Since about 2016, another type of “invisible” money has firmly entered our lives – cryptocurrencies, which at first were represented by the main type – bitcoins. As the popularity of this revolutionary large-scale project grew, cryptocurrency trading developed with the expansion of the line of “alternative money”. And today, trading in altcoins and ethers is of interest to many professional traders and investors.
Initially, cryptocurrencies were not offered by brokers. However, along with regular platforms, specialized electronic exchanges emerged, dealing exclusively with alternative money trading. In all cases, traders are offered convenient means to exchange regular money for the chosen “cyber” currency, which, like regular money, has its own individual quotation rate.
Key features of cryptocurrency trading
- Exchange contracts of this category technically do not differ much from the usual currency pairs or securities.
- The cryptocurrency market is characterized by high and chaotic volatility, which creates the risk of large losses and the possibility of equally large profits.
- After the deafening “collapse” that came at the beginning of 2018, the consistency of the “bulls” strategy in this sector does not work anymore.
- The so-called “signals” or recommendations traded by numerous pomping channels today are often a sham and a way to make money on the trust of newcomers.
- This segment of the stock market is strongly influenced by news markers. Any quickly disseminated news about the purchase or sale of a large batch of cryptocurrency is almost instantly reflected in the exchange rate.
- Due to the fact that this money is a relatively young asset, the lack of data for the last 3-5 years makes it very difficult to analyze rate fluctuations. And the data that is available has no analytical value, reflecting only the evolution of the initial “bubble” that burst in 2018.
- Nowadays, the trader’s task is made easier by the availability of an impressive number of charts reflecting real asset movements per unit of time. As for forecasting, as already mentioned, cryptocurrency behavior is highly dependent on the content of news and rumors being spread.
How to start trading cryptocurrencies
- Getting to know the terminology of the market, types, history of the leading cryptocurrencies.
- Choosing a platform for trading. It is desirable to register on several large platforms with a positive reputation of responsible brokers.
- Studying the trading terminal of brokerage platforms with an assessment of the opportunities provided by various options and functionalities.
- Choosing specific cryptocurrencies to work with a preliminary analysis of the rate dynamics of each of the leading assets of this category.
- Determining the optimal moment to enter the market by opening order and necessarily setting a stop loss to limit the loss.
- Tracking the rate movement and waiting for the right moment to complete the transaction.
- Closing a position at a profitable point.
Varieties of cryptocurrency trading
- Traditional online trading on specialized cryptocurrency platforms. In this case, the usual methods of trading are used, taking into account the features of this asset mentioned above.
- Exchange arbitrage. Quite complicated way of earning, suitable only for experienced traders, able to quickly assess and react to the situation. The essence of the method is to gain income from the difference in the rates of cryptocurrencies on different exchanges. The fact is that today this market has a wide dispersion of quotes, which are not regulated by centralized banking institutions.
- Bitcoin exchange derivatives trading. Today in this sector there is an opportunity to work with – futures, contracts which are also concluded according to traditional schemes. In this case, the buyer, counting on the rise or fall of the cryptocurrency, is obliged to buy the underlying asset at the end of the transaction (expiration).
Specialists also refer to trading operations to acquire new alternative money at the start of the project on various ICO platforms.
Peculiarities of trading cryptocurrencies on the Forex market
- If you trade cryptocurrency on a cryptocurrency exchange, it is mandatory to purchase an asset that remains your property, even if its price falls to a critical minimum. Exchanges do not involve the purchase of cryptocurrencies, working within, concluded on price changes.
- To date, contracts with cryptocurrency on the Forex are concluded using USD, EUR or bitcoins (BTC). In most cases, work with the deposit can be done with a ruble bank card.
- Terminals on Forex platforms are characterized by stable operation and the presence of a necessary set of tools. At the same time, such platforms operate time-tested encryption algorithms that reliably protect traders’ deposits. On relatively young cryptocurrency exchanges, there are risks of software failures and blocked accounts for unknown reasons. In addition, some major banks, expressing their distrust of the new electronic money, banned the purchase of cryptocurrency with their own bank cards.
At present, the cryptocurrency market is no longer subject to rapid ups and downs, although it is highly dynamic compared to the segment of conventional currency pairs. Cryptocurrency trading involves a careful prior study of the terminology and history of each selected asset.
At the same time, one should not forget that new alternative money is constantly being released today. And very often such startups are the usual “pyramid scheme” designed to quickly collect money from gullible investors. That’s why you should work with proven “crypto” – bitcoins, ethers, litecoins, and their derivatives. Otherwise, all the general rules that apply to the classical Forex currency market remain in force for this new direction.