is possible. But it’s not easy. So don’t even think about doing it if you’re not willing to work hard.
As for binary options …
Look, whatever you decide, it’s about how much time and effort you put into learning. I don’t think binary options are a good way to go. Plain and simple. But there are success stories.
If you’d rather learn what I teach, then apply for the Trading Challenge. But no lazy losers allowed. Seriously. Only join the Trading Challenge if you’re willing to work hard.
Are you a trader? Do you trade binary options? Comment below and let your fellow traders know how it works for you. Even if you are brand new, I love to hear from readers. Comment below!
How to trade cryptocurrencies?
So, you have finally decided to start your career as a trader and are already thinking about how you will spend your millions. There is no doubt that cryptocurrencies are an exciting market for investors, but unfortunately, success is not as easy as it seems.
For those of you who are interested in learning about cryptocurrency trading, we are here to help you get started. This guide for beginners will show you everything you need to know about trading cryptocurrencies.
In all seriousness, trading cryptocurrencies can be a risky business. Yes, it’s true: some people have earned a lot of money. However, some people have also lost large amounts.
At the end of the reading of this guide for beginners you will have all the necessary information to trade on your own.
What Is Cryptocurrency Trading?
Bitcoin became the first cryptocurrency launched in 2009. However, with only one currency available, no other cryptocurrency could be traded.
It was not until a few years later when more and more cryptocurrencies were created that people began to trade them. The idea is really simple. You exchange one cryptocurrency for another, in the hope that the currency you buy will increase in value.
This concept is the same as in the real world stock market.
Exchange platforms will charge you a fee for doing this. It normally costs around 0.1% for each transaction. Cryptocurrency trading is very popular today, with billions of dollars in currencies that are bought and sold every day.
When people trade they need to use a cryptocurrency exchange platform. This is how that buyers and sellers can meet. For example, if you have Bitcoin and you want to sell it for Ethereum, an exchange platform will help you find an Ethereum vendor to trade with.
However, experienced traders use many different tools to help them choose the right currencies at the right time. This may include software that helps investors analyze previous price trends, etc.
However, everyone has to start with something! As long as you’re not trading with more than you can afford to lose, there’s nothing wrong with trying.
Now, we will explain what is short term trading, along with its advantages and disadvantages.
Short Term trading
Short term trading is when you buy a cryptocurrency, but only plan to hold it for a short period of time. This can be anything from minutes, hours, days, weeks or even a few months.
You can buy a certain cryptocurrency because you believe its short term price will increase. In that case, you would sell it to get a quick profit if you thought the price would go down again.
Let’s look at some of the advantages of short term trading.
The main advantage of short term cryptocurrency trading is that it offers a very good opportunity to obtain high percentage gains. Unlike fiat currency markets where prices generally do not move more than 1% each day, the prices of cryptocurrencies can almost double overnight!
The large trading volumes are important since it means that you will always find a buyer or seller. It simply means that a large amount of money flows in and out of that cryptocurrency.
Now that cryptocurrencies have become so popular, there are more than 1,500 different projects to trade. This means one thing: there are more opportunities to earn big profits. Some currencies have a large trading volume.
It is very important to maintain control of your emotions, something you will learn when doing short term trading is that you do not always win. It can be very stressful when prices move differently than you expected.
As the cryptocurrency markets are so volatile, prices can change very quickly. This means that if you want to trade short term cryptocurrencies, you will have to spend a lot of time analyzing the markets.
Learning to accept losses is a big part of the cryptocurrency trading. Nobody gets a profit 100% of the time.
Short term cryptocurrency traders seek small gains in small price movements, so they must have a fairly good analytical capacity. This means being able to read financial charts and graphs. Which, if you are a beginner, can take some time to learn.
Another disadvantage of short term trading is that in order to see good returns you must make a fairly large investment. This is something that most beginners may not feel comfortable with.
Many brokers offer leverage to their clients, which allows them to trade much larger amounts than they have. Leverage allows you to earn more than in normal operations, but also increases potential losses.
Long Term Trading
Have you ever heard the word HODL? Well, if not, we will assume that you are completely new to the world of cryptocurrencies. No, it is not a word that is in the dictionary, but you will surely find it in forums that speak of cryptos.
HODL is a slang word that means keeping a cryptocurrency for a long term instead of selling it. Its real meaning is Hold On for Dear Life. In general, long term crypto trading means holding a coin for a year or more.
The idea is that, although there will always be volatility, the price would increase in large amounts in the long term.
A great example of this would be the lucky investors who bought Bitcoin in 2020 when it only cost $0.35. If they maintained it until the end of 2020, they could have sold their coins for almost $20,000 each! That’s more than 57,000X the initial investment!
One of the main advantages of the long term cryptocurrency trade is that it is easy and requires a little time. You do not need to understand complex business charts because you are simply looking to keep your currency in the long term.
Unlike short term trading, where you need to spend time constantly controlling the prices of cryptocurrencies, you can do it in your free time. It’s quite simple, once you’ve bought your currency, you do not need to do anything but wait.
Another good advantage of the long term cryptocurrency trade is that you do not need a lot of money to start. You can buy small amounts as long as you have money to spare and let it grow for a long period of time.
This also allows you to avoid the tensions of market volatility, since you do not need to worry about short term movements in the price.
One disadvantage of long term cryptocurrency trading is that you may lose a good chance of quick profits in the short term.
Sometimes the coins increase in value very fast, only to fall again. Short term traders will notice that and can make a profit quickly.
Another disadvantage is that, because you do not spend your time analyzing the market (as much as a short term trader), you can miss some bad news. If bad news is published that could affect the price of your cryptocurrency (such as regulations), the price could fall and never rise again.
Therefore, you should make sure you are aware of the cryptocurrency news to prevent this from happening.
Now that you know some of the advantages and disadvantages of short and long term cryptocurrency trading, let’s look at some of the things you should be careful about before you get started.
What Should You Pay Attention to?
The most important thing to remember before starting to trade is that there is a possibility that you will lose all your investment.
The cryptocurrency market can skyrocket or fall even dozens of percent in a matter of minutes or hours. It is completely different from stock markets and the traditional currencies and it is important to realize that investing in cryptocurrencies puts your capital at high risk.
The cryptocurrency markets are very volatile, and although some people have made a lot of money, many people have also lost a lot of money. You should never trade with any amount you can not afford to lose.
The way you deal with your losses will determine your success as a trader. Here are some important tips: never try to recover your losses by investing larger amounts. This is investing with emotions and often causes people to lose a lot of money.
A popular term that is used both in the real world and in crypto trading is FUD. This means Fear Uncertainty and Disinformation.
FUD is when people or organizations try to make people not invest in an asset by telling them they will lose all their money (or something similar). They usually say things like “It’s a scam” or “It’s going to explode like a bubble”.
You should always do your own research before reaching any conclusion. Use Google to find out if the information you hear is correct.
One last thing to consider before starting trading is that you should never be influenced by the opinions of other people. Remember, you are not the only person who wants to benefit from trading cryptocurrencies.
Be careful with the people you watch and listen to. They are often paid by cryptocurrency projects to promote their currency. This could increase the price in the short term, but could end up decreasing in the long term. Therefore, we recommend you always do your own research first.
The Patterns Sometimes Lie
Many books and trading guides cover certain techniques of reading charts and patterns used by professionals to predict the market. Although the market sometimes follows patterns, this is never a guaranteed result, and unless you limit your exposure, you could end up losing a lot of money for a pattern that does not exist.
Limit Your Exposure
Limiting your exposure is reduced to two specific concepts:
- Never invest more money than you can afford to lose. Consider all the money you invest into a transaction as lost. If you do not feel comfortable with this idea, then you are trading with more money than you should. Finding the point where you are comfortable with this concept is key to helping you trade without stress.
- Consider setting take profit and stop loss orders. These limits are offered by many professional trading platforms and will help you avoid losing more money than you feel comfortable losing if your trade goes awry, as well as helping you avoid losing a cash withdrawal opportunity.
Know When to Exit
Actually trading is based on knowing when to close a trade. This is key. Getting into a trade is easy, knowing when to exit is difficult, and that is where you should focus most of your learning. This again involves two different aspects:
- Close your trade with a winning trend. Lock in your profits. Cryptocurrencies move faster down than they do up, and you would not want to delay paying for your trade. Nor will you want to arrive too early and lose additional profits.
- Cut your losses. In the same way, you want to be prepared to reduce your losses if your trade goes wrong and at the same time you do not leave too early in case the cryptocurrency recovers.
Cryptocurrency CFD Trading vs. Exchange Trading
Most people trade with cryptocurrencies through cryptocurrency exchange platforms; however, there is another option with which one can speculate on price movements. This can be done by using contracts for difference, or CFD’s.
CFD’s are financial derivatives that are carried out as agreements (contracts) between a trader and a broker. When you have a contract, you do not actually own the underlying asset; instead, you have the right to receive the difference between the current value of an asset and its value in the future. If your prediction about the value of the underlying asset is incorrect and the difference is negative, you will have to cover that loss. CFD’s can be based on stocks, indexes, currencies, and also cryptocurrencies. With CFD’s, traders can speculate on the price rise and fall of an underlying asset.
Leverage and Stop Loss / Take Profit
Leverage is a tool that is used to negotiate with more capital than a trader actually has. In practice, this means that when you open a cryptocurrency position with an investment of $500, and a leverage of 5:1 is used, you do not trade with only $500, but with 5 times the amount of capital: $2,500. As a result, you can earn more money even with small price movements. That said, the risk of losing your money is also much greater, and each price movement in the opposite direction can significantly damage your funds. Therefore, one has to think carefully if trading with leverage is appropriate for their trading style. Almost all CFD brokers offer leverage. Most cryptocurrency exchanges do not support leveraged positions.
CFD instruments can also be traded using loss stop and take profit. These features are useful when considering how extremely volatile the cryptocurrency market can be. When creating a stop loss order, you determine at what price level your position should close, so that no more losses can occur. On the other hand, take profit allows you to lock in profits before the price of the underlying asset decreases. Both stop loss and take profit are very important characteristics that are crucial when trading cryptocurrencies. One must set them at a price level that will not be activated all the time, in which their capital can be destroyed (take into account the volatility of the cryptocurrency market).
As you can see, trading CFD’s has many advantages over traditional operations in the stock market.
Therefore, we recommend that you start your career as a trader with CFD trading.
Start Trading Cryptocurrencies
Now that you know how trading works in the market and you have decided what kind of trader you want to be, you know what to look for and you have studied the theory, you are ready to start trading cryptocurrencies. Let’s take a look at everything you’ll need to start.
1. Find a Broker with Which You Can Trade Cryptocurrencies
Searching for the best cryptocurrency broker is not an easy task. There are many companies and their offers vary. The main aspects that you should keep in mind when choosing a broker are the following:
Trust and Regulation
If you are from a European country, the broker should be licensed by a Regulator Body that oversees all broker activities. E.g. CySEC (Cyprus Securities and Exchange Commission) and its ICF (Investor Compensation Fund) provides full deposit insurance of up to $20,000. Investors in Australia should look for agents with an ASIC license.
Libertex is a trusted and regulated broker: it has all the necessary licenses to work in all the countries in which it has presence.
Costs and Fees
The less fees you pay, the more you can earn. Then, it is logical to find a broker with the lowest fees possible. Most brokers charge an amount equal to a margin for opening a position. A margin is the difference between what you pay for a cryptocurrency token and what you get when you decide to sell it to the broker. Apart from that, many brokers charge an exchange fee when you roll over your position overnight. These brokers are usually the best for daily cryptocurrency trading, and brokers without swaps are the best for long term holding.
Following this link you can become familiar with the trading terms and conditions with Libertex.
Cryptocurrency to Trade
If a broker does not offer the option to trade the cryptocurrencies you want, it does not make sense to create an account with it. Therefore, do not forget to check if the company of your choice offers all the cryptocurrencies you plan to trade.
Leverage can help you benefit from the small price movements of cryptocurrencies. It is a very powerful tool when used by professionals, however, beginners should only use it with great caution.
Libertex has all the above advantages
We offer you to open a free demo account on Libertex right now so you can practice trading cryptocurrencies without any risk.
2. Get to Know the Platform
Cryptocurrency brokers usually offer their own trading platform and each one’s system will be slightly different from each other. You will have to spend time learning how the platform works, where each feature is located and how to use it.
When you first access a broker’s trading platform, you may feel overwhelmed. This is normal. Spend some time and continue researching. Sure you will feel comfortable with this in a short time.
Our free lessons will help you feel comfortable with the Libertex interface.
3. Select Your Cryptocurrency
If you have not chosen the cryptocurrency you want to trade, now is the time. Selecting a digital currency with great potential is a very important step. You do not want to choose a cryptocurrency in which you do not have faith. When you do your research on cryptocurrencies, there are several things you should look for:
- Infrastructure (application development, cloud storage, virtual private networks, financing, etc.)
- Technology (fast transaction process, powerful and easy to use user interface, etc.)
- Development team (expert and experienced, large number of developers, etc.)
- Growing popularity (increased demand for cryptocurrencies, more people who use it, media coverage, etc.)
These are the most important general rules when determining the potential of a cryptocurrency. Some of them are more important than others, but the cryptocurrency that you select must meet at least 3 of these criteria.
4. Determine where the price is. Is it low or high?
Is the price now at its lowest level of 45 weeks? Or is it at its maximum? You probably heard the phrase “buy cheap, sell expensive”.
Do not buy cryptocurrencies when the price is at its highest point, and do not sell them when they are at their lowest point. The cryptocurrency markets rise and fall, and large movements are often followed by sudden drops.
It is definitely true that there may be situations in which the value of a cryptocurrency continues to rise for a long time. However, such investments are very risky for beginner traders because it is difficult to determine how long a rise may last.
The best way to learn how to trade is to really trade. It is not a secret. Once you have learned the whole theory, you will need to practice. Buy some cryptocurrency, set your limits and start. Libertex free demo account will allow you to practice trading as long as you want, without risking real money!
6. The Best Way to Approach Cryptocurrency Trading
One of the best investors of all time, Warren Buffet, once said:
“Be afraid when others are greedy and be greedy when others are afraid.”
And this is an excellent way to approach the cryptocurrency market. Do others sell coins for a relatively low price? Great! It can be a good time to buy them. Is the optimism of the market false? Well, now this could be a good time to secure those gains and exit your trades safely.
7. What Affects the Price of Cryptocurrencies?
There are many factors that fundamentally influence and that can bring the price of cryptocurrencies down or up. The main ones are the following:
Every time a government makes a public statement about the regulation of a cryptocurrency, the market always reacts to it. Remember when China banned ICO’s? The price of Bitcoin and other cryptocurrencies fell rapidly. Therefore, it is very important to be aware of these events, be it a beginner or an expert trader.
Exposure to the Media and Other Influential People
In general, cryptocurrencies gain value when they receive a positive exposure to the media. It’s simply because more people are interested in buying them. There are also people who can influence the crypto prices. These people are usually very well recognized in the field of finance and investment. Then, when the CEO of the largest US bank J.P. Morgan, Jamie Dimon, publicly stated he thought Bitcoin was a fraud that would eventually explode, no wonder the Bitcoin market had taken a big hit.
Broader General Acceptance
Have Amazon, eBay or another large international company announced that from now on they will accept payments in Bitcoin? Great! You probably know what that means for the market.
Similarly, when large companies such as Microsoft, Intel or others provide their name and finances, this is another reason for the price to go up.
Technological Changes and Innovations
Each new technological change carries a high probability that it can significantly affect the price of a cryptocurrency. For example, if the publication of a new security protocol is scheduled that will make cryptocurrencies even more reliable, secure and scalable, this could also induce a positive response from the market.
State of Other Markets
It should not be surprising that cryptocurrencies also react to developments in other markets. In the past, cryptocurrencies tended to benefit from declines in other markets.
Commercial cryptocurrencies work almost exactly like fiat currencies. While profits are never guaranteed during trading, you can take steps to protect yourself from large losses and improve your understanding of how markets move.
The Libertex team hopes that this article will be useful for you and we hope you will start working with us. For this, we can offer you a demo account free of charge, as well as free lessons. In addition, our support service is always ready to help you.
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