What Is Crypto Trading & How To Trade Cryptocurrency?

What Is Crypto Trading & How To Trade Cryptocurrency?

Crypto trading is becoming an increasingly popular form of investment activity, attracting both professional traders and beginners. But what is it all about? What does crypto trading mean, and how do you start trading cryptocurrencies?

What Is Crypto Trading?

Crypto trading is buying and selling cryptocurrencies or contracts on them to profit from the difference between the purchase and sale prices. Unlike traditional forms of exchange trading, where the objects of transactions are company shares, fiat currencies, precious metals, or other classic assets, the main tools in crypto trading are digital coins based on blockchain technology.

Types Of Markets For Cryptocurrency Trading

Before starting to trade cryptocurrencies, you need to familiarize yourself with the types of markets for trading. They are similar to those in traditional assets: spot, futures, options, and the over-the-counter (OTC) market, which is also popular in crypto.

  • Spot Market. The market where real assets are traded at market prices. It is characterized by high liquidity and is understandable for beginners. It is often used for buying coins for a long period (holding). Profits can only be made from the growth of the asset.
  • Futures. Unlike the spot market, here contracts on coins, not the assets themselves, are traded. There are two types of contracts: long (buying in anticipation of a price increase) and short (selling in anticipation of a price decrease). With a long contract, the trader profits from price increases and incurs losses from price decreases; with a short contract, it is the opposite. Leverage (borrowed funds from the exchange) can also be used in futures trading. Futures trading carries liquidation risks, especially when using leverage, so it is recommended for experienced traders.
  • Options. A type of contract on coins with the possibility of selling a specific asset at an agreed price (strike price), but unlike futures, there is no obligation to sell this contract on the asset. They can be perpetual or have an expiration date. Recommended for experienced traders.
  • Over-the-Counter Market (OTC). Over-the-counter trading is trading crypto assets directly between private individuals without the involvement of an exchange. A simple example is online or offline crypto exchanges. It is often used for selling assets to avoid sharp price fluctuations on public exchanges.

Features Of Cryptocurrency Trading

Trading on the crypto market shares similarities with trading stocks or CFDs. The key task for a trader is to buy cryptocurrency or a contract on it at a low price and sell it at a higher price, thus making a profit from the price difference. Crypto traders use various analysis methods to predict price movements and choose the best moments to enter and exit the market.

Here are some of the specific features of crypto trading:

  • Increased Market Volatility. The cryptocurrency market is characterized by extreme price volatility. The value of digital assets can change significantly within short time intervals, providing ample opportunities for high profits but also carrying heightened financial risks. On the crypto market, it is entirely normal for the price of a particular asset to rise or fall by 20% or more in a single day.
  • Market is open 24/7. A unique feature of the cryptocurrency market is its round-the-clock operation without weekends or holidays. This gives traders the opportunity to perform trading operations at any time, regardless of the time of day or day of the week.
  • On-Chain Analysis. Unlike traditional assets like stocks, precious metals, and others, cryptocurrencies can also be analyzed using on-chain analysis. Thanks to the transparency of most blockchain coins, you can observe activities on the blockchain, such as how coins are accumulated and what actions holders take with them. This can be used by traders to make informed trading decisions.
  • Less Legal Regulation. Compared to the stock and forex markets, cryptocurrencies have only recently begun to be legally regulated. For example, in 2024, the Markets in Crypto Assets (MiCA) regulation came into effect in the European Union, requiring market participants to trade only with backed certified assets, have market participant representations in the EU, and maintain statutory capital to cover legal disputes. The “wild west” era in cryptocurrency is gradually ending, making the market cleaner and more regulated.

Trading on the crypto market operates on the principle of a zero-sum game, where one participant’s profit is another’s loss. Cryptocurrency exchanges match buyers and sellers, charging a commission for transactions.

How To Start Trading Cryptocurrencies?

Starting to trade cryptocurrencies may seem daunting for beginners, but by following certain steps, you can simplify the process and make it more understandable. In this section, we will detail the main stages necessary to begin crypto trading, from choosing an exchange to managing risks.

Step 1: Choosing an exchange

If you’re looking for the best way to trade crypto, we recommend starting by selecting a reliable exchange. An exchange is a platform where all buying and selling operations of cryptocurrencies occur. Among the most popular and time-tested crypto exchanges are Binance, Bybit, and OKX. There are many other exchanges, but these three are the most popular and reputable in the market.

Step 2: Creating an account and verification

After choosing an exchange, to start trading cryptocurrencies, you will need to create an account. The procedure includes registering with an email and password. Then, you must go through the verification stage, which may require providing identification documents such as a passport or driver’s license. This is the so-called KYC (Know Your Customer) procedure, a standard requirement to prevent money laundering.

Step 3: Funding your account

The next step is to fund your account on the exchange. This can be done by topping up the exchange’s fiat balance or purchasing cryptocurrency with a card, as well as making a deposit through an on-chain transfer of existing cryptocurrency in the blockchain.

Step 4: Studying the market and choosing your strategy

Before starting to trade, it is important to thoroughly study the market and determine an appropriate strategy. Technical analysis involves studying price charts, trading volumes, and indicators to forecast future price movements. Fundamental analysis focuses on examining news, events, and other factors that influence the value of cryptocurrencies. Choosing a strategy depends on your goals: decide whether you will engage in short-term, medium-term, or long-term trading, and develop a corresponding action plan. A good strategy, psychological resilience, and the ability to make quick decisions are essential when trading cryptocurrencies.

Step 5: Starting to trade

After preparation, you can start trading. It is important to stay informed about market news, analyze charts, and remember to manage risks. Start with small amounts to get accustomed to the trading process without significant losses. Set stop-losses to help limit your losses by automatically closing positions when a certain price level is reached.

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Cryptocurrency Trading Strategies

Professional traders develop various trading strategies. Here are four main types:

  • Intraday Trading (or Day Trading). Traders hold positions for no more than 24 hours and capturing profits from short-term price moves. A subtype of this strategy is scalping, which involves making hundreds of trades with minimal price changes in assets. This type of trading is predominantly popular in the futures market.
  • Swing Trading. This strategy involves tracking trends rather than short-term price moves. Traders hold positions for weeks or months until they decide to lock in a profit or loss. It differs from intraday and scalping trading by having fewer trades and a longer period of holding positions. This type of trading is also common in the futures market.
  • Long-Term Investments (HODL). Investors hold cryptocurrency for several weeks, months, or even years in anticipation of growth. Long-term investments can be part of a strategy. For example, you can buy promising altcoins and wait for significant price increases. This strategy is usually used in the spot market.
  • Arbitrage. This trading strategy involves profiting from price differences across different trading platforms. For example, you might buy NOTcoin on Bybit for $10,000 and sell the same amount on OKX for $10,100, earning a 1% profit from the price difference. This is just an approximate example without considering trading fees, transfer fees between exchanges (if a spot transfer was used), hedging positions on futures, etc.

From choosing a reliable exchange to developing your own strategy, each step is important for successful trading. But what if you want to take advantage of additional opportunities and tools for trading? What opportunities does Tradelink offer traders, and how can they help you achieve success?

Cryptocurrency trading is rapidly evolving, and success in trading depends not only on knowledge and experience but also on access to advanced tools and analytics. Tradelink offers unique opportunities for traders that can significantly enhance their performance and increase their earnings. But how exactly can Tradelink help traders?

Verification of detailed trading account statistics

Tradelink provides verification of trading account statistics by reviewing the complete history and analyzing over 100 parameters. This helps traders gain a better understanding of their strategy, identify strengths and weaknesses, determine areas for improvement, and optimize trading decisions.

Attracting investment for trust management

Tradelink allows traders to attract cryptocurrency investments from platform investors for trust management. Traders can receive investments from individual investors or become part of the platform’s strategy indices, allowing them to manage significant sums. Attracting additional funds increases the assets under management and, consequently, the trader’s earnings.

Validating trading statistics to investors and the community

Tradelink helps traders confirm their trading statistics to investors and the community. Traders can provide a link to verified statistics to prove their results and convince investors to entrust their funds for management. This boosts investor confidence and strengthens the trader’s reputation within the community.

The opportunities provided by Tradelink help traders optimize strategies, attract investments, and build their reputation. If you are looking for the best way to trade crypto, Tradelink has valuable offerings for you.