Cryptocurrency Trading

Cryptocurrency Trading

Cryptocurrency trading involves buying and selling cryptocurrencies for profit. Unlike the traditional stock exchange that closes at the end of the day, cryptocurrency trading is a 24-hour market, 7 days a week.

Trading is the basic activity of all investors or investment services – it’s simply the buying, selling or exchanging of assets. In financial markets, people trade securities such as shares, currencies, commodities and derivatives.

Trade involves the transfer of goods or services from one person or organisation to another, often in exchange for money. A network that facilitates trade is called a market.

There’s always a buyer and seller of the asset who both believe they are getting a good deal. As a trader, you’re always trying to gain profit from any buying or selling that you do.

The easiest way to think of the buying process, or as they call it in trading terms, ‘going long’ is to think that whatever asset you buy is at price ‘X’ and you hold onto this because you think the market is going to rise and give you profit. If that happens, you then sell the asset for price ‘Y’.

A trade example

You’ve bought the watch for €100 and you do this because you believe the price is going to rise. After you purchase the watch there are suddenly a lot of buyers who are interested in this particular watch, meaning there are more buyers than there are watches, so the price rises to €110 – you’ve made a nice €10 profit!

Obviously, when you buy any asset, you are hoping for the price to rise – but what if that doesn’t happen?Let’s go back to our watch for this one. You buy the watch for €100 and you expect it to rise in price. However, there are suddenly way more sellers of watches than buyers. As a result, the price of watches fall to €90. You’ve now lost €10 on the trade.When you “short” the market (sell) you enter into an agreement with another party and say “We will sell to them at the current price come time in the future”. The buyer agrees as they believe the market is going to increase, however, you believe that is going to fall. If the market does fall and the watch is now valued at €90 and you already agreed to sell for €100 per point, you can fulfill the agreement and net a €10 profit (winning!). 

But, if watch prices rise to €110 you still have to sell it at the agreed price and make a loss of €10. As a starting point, this example should give you a roundabout idea of how trading works and there are 2 general points to remember:There is always a winner and a loser Your aim as a trader is to be on the winning side.

Trading in cryptocurrencies carries risks!

Every type of investment involves certain risks. In trading, risk is defined as the potential failure of an investment to deliver the anticipated return. That could mean getting lower profits than expected, losing all the original investment, and in some cases losing more than the original investment. 

Never invest more than you can afford to lose!

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