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Cryptocurrency trading is the process of speculating on the price movements of cryptocurrencies through a Contract for Difference (CFD) trading account or buying and selling underlying currencies through exchanges. CFD trading is a type of financial derivative that allows you to speculate on changes in the price of Bitcoin (BTC) and other changes in the prices of cryptocurrencies without owning the digital assets.
For example, you can buy if you believe that the value of the cryptocurrency will rise, or sell (short sell) if you believe that the value of the cryptocurrency will fall. Both are leveraged financial instruments, meaning you only need to deposit a small amount, known as margin, to gain full exposure to the underlying market. Since your profit or loss is determined based on the total size of your position, leveraging cryptocurrency trading increases both profits and losses.
Before considering entering cryptocurrency trading, it is important to have a comprehensive understanding of the assets and technologies involved. Bitcoin is the soil from which thousands of other new cryptocurrencies have grown.
As with stock trading, forex trading, and any other type of online trading, trading in cryptocurrencies can be complex, involving a variety of components and requiring knowledge. However, over the years, a whole industry of other digital assets has emerged with tradable assets for profit. All other cryptocurrencies that are not forks of Bitcoin (BTC) are known as altcoins, and the largest of these is Ethereum (ETH).
This guide will explain cryptocurrency trading strategies and introduce you to cryptocurrency trading platforms and applications, trading patterns, and the role of technical and fundamental analysis in creating a comprehensive cryptocurrency trading strategy.
Should you trade cryptocurrencies?
When you start trading cryptocurrencies through a trading account with CAPEX, you are speculating whether the market you choose will rise or fall in value, without owning the digital asset. Prices are determined in traditional currencies such as the US dollar and the euro, and you can never own the cryptocurrency itself.
The advantages of trading cryptocurrencies include the following:
Volatility
Volatility is a measure of how much the price of any particular digital asset rises or falls over time. The more volatile the digital asset, the greater its risks as an investment - and the greater the likelihood that the asset will provide higher returns or higher losses over shorter time frames compared to relatively stable assets.
The volatility of cryptocurrencies is the exciting part of this market. Rapid price movements during the day can provide a range of opportunities for traders to buy and sell, but they also come with significant risks. Therefore, if you decide to explore the cryptocurrency market, make sure you do your research and develop a risk management strategy.
Through CAPEX, you will be able to benefit from a negative balance protection policy, which means you cannot lose more money than what is in your account.
Market hours
The cryptocurrency market is available for trading 24 hours a day, seven days a week because it does not have a centralized market management. However, liquidity levels can vary from day to day, and your trades are more likely to be executed when the markets have high liquidity.
Cryptocurrency transactions occur directly between individuals, on cryptocurrency exchanges, and around the world. However, there may be downtime as the market adjusts to infrastructure updates, or "forks."
With CAPEX, you can trade cryptocurrencies against fiat currencies - such as the US dollar and the euro between Friday and Sunday during these times: 22:00-21:55.
High liquidity
Liquidity is a measure of how quickly and easily the cryptocurrency can be converted into cash without affecting the market price. Liquidity is important because it provides better pricing, faster transaction times, and increased accuracy for technical analysis.
In general, the cryptocurrency market is considered to have low liquidity because digital market transactions are scattered across multiple exchanges, meaning that relatively small trades can have a significant impact on market prices. This is part of the reason for the volatility of cryptocurrency markets.
However, when trading cryptocurrencies via CFDs with CAPEX, you can access the liquidity needed for trading because we source prices from multiple venues on your behalf. This means that your trades are more likely to be executed quickly and at a lower cost (low spread and low slippage).
The ability to buy or sell
When you buy a cryptocurrency, you are purchasing the digital asset upfront in the hope that its value will increase. However, when you trade at the price of a cryptocurrency, you can benefit from markets that are declining in price.
