Cryptocurrency trading guide for beginners 2024

 

With renewed interest in cryptocurrencies amid higher regulation and major media coverage, cryptocurrency trading has become one of the most attractive forms of investment. You may be interested in starting digital currency trading using cryptocurrency CFDs if you want to speculate on the price of a digital currency without owning the digital asset and leverage your position so that you only bear a fraction of the cost up front. Explaining digital currency trading?

 Cryptocurrency trading is the process of speculating on the price movements of digital currencies through a Contracts for Difference (CFD) trading account or buying and selling the underlying currencies via an exchange. CFD trading is a type of financial derivative that allows you to speculate on changes in Bitcoin (BTC) prices and other changes in cryptocurrency prices without owning the digital assets.


 For example, you can buy if you think the value of the cryptocurrency will rise, or sell (short selling) if you think the value of the cryptocurrency will fall. Both are leveraged financial instruments, meaning you only need a small deposit, known as margin, to get full exposure to the underlying market. Since your profit or loss is determined based on the total size of your position, the benefit of trading in digital currencies increases profits and losses.


 Before thinking about getting into cryptocurrency trading, it is important that one has a comprehensive understanding of the assets and technologies involved. Bitcoin is the soil from which thousands of other new digital currencies have grown.


 As with stock trading, Forex trading and any other type of online trading, trading in digital currencies can be complex, involves a variety of components and requires knowledge. However, over the years, a whole industry of other digital assets has emerged with assets tradable for profit. All other cryptocurrencies that are not branches of Bitcoin (BTC) are known as altcoins, the largest of which is Ethereum (ETH).


 This guide will explain cryptocurrency trading strategies and introduce you to cryptocurrency trading platforms and applications, trading styles, and the role of technical and fundamental analysis in creating a comprehensive cryptocurrency trading strategy.

Should you trade cryptocurrencies?

 When you start trading cryptocurrencies via a CAPEX trading account, you anticipate whether the market you choose will rise or fall in value, without owning the digital asset.  Prices are set in traditional currencies like the US dollar and the euro, and you can never own the cryptocurrency itself.


 Advantages of cryptocurrency trading include:


 Fluctuations

 Volatility is a measure of how much the price of any given digital asset rises or falls over time.  The more volatile a digital asset is, the more risky it is as an investment – ​​and the more likely it is that the asset will deliver higher returns or higher losses over shorter time periods compared to relatively volatile assets.


 The volatility of cryptocurrencies is the exciting part of this market.  Rapid intraday price movements can provide a range of opportunities for traders to buy and sell, but they also come with significant risks.  So, if you decide to explore the cryptocurrency market, make sure you do your research and develop a risk management strategy.


 Via CAPEX, you will be able to take advantage of a negative balance protection policy, which means you cannot lose more money than what is in you r account.


Market hours

 The cryptocurrency market is available for trading 24 hours a day, seven days a week because it does not have a central market management. However, liquidity levels can vary from day to day and your trades are more likely to be executed when the markets are highly liquid.


 Cryptocurrency transactions take place directly between individuals, on cryptocurrency exchanges and around the world. However, there may be pauses as the market adjusts to infrastructure updates, or “splits.”


 With CAPEX, you can trade cryptocurrencies against fiat currencies - such as USD and EUR between Friday and Sunday during these times: 22:00-21:55.


 Great liquidity

 Liquidity is a measure of how quickly and easily a digital currency can be converted into cash, without affecting the market price. Liquidity is important because it provides better pricing, faster transaction times, and increased accuracy of technical analysis. In general, the cryptocurrency market is considered very liquid because digital market transactions are dispersed across multiple exchanges, meaning that relatively small trades can have a large impact on market prices. This is part of the reason why cryptocurrency markets are so volatile.


 However, when you trade cryptocurrencies via CFDs with CAPEX, you get the liquidity required to trade because we get prices from multiple places on your behalf. This means that your trades are more likely to be executed quickly and at a lower cost (low spreads and low slippage).


 The ability to buy or sell

 When you buy a cryptocurrency, you are purchasing the digital asset up front in the hope that its value will increase. But when you trade a cryptocurrency, you can take advantage of markets where prices are falling, as well as rising. This is known as short selling.

    Bitcoin digital currency trading

 Source: Bitcoin Cryptocurrency Trading CAPEX WebTrader

 For example, let's say you decide to open a short position on the price of Bitcoin because you think the market will fall. If you are correct, and the value of Bitcoin falls against the US dollar, you will win your trade. However, if the value of Bitcoin rises against the US dollar, your position will suffer a loss.


 Exposure to leverage

 Since CFDs are leveraged products, this enables you to open a position on 'margin' - a deposit that is only worth a fraction of the full value of the trade. In other words, you can get significant exposure to the cryptocurrency market while only tying up a small amount of your capital.


The profit or loss you make on cryptocurrency trades will reflect the full value of the trade at the point of closing, so trading on margin offers you the opportunity to make big profits from a small investment. However, it can also magnify any losses, including losses that may exceed your initial deposit for an individual trade. Therefore, it is important to consider the total value of the leveraged trade before trading CFDs.


 It is also important to ensure that you have a proper risk and money management strategy, which should include appropriate stop orders and limit orders.


 With the CAPEX platform, you can trade with leverage of up to 1:30 on cryptocurrencies and other assets, including crypto- and blockchain-related stocks and ETFs.


 Possibility of opening an account quickly

 When buying cryptocurrencies, you will need to buy and sell via a cryptocurrency exchange, which requires you to create an account to store the cryptocurrency in your digital wallet. This process can be restrictive and time consuming.


 But when you trade cryptocurrencies with CAPEX, you don't need to access the exchange directly because we have exposure to the underlying market for you. You won't need to set up and manage an exchange account, so you can get set up and ready to trade more quickly. In fact, you can trade in less than five minutes, through our online account opening form with instant online verification.



 Trade digital currencies with a regulated and licensed broker


 Examples of trading in digital currencies

 To help you understand how to trade cryptocurrencies, we have compiled two examples of cryptocurrency CFD trades and present their results.


 Example of CFD trading: Buying Bitcoin

 Let's assume that Bitcoin is trading at a buy/sell price of 40,200/40,300 USD. You want to buy one CFD because you think the price of Bitcoin will rise.


Bitcoin has a leverage of 1:2 or a margin rate of 50%, which means you should only deposit 50% of the position value as margin.


 In this example, the margin for your CFD contract position would be $20,150 (50% x (1 contract x $40,300 buy price)). 



 Example of cryptocurrency trading - buying Bitcoin

 Example of cryptocurrency trading CAPEX WebTrader

 Result A: A profitable deal

 If your prediction is correct, and the price of Bitcoin rises over the following hours or days, then you have made a profitable trade. Let's assume that the new buy/sell price is 42,200/42,300 USD at the moment you decide to close your sell position at 42,300 (the new sell price).


 The price moved $2,000 (42,300 - 40,300) in your favor. Multiply this by your position size (one contract) to calculate your total profit which will be $2,000.


 If the position is closed during the day, there will be no swap fees and the net profit will be $2,000.


 But if the position is closed after a few days, there will be an overnight fee according to the contract specifications fee.


 Result B: a losing trade

 If your Bitcoin price prediction is wrong, your Bitcoin trading will result in a loss. Let's assume that the Bitcoin price falls over the next hour to a buy/sell price of $38,900/$39,000. Since you want to limit your loss in case the price continues to fall, you can sell at $41,000 (the new selling price) to close the position.


The price moved $1,400 ($40,300 - 38,900) against you.  Multiply this by your position size (one contract) to calculate your loss, which is $1,400.


 Example of CFD trading: selling Ethereum


 Crypto Trading Ethereum

 Example of cryptocurrency trading CAPEX WebTrader

 Let's say Ethereum/EUR is trading at a buy/sell price of €3,542/€3,544, and you want to sell 1.5 CFDs because you think the price will fall.  Ethereum has a leverage of 1:2 or a margin rate of 50%, which means you only have to deposit 50% of the position value as margin.


 In this example, the margin for your CFD contract position would be €2,656.5 (50% x (1.5 lots x €3,542 sell price)).  Remember that if the price moves against you, you could lose more than your initial position margin of €2,656.5.


 Result A: A profitable deal

 Your prediction was correct, and the price later dropped to a buy/sell price of €3,340/€3,342.  You decide to close your buyback trade at €3,342 (the new buy price).


 The price moved by €200 (3,542 - 3,342) in your favor.  Multiply this by your position size (1.5 lots) to calculate your profit, which will be €300.


 If the position is closed after more than a day, the overnight rollover fee will be added to the profit according to the contract specification fee.


 Result B: a losing trade

 Unfortunately, your prediction was wrong, the price of Ethereum against the Euro rose over the next hour to a buy/sell price of 3,682/3,680 Euros.  You have a feeling that the price is likely to continue rising, so to limit your potential loss, you decide to buy at €3,582 (the new buy price) to close the position.


 The price moved €140 (3,682 - 3,542) against you.  Multiply this by your position size (1.5 lots) to calculate your loss, which is €210.


 Cryptocurrency trading patterns

 There are a range of methods used to accomplish a cryptocurrency trading strategy, each with its own appropriate market environments and risks inherent i n the trading strategy.


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