Cryptocurrency trading is a relatively new type of earnings. It involves the sale and purchase of coins on special trading platforms. But if the cryptocurrency fundamentals are quite clear, then the concept of “margin trading” is not yet well known.
Cryptocurrency trading is a way to make money on the cryptocurrency price fluctuations by means of spread betting, a CFD trading account, and buying or selling base currency through the exchange.
What is Spread Betting or Margin Trading with Cryptocurrency?
Spread betting and CFD trading are the instruments that allow you to speculate on cryptocurrency price movements without purchasing base coins. You can create a long position (“to buy”) if you think that the cryptocurrency will rise in value, or short one (“to sell”) if you think that it will drop.
Both products are borrowed funds, which means that you only need to make a small deposit, also known as margin, to have a complete picture of the market. Your profit or loss is calculated according to the full size of the position you have chosen, so the leverage will increase both profit and loss. That is how the margin trading works.
How to Trade on the Cryptocurrency Exchange?
When you buy a cryptocurrency via the exchange platform, you purchase coins for your own money. To do this, you need to create an exchange account, set the full value of the asset to open a position, and store cryptocurrency tokens in your own wallet until you are ready to sell them.
Of course, you must have a clear understanding of trading process. That is why you should watch training videos on cryptocurrency trading.
You need to understand the technology and learn to interpret the data. Many exchanges also have restrictions on the deposit amount. Moreover, the account maintenance can be very expensive. That is why cryptocurrency trading on the exchange often leads to losses for beginners.
Cryptocurrency Prices in 2018
All the crypto community was waiting for the year 2018 to come. There were many hopes and optimistic forecasts. Investors were ready to make a profit and anticipated the Bitcoin price growth as well as the growth of the entire crypto market. But what happened?
2018 has gone down in history as one of the most challenging years for the entire cryptocurrency trading industry. At the end of 2017, most cryptocurrencies reached their maximum values. Growth lasted till early January. However, a month later, the market fell into a long bearish trend.
In December 2017, Bitcoin was trading at $20,000. However, in January there was a significant drop. This trend was persisting until December 2018. Currently, Bitcoin price is about $3,900, which is 80% below its historical maximum.
Most altcoins suffered serious losses. Ethereum, for example, lost more than 90% of its value during the year.
Other altcoins experienced the same, or even greater decline. The only exception was stablecoin which retained its stable value.
Such a negative price trend influenced the public perception of the cryptocurrency industry as a whole, resulting in many players withdrawal from the market. This tendency further aggravated the situation.
What are the Main Differences Between Cryptocurrency Trading on the Exchange and the Stock or Currency Markets?
Cryptocurrency markets are decentralized. What does it mean? Simply put, the issuance of coins is not regulated by the government of a country. No authority today is able to fully track and control this process. However, cryptocurrencies can be purchased and sold through exchanges and stored in one’s wallets.
Unlike traditional currencies, cryptocurrencies exist only as a general digital record about the owner and is stored in a distributed database. When one user wants to send crypto coins to another one, he makes the corresponding transaction to a digital wallet. A transaction is considered completed when it is verified and added to the block chain by means of a process known as “mining”. Also, new cryptocurrency tokens are usually created in the same way.
Blockchain technology has unique security features that ordinary computer files do not have.
The blockchain file is always stored on several computers on the network, rather than in one place, and usually may be read by all users. This makes the technology completely transparent and protected from hackers.
Tips for Beginners: a Cryptocurrency Market Dictionary
Many who start trading cryptocurrency think: where to start? First of all, it is necessary to understand the cryptocurrency trading technology. To make it easier, we provide you with a brief glossary of basic terms.
Cryptocurrency exchange – a trading platform through which users can exchange one cryptocurrency for another or for fiat currency.
Ask – the price the seller agrees on to sell you a cryptocurrency.
Bid – the price you agree to buy a cryptocurrency.
Last – the price for cryptocurrency assets the seller and the buyer agreed on.
Limit Buy – the minimum value when the trader is ready to buy cryptocurrency.
Limit Sell – the maximum value when the trader is ready to buy cryptocurrency.
Balance – the current status of your account. Note: it does not include the amount of transactions opened at the moment.
Broker – an intermediary between the seller and the buyer, receiving a certain profit.
Bulls – market participants who earn only by raising prices, buying cryptocurrencies cheap and selling them when the price goes up.
Bullish Candlestick – a sharp increase in cryptocurrency price.
Volatility – a statistical value that demonstrates how the rate of a particular cryptocurrency has changed over a certain period of time.
Volume Chart – cryptocurrency trading statistics showing all the cryptocurrency, which was purchased or sold in a specific period of time.
Dump – sale of a large number of cryptocurrency. As a rule, it is used by market participants for artificially lowering the price for cryptocurrency.
Bottom – the lowest point the cryptocurrency value can reach.
Long Upper Shadow Candlestick – the maximum price increase for buyers.
Long Lower Shadow Candlestick – the minimum price limit set by sellers.
Acquisition – the purchase of a large number of coins spending most of the trader's account funds.
Swing – minor price changes up or down. Such price fluctuations do not have much influence on the market in general.
Whale – an experienced specialist in cryptocurrency trading.
Squid – statistical data that allows the trader to understand the ratio between the ability to gain or lose profit.
The Sharpe Ratio – an indicator of the operations’ effectiveness.
Long – the purchase of digital assets for long-term trading.
Bears – traders who work to lower the prices.
Order – an open order for the purchase or sale of a specific number of coins.
Pump – purchase of a large number of coins in order to artificially increase the price.
Peak – the highest point in the cryptocurrency value.
Bubble – surge in demand for a specific cryptocurrency.
Flush – a phenomenon when many traders suddenly sell their cryptocurrency, resulting in a sharp price decline.
Trader – a person who is trading cryptocurrency on the exchange.
Trend – a tendency of cryptocurrency market to move in a certain direction over time.
Support Level – price stopping point.
Resistance Level – price stopping line.
Futures – a tool that allows you to quickly buy or sell an asset.
Hard Fork – a radical change of the protocol (relates to blockchain technology).