(22th-12-2019)
Cryptocurrency trading is the act of speculating on cryptocurrency price movements via a 'CFD' (meaning 'contract for difference'), or buying and selling the underlying coins via an exchange.
CFD trading on cryptocurrencies:
CFDs trading are derivatives, which enable you to speculate on cryptocurrency price movements without taking ownership of the underlying coins. You can go long (‘buy’) if you think a cryptocurrency will rise in value, or short (‘sell’) if you think it will fall.
Both are leveraged products, meaning you only need to put up a small deposit – known as margin – to gain full exposure to the underlying market. Your profit or loss are still calculated according to the full size of your position, so leverage will magnify both profits and losses.
Major Types Of Cryptocurrency Trading
Cryptocurrency trading styles can be divided into two main categories which can further be divided into four subcategories. The two main types of cryptocurrency trading style are:
Shot Term Trading:
Short-term trading is where you buy a cryptocurrency but only plan to hold on to it for a short amount of time. This can be anything from minutes, hours, days, weeks or even a few months!
You might buy a certain cryptocurrency because you think it will rise in price in the short term. In which case, you would then sell it for a quick profit if you thought the price was going to drop again!
Let’s look at some of the advantages of short-term trading.
Advantages
The main advantage of short-term cryptocurrency trading is that it offers a really good opportunity to make high percentage gains. Unlike fiat currency markets, where prices usually don’t move by more than 1% each day, cryptocurrency prices can almost double overnight!
Now that cryptocurrencies have become so popular, there are now more than 1,500 different cryptocurrencies to trade. Which means one thing — more opportunities to make huge profits. Not only that, though, but there are large trading volumes for lots of coins.
Large trading volumes are important as it means you will always find a buyer or seller! It simply means that a high amount of currency is flowing in and out of that cryptocurrency.
Disadvantages
As the Cryptocurrency markets are so volatile, the prices can change very quickly. This means that if you want to perform short-term crypto trading, you will need to spend a lot of time analyzing the markets.
It’s super important to keep in control of your emotions — one thing you will learn when short-term trading is that you don’t always win. It can be very stressful when prices move differently to how you had hoped.
So, learning to accept losses is a big part of cryptocurrency trading. Nobody makes profits 100% of the time!
Short term cryptocurrency traders look for small gains in small price movements, so you will need to have quite a good analysis ability. This means being able to read trading charts and graphs. Which, if you are a beginner, can take a little while to learn.
Another disadvantage of short-term trading is that, for you to see good returns, you must make quite a large investment. Which is something that most of you beginners might not feel comfortable with.
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