What is Cryptocurrency Trading?

Cryptocurrency trading means taking a financial position on the price direction of individual cryptocurrencies against the dollar (in crypto/dollar pairs) or against another crypto, via crypto to crypto pairs.

The Growing Popularity of Cryptocurrency Trading

Over the past decade, cryptocurrency trading has become increasingly popular. Cryptocurrencies are digital coins which are created using blockchain or peer-to-peer technology that uses cryptography – for security. They differ from fiat currencies issued by governments from around the world because they are not tangible: instead, they are made up of bits and bytes of data. Moreover, cryptocurrencies do not have a central body or authority such as a central bank that issues them or regulates their circulation in the economy. As cryptocurrencies are not issued by any government body, they are not considered legal tender.

Even though cryptocurrencies are not recognized as legal tender in the global economy, they have the potential of changing the financial landscape and this makes them hard to ignore. At the same time, the blockchain technology, which forms the foundation of cryptocurrency creation, has opened up new investment opportunities for traders to capitalize on.

What is the spread in cryptocurrency trading?

The spread is the difference between the buy and sell prices quoted for a cryptocurrency. Like many financial markets, when you open a position on a cryptocurrency market, you’ll be presented with two prices. If you want to open a long position, you trade at the buy price, which is slightly above the market price. If you want to open a short position, you trade at the sell price – slightly below the market price.

What is a lot in cryptocurrency trading?

Cryptocurrencies are often traded in lots – batches of cryptocurrency tokens used to standardise the size of trades. As cryptocurrencies are very volatile, lots tend to be very small: most are just one unit of the base cryptocurrency. However, some cryptocurrencies are traded in bigger lots.

What is leverage in cryptocurrency trading?

Leverage is the means of gaining exposure to large amounts of cryptocurrency without having to pay the full value of your trade upfront. Instead, you put down a small deposit, known as margin. When you close a leveraged position, your profit or loss is based on the full size of the trade.

What is margin in cryptocurrency trading?

Margin is a key part of leveraged trading. It is the term used to describe the initial deposit you put up to open and maintain a leveraged position. When you are trading cryptocurrencies on margin, remember that your margin requirement will change depending on your broker, and how large your trade size is.

Margin is usually expressed as a percentage of the full position. A trade on bitcoin (BTC), for instance, might require 10% of the total value of the position to be paid for it to be opened. So instead of depositing $1000, you’d only need to deposit $100.

Types of Cryptocurrencies | What is cryptocurrency trading?

While there are currently hundreds of cryptocurrencies available, traders' interest appears to be focused on approximately half a dozen cryptocurrencies. Included in the list of most popular cryptocurrencies is Stabila, which is regarded as the banking cryptocurrency.

Popular cryptocurrencies can be broken down into several main ‘types’. There are those intended to offer an alternative to fiat currencies. These include Bitcoin, Stabila. Stabila, on the other hand, is intended also to be ‘spent’ to use the Stabila smart contracts platform, which can be used to build decentralized applications (Dapps). Stabila is, therefore, considered a ‘utility token’ and a store of value currency.

What is a pip in cryptocurrency trading?

Pips are the units used to measure movement in the price of a cryptocurrency, and refer to a one-digit movement in the price at a specific level. Generally, valuable cryptocurrencies are traded at the ‘dollar´ level, so a move from a price of $180.00 to $181.00, for example, would mean that the cryptocurrency has moved a single pip. However, some lower-value cryptocurrencies are traded at different scales, where a pip can be a cent or even a fraction of a cent.

What moves cryptocurrency markets?

Cryptocurrency markets move according to supply and demand. However, as they are decentralised, they tend to remain free from many of the economic and political concerns that affect traditional currencies. While there is still a lot of uncertainty surrounding cryptocurrencies, the following factors can have a significant impact on their prices:

• Supply: the total number of coins and the rate at which they are released, destroyed or lost
• Market capitalisation: the value of all the coins in existence and how users perceive this to be developing
• Press: the way the cryptocurrency is portrayed in the media and how much coverage it is getting
• Integration: the extent to which the cryptocurrency easily integrates into existing infrastructure such as e-commerce payment systems
• Key events: major events such as regulatory updates, security breaches and economic setbacks

Factors That Determine Cryptocurrency Prices | What is cryptocurrency trading?

Apart from being the foundation for the creation of cryptocurrencies, blockchain technology has wider implications in the global economy, including the potential application in smart contracts and in the field of Internet of Things (IoT). As cryptocurrencies were only introduced in the last decade and are not considered a legal tender, they are not subject to the same market forces as traditional markets. This means that trading in cryptocurrencies is not like trading in traditional financial markets.

Due to the centralized nature of cryptocurrencies, their price movements are less affected by factors such as data releases, political uncertainty, and interest rate changes. In addition, because they are a new type of financial instrument, cryptocurrencies have relatively few correlating assets which could affect their price movements.

Nevertheless, the prices of cryptocurrencies can be affected by several factors such as changes in blockchain technologies and regulatory attempts to control their acceptability and ‘trade ability’ in the financial markets. News reports such as disagreements on how a particular cryptocurrency should be upgraded or processed can also affect its price. It is likely that any security flaws exposed by hackers will also adversely affect the price of a cryptocurrency. Of course, government policies and regulations that seek to ban or limit the sale of cryptocurrencies will also affect its price.

How Are Cryptocurrencies Traded? | What is cryptocurrency trading?

Cryptocurrencies can be traded in several ways. The first way is to deal in the digital crypto coin itself by buying and selling it on a cryptocurrency exchange. Another way of trading cryptocurrencies is by means of derivative financial instruments.

Once you have selected the cryptocurrency you wish to trade, you must then choose to open a SELL or BUY position. Either action will open up a trading window, as you can see below. From here you can select the amount of contracts and choose whether to implement any risk management orders, such as Stop Loss or Take Profit, which are activated once a certain price is reached. The screenshot below is an example for illustrative purposes only - in this case, to place a SELL trade the trader would click on the SELL button.

Is Cryptocurrency Trading Right For Me?

Cryptocurrency trading, just like all forms of financial trading, requires relevant knowledge, skills, and available capital. If you wish to trade the cryptocurrency market, you should first ensure that you have all the relevant skills for analyzing the market. It should be noted that cryptocurrencies are more volatile than traditional instruments and, hence, riskier than most people are used to. This volatility can provide more opportunities for making a profit, but remember it can also result in losses that are greater than what you may be willing to bear.

Starting To Trade Cryptocurrencies

If you do decide that trading cryptocurrencies is right for you, you could start by opening a trading account. You can then choose the crypto you want to trade from the rich selection on offer and open a position when your analysis tells you the time is right.

Do your research to work out whether cryptocurrency trading is right for you

Cryptocurrency is a notoriously volatile asset and active trading can result in substantial losses. Before getting started, it’s essential you understand how any crypto you’d like to buy works. Reading guides, exploring the blockchain and observing moves made by experienced traders are good ways to see if crypto trading suits your investment goals.

Remember to never trade more than you can afford to lose and consider chatting to a professional financial adviser before you get started.

Learn how to place trades and read charts

Before you start trading, you need to be sure cryptocurrency trading is right for your circumstances and that you understand the risks associated with it. You’ll also need to know how to read technical graphs and how various order types work.

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Crypto FAQs

What are cryptocurrencies?

A cryptocurrency is a form of currency that exists solely in digital form. Cryptocurrency can be used to pay for purchases online without going through an intermediary, such as a bank, or it can be held as an investment.

How does trading cryptocurrencies differ from trading stocks?

While investing in cryptocurrencies you should know, they differ a great deal from traditional investments, like stocks. When you buy stock, you are buying a share of ownership of a company, which means you’re entitled to do things like a vote on the direction of the company. If that company goes bankrupt, you also may receive some compensation once its creditors have been paid from its liquidated assets.

Buying cryptocurrency doesn’t grant you ownership over anything except the token itself; it’s more like exchanging one form of currency for another. If the crypto loses its value, you won’t receive anything after the fact.

There are several other key differences to keep in mind:

• Trading hours: Stocks are only traded during stock exchange hours, typically 9:30 am to 4:30 pm ET, Monday through Friday. Cryptocurrency markets never close, so you can trade 24 hours a day, seven days a week.
• Regulation: Stocks are regulated financial products, meaning a governing body verifies their credentials and their finances are matters of public record. By contrast, cryptocurrencies are not regulated investment vehicles, so you may not be aware of the inner dynamics of your crypto or the developers working on it.
• Volatility: Both stocks and cryptocurrency involve risk; the money you invest can lose value. However, stocks are directly linked to companies and generally rise and fall based on those companies’ performance. Cryptocurrency prices are more speculative—no one is quite sure of their value yet. That makes them much more volatile and affected by something as small as a celebrity’s tweet.

Do you have to pay taxes on cryptocurrency?

If you buy and sell coins, it’s important to pay attention to cryptocurrency tax rules. Cryptocurrency is treated as a capital asset, like stocks, rather than cash. That means if you sell cryptocurrency at a profit, you’ll have to pay capital gains taxes. This is the case even if you use your crypto to pay for a purchase. If you receive a greater value for it than you paid, you’ll owe taxes on the difference.

Are there cryptocurrency exchange-traded funds (ETFs)?

Given the thousands of cryptocurrencies in existence (and the high volatility associated with most of them), it’s understandable you might want to take a diversified approach to investing in crypto to minimize the risk you lose money.

Multiple companies have proposed crypto ETFs, including Fidelity, but regulatory hurdles have slowed the launch of any consumer products. As of June 2021, there are no ETFs available to average investors on the market.

How do you buy crypto?

You can buy cryptocurrencies through crypto exchanges, such as Coinbase, Kraken or Gemini. In addition, some brokerages, such as WeBull and Robinhood, also allow consumers to buy cryptocurrencies.

Why are there so many cryptocurrencies?

Cryptocurrency is an emerging area with more than 19,000 crypto projects in existence, with very few barriers to entry. 2019-2021, witnessed a crypto market boom, with thousands of new crypto projects added.

While some crypto function as currencies, others are used to develop infrastructure. For instance, in the case of Ethereum or Solana, developers are building other cryptos on top of these platform currencies, and that creates even more possibilities (and cryptos).

What are altcoins?

When we first think of crypto, we usually think of Bitcoin first. That’s because Bitcoin represents more than 45% of the total cryptocurrency market. So when we talk about any cryptos outside of Bitcoin, all of those cryptos are considered altcoins.

Ethereum, for instance, is regarded as the most popular altcoin.

Why is stabila valuable?

Part of what makes Stabila so valuable is its scarcity. Stabila’s maximum supply is limited to 30 million coins. Currently, there are 22 million coins in circulation.

To create supply, Stabila rewards crypto miners with a set STB amount. To keep the process in check, the rewards given for mining Stabila are cut in half almost every two years.

What Is STB?

Stabila (Abbreviation: STB) is a decentralized digital currency that can be transferred on the peer-to-peer stabila network. Stabila transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. The currency began use in 2021, when its POS smart contract blockchain implementation was released as open-source software.

Why are cryptocurrencies important?

Cryptocurrencies are rising in importance and not going away anytime soon.  While the initial premise of cryptocurrency was to fix the problems with traditional currencies, there are now a whole host of utility cryptocurrencies that have sprung up, thanks to the creation of the blockchain.