Whenever you do decide to start trading cryptocurrencies, there are several factors to keep in mind. You will have to find the appropriate places to trade your cryptos, and know how you are trading. This whole process starts, much like in many other markets, by finding an exchange.
Choosing an exchange
It’s best practice to trade most currencies on some sort of exchange, as the forex market is. This is doubly true for the cryptocurrency market. Since cryptocurrencies are even more limited in scope than the traditional currencies. Therefore, the first thing you need to do s find an exchange that is appropriate for you. See how trustworthy they are, how other traders perceive a prospective exchange. Any reasonable exchange should offer tools to help you in your trading endeavours. See what tools every exchange has and how appropriate they will be for you. You also have to see which cryptos they offer trades in, and how accurate their prices are.
Choosing a reliable broker for crypto trading
There are several vital signs to look out for when finding a broker for crypto trading. The most obvious thing to look for is their regulator. Every valid broker should have an associated regulator. They ensure that the brokerage that you are looking into has sound trading practices. See if they have a legitimate and trustworthy regulator behind their name. If they do not have any variety of regulator whatsoever, that is a major negative sign. In that scenario, it would be best to completely forget about trading with them. Furthermore, see what kind of trading practices your particular prospective broker has.
The conditions in trading cryptos
Whenever you do decide to set up a deal with an exchange, the conditions of that exchange are important to look at. There will be several different factors that can appear in any contract you may commit to.
Leverage
First off, there is leverage. Trading on leverage, or margin, allows you to get a loan when you trade. In the crypto market, this loan can be 1:100 of your original contribution. Once you receive that loan, you will be able to trade with far greater volumes of crypto. This means that the potential profit also rises in accordance with it. You can make far higher profits than you may have originally expected. Once you do this, the only thing you have to pay back is the loan and some interest. The size of your profit makes no difference in your payment back. This is a system that does increase risk, however, as making significant losses on leverage can leave you in very unfortunate situations. This is why it is best to use them it smallish, sure-fire trades.
Spreads
Spreads are the next important concept. They are the primary way that brokers usually make money. The prices they offer you will for buying and selling will not necessarily match market prices. What brokerages do is they take the difference between what they offer you and what the other party in a trade is offering. There are two types of spreads: fixed and variable. Fixed spreads are quite simple, you get what you ask for. The proportion of the spread will not change no matter what. Variable spreads are more tricky. Generally, they are smaller, but a broker can increase it if they feel uncertainty about the trade, due to volatility, for example. So variable spreads can end up costing more if you are not careful.
Instruments for crypto trading
First of all, as we said before, you should know what cryptocurrencies a particular exchange offers. It is not necessarily a given that they will offer you what you need. Secondly, see which markets you can penetrate. It is not necessary to trade only in other cryptocurrencies. You can extend your wings and try your hand at forex, commodities, or the stock market. Cryptocurrencies do have monetary value, after all. However, not everyone is going to accept them, so carefully look for where they will.
Finally, see what types of contracts they can offer you. CFDs, futures contracts, options; these are all possibilities that you should look into. They all have differing features and which one you choose depends on what particular trade you want to commit to.
