This article explains cryptocurrency trading in general. TriumphFX nor Triumph Exchange are by no means recommending any exchange. The article is only aimed to educate and should not be taken as investment advice.
As cryptocurrency talks are getting increasingly frequent everywhere, it’s worth noting that cryptocurrency trading is also getting more and more popular in the broader global population. It isn’t just limited to the wealthy, but rather it has reached a wide range of people who can participate in building wealth.
By definition, cryptocurrency trading is the act of speculating on cryptocurrency price movements via a CFD trading account, or buying and selling the underlying coins via an exchange.
CFD (contract for difference) trading is a type of derivative, which allows you to speculate on cryptocurrency price movements without possessing the underlying coins. You can go long (buy) if you think a cryptocurrency will rise in value, or short (sell) if you think the value will fall. As both are leveraged products, meaning you only need to put up a small deposit (margin),to have total exposure to the underlying market. Your profit or loss are still calculated according to the full size of your investment, so leveraging trading crypto will magnify both profits and losses.
When you buy cryptocurrencies via an exchange, you purchase the coins themselves. First, you’ll need to open an account with a crypto exchange which is similar to opening a stock brokerage account. As soon as that’s done, the next step is to put up the full value of the asset to open a position, and store the cryptocurrency tokens in your own wallet until you’re ready to sell.
“Trading pairs” or “cryptocurrency pairs” are assets that can be traded for each other on an exchange. Some cryptocurrencies can only be bought with other cryptocurrencies, so knowing what crypto trading pairs are out there can help you expand your crypto holdings. Additionally, having the knowledge of crypto trading pairs creates opportunities for investors to profit from differences in asset prices between markets.
A crypto trading pair will consist of two parts: the base currency and the quote currency, which are often represented with a set of three letters with a backslash. The base currency always comes first in the trading pair and it is the base to which the other currency is compared. The latter part of the pair is represented by the quote currency which is the price of the base currency quoted using the quote currency. Let’s say, ETH/BTC is trading around 0.065, what this means is a trader would receive 1 ether for about 0.065 bitcoin.
Popular base pairs for crypto trading include USDT, USD, bitcoin (BTC), and ether (ETH) — with some of the most common trading pairs being BTC/USDT, BTC/USD, ETH/USDT, and ETH/USD.
Many crypto trading pairs are also associated with stablecoins in crypto exchanges worldwide. This just shows how stablecoins play an essential role for crypto trading pairs with major crypto exchanges. The most used and liquid trading pairs usually involve fiat-backed stablecoins such as tether (USDT), USD coin (USDC) and Binance USD (BUSD). This is also the reason these stablecoins have a high market capitalization.
In stock trading, stocks are dealt using fiat currencies while buying and selling cryptocurrencies involve the use of crypto trading pairs. Whether or not users can deposit and withdraw fiat when trading crypto, it differs from one crypto exchange to another.
As we know it, stock trading is generally restricted to set business hours depending on different exchanges all over the world, such as the US stock market hours, European stock market hours, etc. Interestingly, crypto markets are always open: they run 24 hours a day, 365 days a year. This is because the crypto market is spread across a decentralised network where it isn’t regulated.
Publicly traded companies may have the option to issue new shares whereas a cryptocurrency’s total supply is tied to the issuing organisation’s internal policies which are generally not contingent on laws or policies. Crypto projects may set hard caps on their cryptocurrency supply in a way that is unalterable.
It is the general impression that cryptocurrency trading carries more risk than traditional stock trading, but this all depends on what stocks or cryptocurrency you are trading and how you’re trading it. Both crypto and stocks are valid investment choices, and they can serve different purposes in your portfolio. With that said, never skip doing your own research and remember to trade responsibly.
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