Have you ever wanted to know what Crypto trading is and how does it work? You’ve been passionate about the whole blockchain technology, but you still need to figure out what this trading process means and involves exactly?
First of all, Crypto trading refers to buying and selling the underlying coins via an exchange. It also involves trading on price movements which is done with the, so-called, CFD account.
CFD Trading – detailed explanation
For those who aren’t familiar with this terminology, CFD is an acronym for Contract for differences which is a contract between a buyer and a seller. It means that the buyer must pay the seller the difference between the current value of an asset and its value at contract time.
On the other hand, CFD trading includes derivatives. That enables trading cryptocurrency price movements which doesn’t demand ownership of the underlying coins. So, as a regulated crypto broker, in case you think that the value of a certain cryptocurrency will rise in value, you can feel free to buy it (log it), or you can sell it in case you think it will fall.
What happens when you buy or sell crypto via exchange?
When it comes to buying or selling cryptocurrencies via exchange, one thing is clear. You purchase the coins themselves. Here is what you need to do:
- Set up an exchange account
- Put up the full asset to open up the position
- Store the cryptocurrency tokens in wallet until selling them
In order to learn how to make sense of the data, you need to get the grips of technology which is involved and to deeply understand how exchanges are done. For example, it’s known that numerous exchanges have deposit limits, and the maintenance of accounts can be very expensive.
Best Crypto Trading Strategies
For all of you who are eager to learn how to do the crypto trading in the best possible way, we’ve provided you with the best crypto trading strategies that will save your time and, more importantly, money in the long run.
1. Scalping strategy
If you decide to go with scalping, have in mind that scalpers use increased trading volume to profit. They often exit the trade just a couple of seconds after entering, and they also use automated bots in order to increase the trading cycle frequency.
The best scenario for scalpers is to exit as quickly as possible, before short-term fluctuations could change the market’s sentiment on a coin or before any news item.
2. Arbitrage Strategy
When it comes to the Arbitrage Strategy, it’s essential to know that it involves buying crypto at one market and selling it on the other at a much higher price. So, the main difference between the sell and buy price of an asset is classified as ‘the spread’.
Since we all know that the crypto market is unregulated, it’s allowed for anyone to make such an exchange. There can be major differences in the spread due to different assets in trading volume and asset liquidity. Traders have their own portfolio on exchanges of trading.
In order to start this strategy, you need to open accounts on exchanges that you think will show very different prices for the same asset.
3. Range Trading Strategy
Inside a certain range, in numerous cases, a cryptocurrency will trade for a long period of time. Since Cryptomarket caps are small enough, it’s possible to manipulate them with one single bid mover.
Sometimes the price of the coin can be systematically manipulated in order to profit from a range, so you can take advantage of them. Make sure to pay attention to, so-called, overbought and oversold zones, where the overbought includes saturated the needs of buyers, while the oversold means the opposite.
4. Playing Bitcoin Volatility Strategy
Did you know that a cryptocurrency has 5x the volatility of traditional asset classes and that volatility traders are directionless in the best scenario? That means that you can definitely earn money when Bitcoin goes up or down.
It’s because of the CME (The Chicago Mercantile Exchange) options on Bitcoin futures, which allows a wealth of volatility strategies. All you have to do is to buy a call and put an option at the same time for the same strike price and expiration date.
At the time when Bitcoin rises or falls away from the strike price by more than your premium, the Bitcoin straddle is profitable. In case you want to exit the trade, you need to sell the call and put at the same time.