Cryptocurrency trading is a growing activity as decentralized finance takes up more and more space in financial markets. But cryptocurrencies are still nebulous for most people, and these speculative tools don’t always get good press. However, there are huge opportunities to profit from DEFI and blockchain technologies.
With our experience, we are going to give you a quick guide to crypto trading, understanding this derivatives market, and avoiding the pitfalls you may encounter. The potential for added value through cryptocurrencies is very important, but you must also assess the risks, as you can lose your entire trading account.
After reading this article, you will learn:
- What is a cryptocurrency;
- How to analyze the market for cryptocurrency trading;
- What stock market tools to use for proper crypto chart analysis;
- So let’s get started without further ado and you can enter the world of decentralized finance with more peace of mind.
Trading Cryptocurrencies: Everything You Need To Know
Cryptocurrencies are a new financial instrument that is becoming more and more accessible to investors and traders. However, what is cryptocurrency? You can think that these are virtual currencies that allow you to make payments or exchanges. However, the reality is a bit more complicated and it is not done in the same way as the Forex market with sovereign currencies.
Before knowing how to trade cryptocurrency, it is important to clearly define what it is, and what applications and technologies are associated with it. Decentralized finance offers many investment opportunities, and above all, you can get very interesting returns by generating significant compound interest to get a good return on your capital.
What Is Cryptocurrency?
Cryptocurrency is a financial instrument traded on decentralized and centralized financial markets. There are several types of cryptocurrency.
- You have cryptocurrencies that are directly connected to blockchain technology. These technologies are decentralized exchange networks for carrying out financial transactions. There is, for example, the Ethereum network or the Binance Smart Chain;
- There are also blockchain technologies that allow product tracking. This is very practical to avoid fake luxury items. The Vetchain blockchain with its VET cryptocurrency is designed with this in mind;
- some cryptocurrencies are tokens and use an already existing network. These are blockchain-related technologies that have other applications than financial transactions. An example is an NFT (non-fungible token). The VEVE platform is a marketplace where NFTs are traded and the ECOMI cryptocurrency (token) is used to buy and sell on this exchange platform;
- Finally, there are meme coins or shitcoins, which are purely speculative tokens and run solely on the hype of the communities promoting them. The first purely speculative cryptocurrency is Bitcoin, because aside from being a “haven,” Bitcoin has no real utility. There are other Shitcoins like DOGE, SHIBA, or CHECOIN.
How Decentralized Finance Works
Decentralized finance works without any regulation and the AMF (Management for Financial Markets) does not influence it. Central banks (ECB or Fed) and regulatory financial institutions are also unaffected. This makes it a particularly volatile and risky exchange for an investment portfolio. In addition, only cryptocurrencies are traded on DEFI blockchains.
To trade on decentralized markets, you must trade the sovereign currency on a centralized platform such as Binance, Swissborg, Coinbase, or Kraken (the most popular brokers). With capital, you can buy cryptocurrencies and keep them in your centralized trading account. Please note that a demo account or demo mode is not available on cryptocurrency trading platforms.
Otherwise, you can also transfer your virtual money to a decentralized wallet called a wallet. The most famous are Trustwallet and Metamask. You will then be able to exchange or trade cryptocurrency on decentralized trading platforms like Pancakeswap. As a rule, these are cryptocurrencies that are not yet listed on the centralized exchanges on which the trader is speculating.
What Is The Purpose Of Cryptocurrency?
Let’s draw an analogy between cryptocurrency and stock. Indeed, for a trader, a stock market share is an ownership interest in a company that appreciates or depreciates according to the company’s performance. By the same principle, you can speculate in cryptocurrency.
However, it is more of a bet that you take depending on the technology and the application area in which the cryptocurrency will develop. In the stock market, you invest in a company and its valuation. Simply put, think of the token as a stock and the technology or blockchain as a business in which you want to invest your money.
Ultimately, the goal of cryptocurrency, blockchain, and decentralized finance is to change the landscape and everyday life. We are not aware of this at the moment because the impact is still minimal. But in the future, the QR code will always be connected to blockchain technology.
How To Analyze The Market For Cryptocurrency Trading?
Now that you have a clear understanding of cryptocurrencies, let’s take a look at how to analyze the cryptocurrency market. Virtual currency is studied differently than the traditional financial market. An index (CAC 40, Dow Jones, DAX), forex currency (USD, EUR, etc.), or commodities are regulated by the AMF (Financial Market Authority). Technical analysis and fundamental analysis have different meanings for cryptocurrency.
How cryptocurrencies enter the world of sport
Therefore, we will see where and, above all, how to follow cryptocurrencies to study the underlying assets well. Crypto financial information will allow you to make the right trades by entering the market at the right time. Let’s say that cryptocurrency is like the stock market and that cryptocurrency is part of the blockchain technology in which you are investing. Cryptocurrency trading is long-term, short-term, To ,and medium-term. However, pay attention to the currency and the nature of the technology you are trading.
Best Indicators For Trading Cryptocurrencies
In order to trade cryptocurrency, several indicators will be important. Of course, for a technical indicator to be useful and reliable, a future cryptocurrency must exist for a certain amount of time.
RSI is the momentum most often used to analyze cryptocurrency. But the volume indicator is of great importance, because it allows you to visualize when capital accumulation occurs. This could signal an upcoming bullish momentum in the virtual currency.
How To Make A Graphical Analysis Of Cryptocurrency?
The same method used in traditional financial markets is used to analyze cryptocurrency. Depending on your trading technique, you will analyze the market differently if you are day trading or swing trading cryptocurrency.
Fundamental Analysis Is Key In Cryptocurrency Trading
Fundamental analysis is by far the most important thing when studying cryptocurrency. Social media is a place that can pump (raise) the market or dump (fall) it. It is not uncommon to see “pump and dump” phenomena, especially on shitcoins.
Cryptocurrencies Can Be A Great Source Of Capital Growth In A Bull Market
Now you have the weapon to start investing in future cryptocurrencies. Remember that cryptocurrency is like a listed stock. Buying virtual currency can provide you with a very important capital gain and profit for your trading account. Remember that the volume indicator and RSI are indispensable technical tools. Just like Fibonacci retracements, moving averages are also useful.
To have the right weapons in market analysis, you need to have good training. At the Geneva Trade Center, we have developed the PERFORMER training, which will allow you to access the futures markets of indices, currencies, and commodities. In addition, you will know the order book and market profile to become a highly successful trader.
