The year 2021 started extremely well for the crypto industry. With the renewed interest of prominent personalities, the value of digital currencies is expected to increase even more in the near future.
That said, crypto is still one of the most volatile trading markets. Accordingly, if you want to get involved in the action – the most important thing is that you are armed with the necessary knowledge about how crypto trading works before you start.
In this Learn how to trade a crypto guide V We will walk you through the basics of this class of digital assets, discuss many different strategies, and offer you clarity on how to develop a systematic approach to trading.
What are cryptocurrencies?
You may be somewhat familiar with the concept of cryptocurrencies. Simply put, cryptocurrencies are digital currencies. They are not issued by any centralized bank or government, nor are their value supported by any fiat currency.
Each cryptocurrency is a token stored in a digital wallet. For example, if you use Bitcoin, you can use coins as a means of exchanging several products and services.
What are the basics of crypto trading?
Cryptocurrency trading revolves around guessing the future price movements of the digital coin in question. For example, when trading Bitcoin – you are trying to predict whether the price of coins will rise or fall on the open market.
You issue a buy or sell order based on your speculation – hoping to make money in the process.
Here is a practical example of cryptocurrency trading:
- Suppose you want to trade Litecoin against the USD.
- This will be marked as LTC / USD on the selected cryptocurrency trading platform.
- The current LTC / USD price is $ 177.
- Create and buy an order worth $ 500 per pair.
- A few hours later, the LTC / USD exchange rate rises to $ 190
- This means a price increase of 7.3%.
- You made a profit of $ 36.50 on your $ 500 role.
This is a typical example of cryptocurrency trading when you assume that the price of an asset will increase in the short term.
On the other hand, you can also go “short” if you expect the price to fall. This is possible by trading crypto CFDs. We will go into the details of the short sale later in this Learn How to Trade a Crypto Guide.
To summarize, crypto trading allows you to take advantage of both the downward trend in property prices – given that you are correctly predicting the market.
Crypto trading pairs
In the world of cryptocurrencies, trading pairs are assets that can be exchanged for each other. This can be broadly classified into two categories – crypto-cross trading pairs and crypto-fiat trading pairs.
Let’s take a closer look at each type of trading pair below.