How To Choose A Crypto Pair To Trade
When choosing the best trading pair you should make sure that you choose the one thats offering you an advantage. Make sure that youre not losing money on a trade, and make sure to take the current trading volume into consideration.
If a trading pair has little trading volume then you could be sitting on a trade for a very long time before it goes through. This could impact your decision to use a certain pair even if you would come out ahead on the deal.
Similarities Between The Crypto And Stock Market
- Trading and investing tools are more or less the same. This is especially true for technical traders using tools such as charts to analyze the market. You can use the same tools to perform TA ” rel=”nofollow”> Technical Analysis) for trades on either market.
- Assets denominated using fiat currencies. The crypto market may be innovative and revolutionary with the assets designed to append the current financial system. However, the denominations in the marketplace are still valued compared to fiat currencies similar to the stock market.
- Trading and investing strategies are similar. In the stock market, traders can choose to day trade, swing, or position trade. They can also opt to buy and hold their assets for the long term. Similarly, traders and investors in the crypto market can do the same things.
- Similar market products. The stock market has been around for generations, leading to innovative products such as derivatives and techniques such as using leverage to inflate gains Those same products and techniques have been ported over to the new age cryptocurrency market. You can now trade Bitcoin futures, options, and leveraged tokens. You can use leverage on most of your trades on most leading cryptocurrency exchanges, such as Binance, Bitfinex, or BitMEX. The full list of digital asset exchanges with a leverage trading here.
Please note: DO NOT trade cryptocurrencies with leverage unless you are fully aware of what you are doing and what risks you face.
Choose A Trading Strategy
There are many techniques day traders use to make gains on short-term fluctuations in the crypto markets. A crypto day trader should devise a winning strategy backed by research, with well-laid plans for when to enter and exit their positions.
For prospective day traders, certain websites allow users to track and copy the most successful traders on the platform. Below are some of the most popular trading strategies in the crypto day trading game.
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Valuing Your Coins In Usd
When youve used your 0.025 BTC to buy 1 XMR, you monitor the USD value of your XMR. This means valuing your XMR in USD value only, making it easier for you to calculate your gains. There are many applications and resources that allow you to do that, and Coin Market Cap is a popular resource:
So, if your XMR increases to $500 in the future, you know that youve made $130 from your initial investment of $370, giving you a great return of over 35%.
The Nature Of Crypto Vs Forex
First, it’s vital to understand the nature of these assets.
Both rely on laws of supply and demand to determine their price. But both have different risk profiles due to how they derive value.
“Fiat currencies have a measurable value, cryptocurrencies are purely speculative,” opines Justin Grossbard, founder of CompareForexBrokers.com. A currency has broad-based acceptance as legal tender and use as a common medium. Further, it comes with the backing of a government able to control its supply.
A cryptocurrency doesn’t provide these same functions in that, with precious few exceptions, it fails to qualify as legal tender, doesn’t come with backing from a government, nor comes with control of supply by a central bank. Cryptocurrencies rely solely on shared belief in their value between two parties.
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How To Pick The Right Exchange
Above we laid out some choices for where to trade, below we will dive a little deeper into those choices to help you pick the right crypto exchange for you.
The first thing to understand is that you dont have to jump right into traditional crypto exchange trading to get exposure to crypto. In fact:
GBTCs price to NAV can get a little absurd at times.
For those who want the real cryptocurrency experience, the questions become 1. do you want to deal with limit orders and real exchange trading, and 2. do you want a wide selection of coins?
I think the simplest and best place to buy, sell, and store coins in the US is Coinbase , but you can only buy, sell, and store Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and a small selection of other coins on Coinbase. Coinbase will let you try out simple broker-based trading and real exchange-based trading and will give you exposure to enough coins to get you started.
However, if you are serious about trading cryptocurrency, and want access to all the coins crypto has to offer, youll want to also sign up for another platform that allows you to buy/sell crypto like Coinbase Wallet, Bittrex, Binance, or Kraken .
See our list of exchanges for beginners for a more complete list of options.
TIP: Even if you are going to get fancy with wallets and exchanges, Coinbase is a good starting point because it works as a simple on-ramp/off-ramp for fiat .
How To Trade Crypto
If you want to trade cryptocurrency you need:
When trading, you can:
Lastly, for storing crypto you need:
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Trading Crypto Vs Forex: Neither Is For The Faint Of Heart
Ten years ago, talk of cryptocurrencies remained relegated largely to internet forums and chatrooms as a possible solution to a host of issues that describe our current fiat currency systems: privacy concerns, centralized command and control, theft and fraud and more.
But while these new cryptocurrencies address many of these items, they still serve primarily as an alternative to fiat currencies in our day-to-day lives.
What we will see unfold in the coming years might change how crypto is regulated, issued and traded. Depending on how governments treat the virtual currency class, we could see fewer differences between forex vs. crypto trading and perhaps more resemblance.
In either case, neither forex nor crypto trading is for the faint of heart as both carry risks related to trading, volatility and complexity. For now, seasoned traders are the best candidates for trading in these markets, as they can employ more risk mitigation techniques and hedge their trades appropriately.
How To Trade Cryptocurrency Pairs
If you are a beginner in the crypto market, your first trading pair is likely to be EUR/BTC or USD/BTC. This depends on your native fiat currency. On your preferred exchange platform, you will convert fiat currency to base currency. For example, maybe Coinbase is your preferred exchange. Deposit the USD into your Coinbase wallet and buy bitcoin, which will serve as your base currency. Also, ensure you have a secure wallet to hold and store your digital coins.
Next, you can opt to continue trading with crypto base currencies or buy altcoins. In our example, since you have BTC, you can trade with any pair listed on the BTC exchange. If you want to trade altcoins, you have to look for an exchange platform that only allows crypto deposits. Thus, you can only use the purchased base currency to buy altcoins but not fiat or domestic currency.
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What Is Cryptocurrency Trading
On a top-level, trading cryptocurrency is very similar to trading forex.
Both markets run around the clock, have elaborate derivatives built on top of them , and enable traders to speculate on different currency pairs .
That said, while forex purely consists of trading fiat currency pairs between each other, in cryptocurrency markets, there are two pair categories:
- Fiat to crypto trading: Where cryptocurrencies are traded against traditional fiat currencies. e.g. BTC/USD
- Crypto to crypto trading: Where cryptocurrencies are traded against other cryptocurrencies and traditional fiat currencies are NOT involved. e.g. ETH/BTC
Generally, if you are just getting started and are looking to make your first cryptocurrency trade, you should stick to fiat to crypto trading. Fiat to crypto trading is mostly done on regulated coin exchanges and is simpler to grasp at first.
Finally, its important to note that there are many different ways to trade the above-mentioned cryptocurrency pairs. At the time of writing, there are cryptocurrencies spot markets, futures markets, and options markets.
Next, well outline why trading cryptocurrencies is attractive, followed by the different ways to trade a market like Bitcoin.
Which Crypto Has The Brightest Future
The world of cryptocurrency and blockchain technology is here to stay, with Bitcoin and Ethereum being among the cryptos with the highest potential. That said, because of its unique features that support smart contracts and decentralised apps, Ethereum is perhaps the crypto with the brightest future with tech innovations.
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Beware Of Fees And Pairs
You’ve sifted through the pool of potential exchanges and found some that appear to have excellent reputations, stellar histories concerning security, and no backgrounds of hacks or scams. That’s a great start, but now you’ll need to consider how each exchange will impact your investing daily.
Two major factors that distinguish different exchanges are the fees and the currency pairs they offer. Most exchanges will include some type of fee for your transactions these can be based on the size of the transaction, or they may be dependent upon your level of activity, or, in some cases, they may be unrelated to either of those factors.
Learn about the fees and consider how they would impact your investing based on your style do you plan to be highly active, making some transactions every day? If so, perhaps consider an exchange with a lower per-transaction fee. If youre considering transacting ether, you will want to be aware of the gas fees youll need to pay that are associated with various transaction types.
What Is A Base Currency And Why Is It Important
To fully take advantage of crypto trading pairs, you need to understand base currencies. A base currency is a way to denote an agreed-upon value of different assets. Base currencies are a common tool for comparing exchange rates across fiat currencies in different countries. An American traveling to Italy will want to convert USD into the Italian currency, the Euro. In this case, the USD serves as the base currency. The same principles apply to crypto assets.
If youre seeking a lesser-known crypto on an exchange, youll likely need to own one of the base currencies listed in a pair before you can trade. In most cases, the most popular cryptocurrencies serve as base currencies, but accepted base currencies will vary for each exchange. Before diving into trading pairs, investors should confirm which base currencies are accepted at their exchange of choice as well as which trading pairs the exchange offers. In addition, many exchanges offer stablecoin trading pairs, usually pegged to USD. These stablecoins may hold one-to-one physical reserves of USD or use another mechanism such as DAI.
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How Do Regulators View Crypto Vs Forex Trading
Depending on how an asset is classified, it falls subject to rules and regulations of certain regulatory bodies within the United States and other countries.
The U.S. does not currently provide for comprehensive oversight of cryptocurrencies instead, it relies on a hodgepodge of regulatory supervision.
Regulators and investors have traditionally seen cryptocurrencies a bit like a bystander witnessing Superman, asking “Is it a bird? Is it a plane?” says Greg King, founder and CEO of Osprey Funds, which offers multiple cryptocurrency funds.
While this asset class has grown at breakneck speed, regulations around it have lagged. But here are some important cryptocurrency regulatory facts:
Forex or traditional currencies, on the other hand, meet a higher regulatory definition by classifying not only as commodities, but also as securities, Grossbard says.
“Currencies can function as commodities in the sense that traders buy and sell them to profit from exchange rate fluctuations,” he says. “However, they are a security because they are released by a central authority.”
As a result, currencies are subject to several higher levels of regulatory scrutiny, as well as investor protections through FDIC and SIPC insurance.
As of now, the SEC states that crypto fails to meet this definition. However, this might change in the future as the Biden administration investigates matters further.
Who Is Binanceus Best For
Binance.US is not available in Connecticut, Hawaii, Idaho, Louisiana, New York, Texas, or Vermont. For people outside of those states looking to invest in crypto, Binance.US offers both an easy buy/sell interface and more advanced trading views. It has low fees, and further fee discounts for using its native currency, Binance Coin, and does offer some educational content through its on-site blog.
Despite its low fees, we do not recommend Binance.US, especially for beginners. Binance.US doesnt offer any information about how your investment will be secured, stored, or protected by the firm, unlike other cryptocurrency exchanges. Plus, there are many other active exchanges that offer simple buy/sell interfaces for long-term investors. We believe that transparency about the safety of your investment is worth paying a bit more in fees.
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Buy If Mfi = 100 And If The Subsequent Candle Is Bullish
We can now wait for the third MFI reading above 100. It doesnt necessarily have to be the third MFI = 100 reading, you can take every other MFI = 100 readings. If your time doesnt allow you to catch the third 100 reading on the MFI indicator, you can simply pick the next one as long as all the other technical conditions are satisfied.
Next, we also need the candlestick when we got the MFI = 100 reading to be a bullish candle. The close of this candle needs to be near the upper end, giving us a candle with very small wicks.
This brings us to the next important thing that we need to establish when day trading cryptocurrency, which is where to place our protective stop loss and where to take profits.
Valuing Your Coins In A Base Currency
The main purpose of valuing your coins using a base currency is to increase the number of coins you hold. Following the above example, if say you bought 1 XMR using 0.025 BTC and the price of XMR/BTC increases to 0.030 sometime in the future, it means that your XMR has increased by 20%. This also means that you can buy 20% more Bitcoin using your XMR. If you decide to sell your XMR for BTC, youd have 0.03 BTC, which is 20% more than when you first started with 0.025 Bitcoin. And just like that, youve increased the number of coins youre holding!
What Are The Most Trusted Exchanges Out There
To buy and sell cryptos successfully, make sure to choose a safe and trusted exchange and pay attention to ticker symbols. That said, eToros exchange is one of the safest exchanges that allow traders to buy, store, and sell cryptos, with more than 90 cryptocurrencies available on the platform. Note that eToro is known for being an advanced social trading platform that is suitable also for beginners a platform that allows traders to speculate on prices and trade CFDs as well.
Always Pay Attention To Bitcoin
Most altcoins are pegged more closely to Bitcoin than Asian currencies were to the USD during the Asian Financial Crisis.
If Bitcoin price pump drastically, altcoins price can go down as people try to exit altcoins to ride the BTC profits inversely, if Bitcoin prices dump drastically, altcoin prices can go down, too, as people exit altcoins to exchange back into fiat. The best times for altcoin growth appear when Bitcoin shows organic growth or decline, or remains stagnant in price.
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Differences Between The Stock Markets And Crypto Markets
- Owing to its old age, the stock market is more stable and less volatile. The crypto market, on the other hand, is accustomed to wild price swings. It is pretty normal to see double-digit percentage swings in a matter of hours.
- . Age is a significant factor in trading. The stock market has been around for a long time, while the crypto market is only about a decade old. This means that market value and trade volume in the former is much larger compared to the latter. The younger age also contributes to the wild volatility experienced in the crypto market.
- . In the stock market, you invest in the publicly listed company shares by buying their stocks. In the crypto market, you invest in the idea, the technology, or the currency , but not the company behind the currency.
- Regulations. Since the stock market has been around for ages, regulators have had enough time to develop and implement rules and regulations governing the markets conduct. This contributes to the minimal volatility we highlighted earlier. In the cryptocurrency market, this is not the case. The regulators are still grappling with understanding the emerging asset class, and this lack of regulations are part of the reason for the markets wild nature.