WHAT IS CRYPTOCURRENCY TRADING?
Cryptocurrencies are not well known to everyone, largely because they are still so new. This includes seasoned investors who have traded Forex and Indices for the last 30 years and are not interested in adapting their trading strategies to make room for the new kid on the block.
Cryptocurrency trading shares the same fundamental goal as any other form of trading – generating a profit through fluctuating values over the short, medium or long term. Cryptocurrencies can be exchanged either for fiat (or vice versa), or for other cryptocurrencies. For instance, bitcoin can be sold in exchange for ether or for US dollars.
Those looking to begin cryptocurrency trading need to be aware of one very important distinction: trading bitcoin is not necessarily buying bitcoin.
This means that you can only speculate on the price – you cannot use it as a payment method or send it to friends and family. This works in the same sense that in commodities trading, you are not physically purchasing corn. You are simply opening a trade relative to its value and making a profit or a loss depending on whether or not the market takes a favourable turn.
Finding a website to buy bitcoins online would thus deliver a completely different result. If your aim is to buy bitcoins for the purpose of using them, be clear in this intention beforehand. Keep in mind that purchasing actual bitcoins only delivers a return on investment should the value of bitcoin rise. Trading allows investors to speculate whether the price will go up or down, and collect a profit in the instance where the predictions are correct.
USING LEVERAGE OR MARGIN IN CRYPTOCURRENCY TRADING
Margin trading is the ability to open trades of higher values by giving the trader access to an additional amount of funds in proportion to the selected margin. For instance, a margin of 50:1 would support a trade worth $500 with only $10 invested. Leveraged trades have the potential for significantly higher profits, yet carry the risk of equally greater losses.
Already risky in the traditional Forex market, margin trading is far more so in the cryptocurrency market as the latter holds the highest volatility levels. Inexperienced traders are best served refraining from margin trading until they have an intuitive understanding of the market and its movements.
When you believe you are ready to begin bitcoin trading, keep the following golden rules in mind:
- Don’t let emotion overpower you. Even the humblest of traders can get swept away in a moment of greed. Manage the risk by selecting the maximum amount that you are willing to lose in a bad transaction, and trade accordingly.
- Keep a close watch on your trades. Margin trading greatly amplifies risks, and thus should not be used unless positions are actively watched. Aim to keep leveraged trades as short as possible.
- Be aware of deep fluctuations. These can sometimes work against you by hitting your stop loss value and closing your position at a loss, even if the market recovers instantaneously. You can, however, use these extreme fluctuations to your advantage by setting a higher than usual target closing position in the chance that it will be et in a sudden fortuitous spike.
FINDING THE RIGHT TRADING PLATFORM FOR CRYPTOCURRENCY
Finding a BTC online trading platform is the easy part, as the hype surrounding the cryptocurrency sparked a boom of competition in the market. The challenge is finding one that is legitimate, legal in your country, and accepts your preferred methods of deposits and withdrawals.
Before making a decision, research the trading platforms that are available and read the reviews and user experiences for each one. Also be sure that the platform of your choice offers the cryptocurrency trading pairs that you require, and check their policy on deposits and withdrawals. It is always better to enter into a new initiative with an informed mind than to find out deal-breaking information first hand at an inopportune time.
ONE FINANCIAL MARKETS AS AN ONLINE BITCOIN TRADING PLATFORM
One Financial Markets includes BTC as part of its service offering. Maximum margin offered is 50%, allowing traders the benefit of leverage while limiting the amount of risk they are exposed to.
If you are new to cryptocurrency trading, we recommend that your starting point is experimenting risk-free with our demo trading account. This allows you to get a feel for the market and its movements, to place trades and to experience virtual wins and loses without losing actual capital. No deposits are necessary until you wish to start trading with real funds on a live account.