Introduction To Crypto TradingC.A. Writer
Cryptocurrency trading or crypto trading has become one of the most talked-about in the online and offline world. The cryptocurrency which is a tradable digital asset with its large market with close to $3trillion market capital currently has given people the chance to make money from it by just trading.
You might be wondering how you could be able to trade cryptocurrency and in return make money from it but not to worry, because in this article you’ll be getting to know everything about crypto trading.
So, before we dive into that right now, you ought to be familiar with the word “cryptocurrency”. On this link, “What is Cryptocurrency?”, we gave a little brief understanding of what it is all about.
It will be cool if you click on that link above before heading down to this article.
Now, we begin.
What is Crypto Trading?
Crypto trading, like most trades, is the act of buying and selling cryptocurrency via an exchange platform, using certain strategies in speculating on the price movements of that cryptocurrency.
The price movement of any given cryptocurrency is caused by demand and supply. When demand is higher than supply, the price of that cryptocurrency increases and when the supply is higher than the demand, the price tends to decrease.
This was what we were taught in Economics and the same principles that apply in all trades do the same in the crypto market.
This trading is sometimes done in one day (short-term) by the crypto-traders, unlike crypto investors, who happen to go for the long run by holding onto their cryptocurrency for a long period of time (long-term). So, the profit gotten from this trade is from the small movement in price by the cryptocurrency.
Crypto trading is very risky due to the high volatility involved, but for a crypto trader or wannabe crypto trader to be successful in it, he/she has to deploy some useful strategies and also be equipped with some tools to be able to profit from the little changes in the price of the cryptocurrency he/she is trading with.
The increase and decrease in the price of a given cryptocurrency in the crypto market are identified by a percentage which is of two colours. When the price increases, it is represented by green colour and when it decreases, it is represented by a red colour.
Types of Crypto Trading
There are two major types of crypto trading, which are the Spot Trading & Future Trading;
Spot trading in the cryptocurrency aspect is the immediate buying and selling of a particular cryptocurrency within a specific time. Traders here are known to buy a particular cryptocurrency at a lower price and then sell off when the price is higher than what they bought it initially.
Profits are only made when the price goes up from the initial price a trader buys a cryptocurrency and losses are made when the price decreases from that same initial price.
So, the percentage increase and decrease are used in calculating both profit and loss which was made in a particular trade.
Future trading is more like Spot trading but different in some aspects. In Future trading, the crypto trader here, do not buy or sell the cryptocurrency but predict the price change of the specific cryptocurrency if the price is to go up or down.
Crypto Futures here are contracts that derive their value from cryptocurrencies like Bitcoin, Ethereum and others.
So in Future Trading, the trader doesn’t owe any cryptocurrency at that particular moment he/she is trading future. When trading, certain words like “Short” and “Long” are used in the place of “Sell” and “Buy”.
Short in this sense, simply means the crypto trader is predicting the price of the cryptocurrency he/she is trading on to decrease from the current price the cryptocurrency is. Long here means the opposite, the crypto trader is predicting the price to increase.
Profits are made when the predicted price kicks in and losses are made when it doesn’t. So, this means that the crypto trader makes a profit from the decreasing and increasing of the price of the cryptocurrency.
The amount of profit or loss made is calculated by the leverage used in trading.
Trading cryptocurrency might seem complex or difficult but when using the right strategy and tool in trading, the case will be favourable. Basic knowledge of what trading is all about is highly needed.
So, it will be unwise to go into it without the right knowledge, strategy and tool needed to help make things a quite easy.