In this article, we will cover the main aspects of cryptocurrency trading on trading platforms, as well as discuss the choice of strategy, tools, and risks.
Cryptocurrency trading involves the purchase and sale of digital assets on the market with the aim of making a profit. Considering the trader’s goals and strategy, cryptocurrencies can be traded in different time frames — from a few seconds to several years.
Cryptocurrency markets are characterized by high speculation and volatility. For this reason, before starting to trade, it is necessary to conduct a deep analysis, develop a clearly defined trading plan, and master the basic principles of cryptocurrency trading. All traders approach trading in their own way, but there are several common principles relevant to all market participants.
- Choice of cryptocurrencies. The trader decides for himself which cryptocurrencies to trade, relying on his opinion and level of trust in a given asset.
- Choice of trading platform. Traders use cryptocurrency exchanges or p2p platforms to carry out trading operations. These platforms facilitate the process of buying and selling cryptocurrencies.
- Registration on the exchange. An account is required on each platform for cryptocurrency trading. This process includes providing personal data, identification according to the “know your customer” (KYC) principle, and creating a wallet for storing crypto assets.
- Balance replenishment. To start trading cryptocurrencies, you need to deposit funds into the exchange balance. This can be fiat currency (rubles, dollars, or euros) or stablecoins, digital assets that are tied to the dollar exchange rate (USDT or DUSD). In addition, you can directly transfer cryptocurrency to wallets that are supported on the exchange.
- Order placement. During trading, traders place orders (requests for purchase or sale of cryptocurrency) on the exchange. There are different types of orders, including market (purchase or sale at the current market price), limit (purchase or sale at a pre-set price) and stop-loss orders (order activation for purchase or sale when the price reaches a set level), which are available to Bit.Team traders working with the exchange through API.
- Analysis and strategy. Traders often use technical and fundamental analysis to determine when to buy or sell cryptocurrency, applying a variety of trading strategies — intraday trading, swing trading, long-term investing, and others.
- Risk management. Cryptocurrency trading on the exchange is associated with risks and significant price fluctuations (market volatility). When trading cryptocurrency, it is important to effectively manage risks, using portfolio diversification, setting stop-loss orders, hedging strategies, and not investing more than you are willing to lose.
- Order monitoring and execution. Crypto traders carefully monitor the market and close their orders when the pre-set conditions are met. Prices in the cryptocurrency market can change quickly.
- Security. It is very important to take measures to ensure the security of accounts on exchanges and cryptocurrency wallets from hacker attacks and fraud, using bookmarks in the browser and be sure to set up 2FA authorization.
Trading strategy
A trading strategy is a comprehensive plan in which a trader determines his financial goals, acceptable risks, and specific methods of buying and selling cryptocurrency.
There are many strategies popular among crypto traders. Some of the most common include intraday trading, long-term investing (or “holding”), futures trading, arbitrage trading, and scalping. Each of these strategies has its advantages and disadvantages, and their successful application largely depends on market conditions, experience, and trader knowledge.
For example, intraday trading involves making several trades within one day with the aim of making a profit from short-term price fluctuations. On the other hand, a “holding” strategy involves buying and holding cryptocurrency for the long term with an expectation of a long-term increase in its value.
Conclusion
Cryptocurrency trading is a complex and risky activity that requires careful planning, analysis, and risk management. Before starting, it is important to conduct a deep analysis and develop a strategy that matches your financial goals, comfort level with risk, and available time. It is also necessary to consider the importance of security and protection of your investments from potential threats. Remember, the key to success in cryptocurrency trading lies in education and continuous self-improvement.
Info taken from: bit.team/blog/en/basics_of_exchange_trading_en/
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