Money & The Economy

Cryptocurrency Trading: Things Worth Knowing

The trading volume of the cryptocurrency market is nearly worth as much as the total value of actual stocks worldwide; such is its liquidity. Every second, on a cryptocurrency exchange platform, someone is trading, looking to buy XRP, Ethereum, Bitcoin, and other altcoins.

As a crypto trader, you should be familiar with some concepts and procedures. It doesn’t matter whether you are a newbie or a veteran – you must master certain basic and semi-advanced processes and terms to trade effectively.

That’s why we’ve written this article to educate you so that you don’t go in blindly. Even if you’re already familiar with the basics, you will find your very words in this article. After all, no one knows everything! Read on!

What is Cryptocurrency?

One cannot mention cryptocurrency without talking about the blockchain, as they work in tandem. The blockchain is a distributed ledger of immutable transactions, with cryptocurrency being the legal tender within the network. 

Cryptocurrencies like Bitcoin, Solana, and XRP are highly encrypted tokens with fluctuating, volatile values. For example, Bitcoin’s value has been flitting between $40,000 and $60,000 in 2021, while Solana’s value has increased by more than 100% in 2021 alone. 

How To Begin Trading Cryptocurrency

To start trading in crypto, you will first have to choose a trading platform to use. Several options abound like Pancakeswap, Kraken, Coinbase, Kucoin, and Binance. These platforms are different, and you should consider some factors before you start trading.

For instance, you can choose a platform with a great UI/UX that is suitable for beginners. If you’re a veteran in need of advanced trading tools, a platform like Coinbase is an excellent choice.

If you’re an adventurous trader who wants to buy several coins, then Binance is your best bet, as it supports a wide range of trading pairs.

Registration is a straightforward issue. You will have to complete the 2FA and KYC procedures before you begin trading. Depending on your means of identification and availability of personal documents, verification can take anywhere from a few days to weeks. 

After registration, you can then purchase crypto with fiat. Each platform has its own fees policy for processing transactions, so you would do well to check them out before you begin trading. 

Trading Terminology

Here are some trading terms for you to master: 

Spread

In crypto trading, spread refers to the distinction between the existing sell and buy prices of crypto. Similar to other financial markets, there are two prices with every stock, in this case, crypto. You must trade your crypto at the buy value/price to start a long position. 

You have to trade your tokens at the sell value/price to open short positions. The buying price is a little more than the market value, while the selling price is slightly less than the sell value/price. 

Lot

Crypto is sometimes traded in batches called lots. These lots help to keep trade sizes standard. Because crypto is usually volatile, lots are usually quite small. 

Nevertheless, some other cryptos trade in large lots.

Leverage 

In crypto, leverage is the way to attain exposure to many tokens without having to pay the full value upfront. Instead, users can deposit small amounts called margins. If you end a leveraged position, the trade size determines whether you make a loss or profit. 

Margin

Margin is an aspect of leveraged trading. When opening a leveraged position, the margin is the amount deposited to maintain the position. If you do marginal trading, keep in mind that the margin requirement will vary according to your trade size and your broker. 

Mathematically, the margin is expressed in percentage terms relating to the trading position. For instance, if you trade Bitcoin worth $5000, you may have to pay just 15% of the total value, i.e., $750, as the margin. 

Pip

Pips refer to measurement units for crypto prices. They are single-digit price movements at a particular level. Generally speaking, the most valuable tokens are traded at the level of the dollar. Therefore, a change in price by $1 means that the token has moved by one pip. 

Conclusion

Cryptocurrencies form the basis of next-gen digital transactions due to their security, transparency, and versatility. Today, cryptocurrencies are more than just for financial transactions. 

Crypto has the potential to modernize healthcare and modern financial systems. Even though the change is slow in coming, it is spreading steadily. And soon, it will only be a matter of time before it becomes legal tender in many countries. 

However, as a crypto trader, you should not be a novice to the trading terms that have been highlighted in this article. Trading isn’t as easy as it seems, and the wrong knowledge can easily be the difference between profit and loss. 

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