Home Article Cryptocurrencies: Should You Buy Or Trade?

Cryptocurrencies: Should You Buy Or Trade?

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Cryptocurrencies have been nothing but exciting to many investors. They have a natural appeal. They have gone a long way, and investors are lured by apparently high returns on offer. Their volatility also offers a lot of opportunities for those looking to trade price movements. Here are the steps you need to take if you want to try your hand.

1) Decide whether you want to buy or trade

You can choose to own cryptocurrency units or trade for the price of the cryptocurrency. By trading, you can speculate on the price without ever taking ownership of derivatives trading instruments called cryptocurrency CFDs.

With a cryptocurrency unit, you have to pay the full price of the asset. With trading, you only have to make up a small proportion of your total position size. This allows you to take a leveraged position on the price, gaining a higher exposure than your investment amount would otherwise have been available.

There are a number of tax advantages for trading over investing. You don’t have to pay capital gains on the profits of cryptocurrencies trading, while you do so if you profit from buying and selling cryptocurrency directly.

On the other hand, a trading approach can increase losses if you get your technique wrong.

Image result for ripple ethereum bitcoin

2) Create an account

You need to buy and sell cryptocurrencies from exchange to trade. This means that you need to create an exchange account and store the cryptocurrency in your digital wallet.

If you actually want to sell bitcoin, you only need a trading account instead of directly accessing the underlying exchange. The broker will be exposed on your behalf to the underlying market. Typically, this is simpler and easier to set up.

3) Make the decision which currency you want to buy and sell

In fact, you’re not going to be able to trade all 1,500 cryptocurrencies. However, you should be able to trade all big currencies including bitcoin, bitcoin wallet, Ethereum, Ripple XRP, and Litecoin – and new currencies are being introduced all the time. With too many about, it can be better to pick those you know more about and become a professional in their price trends, rather than a broad-brush approach.

4) Decide on your trading technique

You need to make sure that you know and understand your market. The price of cryptocurrency relies on a number of variables. In the past 12 months, markets have been affected by questions about government policy, media coverage of the sector, and the performance of the US Dollar-As well as comments made by famous business people or members of the government. The more people get interested in cryptocurrency, the more powerful these different factors may become.

5) Apply your technique by trying to put a trade

Decided on a trading plan, you would need to identify your ‘near’ terms – that is, the stage at which you will leave a deal. This may be an important discipline. Cryptocurrencies are volatile and wide-open positions are dangerous. Once your target has been met, or you exceed your maximum loss, You’re going to need to close your position. These filters can be set up to happen automatically. Starting small or checking your experience with a demo/practice account will help you get a sense of how these markets operate and what drives them.

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