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In today’s world, there are many ways to invest in order to multiply capital more effectively than through low-interest bank deposits. One option that has gained considerable popularity in financial markets is trading, used in the Forex market as well as in the cryptocurrency space.
Who is a trader? What does this profession entail, how does a trader utilize financial markets, and who can become one? What can be used to help even a beginner trader make money through trading while reducing financial risk? What do the best traders focus on when buying and selling financial assets? We will answer these and other questions in today’s article.
What is Trading – Working in the Forex Market and Cryptocurrency Exchanges
Let’s start from the beginning – what is trading? This term, borrowed from English, refers to a specific field of trade in financial markets, where financial assets are bought and sold (both online and offline), especially currencies (and of course cryptocurrencies), bonds, stocks, other securities, stock indices, and commodities. Traditional traders often work in large financial institutions (institutional traders) either nationally or on global financial markets. Increasingly, freelancers are also encountered in the financial industry, especially in the crypto world.
The key to success and profit in trading is monitoring the current rates (currency, commodity, cryptocurrency markets) to buy low and sell high. Usually, the time perspective is quite short – trading on a specific currency pair or other instrument lasts from a few seconds to a maximum of a few days, depending on the chosen strategy.
Trading is carried out in various financial spaces. It is used in currency markets (Forex exchange) and cryptocurrencies, stock exchanges, commodity markets, and goods markets. For these reasons, it can have a global character and be associated with different financial institutions.
Cryptocurrency Exchange and Financial Markets – Is It Profitable?
A trader’s workplace is the stock exchange, Forex market, or various cryptocurrency exchanges. Cryptocurrency exchanges, in particular, create an interesting space for investment and trading in financial markets. Why? It’s an open market that is not subject to state regulatory institutions. On one hand, this may mean a greater risk of unpredictable situations that we do not expect on traditional exchanges (flash-crash, trading suspension, etc.). However, it also offers a wide range of opportunities to make money, including through trading. A trader who properly manages their capital can achieve significant profits in a short time.
The Work of a Cryptocurrency Trader – Trading Strategies with Financial Instruments and Daily Life in Cryptographic Markets
Traders who engage in trading decide when to buy or sell assets to achieve the highest profits. Many traders operate on their own account, simultaneously acting as traders and investors. However, they sometimes work for others, including brokerage companies.
It is worth noting that the work of a trader often significantly differs from what we usually define as “being an investor.” An investor can simply choose a broker who will multiply the entrusted capital (preferably choosing an entity offering low spreads). A trader, on the other hand, deals with analysis and independently makes numerous investment decisions about when it is best to end a transaction to be successful.
Trading can be divided into many types, depending on the time horizon of the actions. However, these are usually short-term operations. Therefore, we can mention, among others:
- Day trading,
- Swing trading.
What trading plan should you choose? The first assumes closing positions after even a few seconds, while day trading means conducting transactions within one day. Swing trading focuses on short-term trends, which means maintaining positions for several days or weeks.
Trading strategies may also involve using not only one’s own funds. For many traders, the way to success is financial leverage, i.e., using borrowed funds (from a bank, an investor) to finance the purchase of cryptocurrencies (or other assets), assuming that the profit will more than cover the loan costs. Therefore, how much a trader earns depends on many factors.
Earning Through Market Technical Analysis in Trading – Currency Rates and Market Volatility
A successful trader (day trader or swing trader) primarily focuses on price fluctuations. Since trading concentrates more on short time perspectives, it requires thorough analysis to estimate the best time to open and close a transaction. A trader must also constantly monitor financial markets to quickly spot changing trends (also in the area of macroeconomic data). Where to find data? This is provided by archives of exchange rates, industry portals, and even social media. Actions can take place in various models, such as:
- Technical analysis,
- Fundamental analysis.
Each of these is useful in different trading strategies in cryptographic markets or other trading spaces. Technical analysis focuses on historical data (rates and results), checking prices and trading volumes. Fundamental analysis is much broader, as it focuses on the merits of a particular financial product, taking into account the situation of, for example, a particular cryptocurrency, social conditions, and potential applications in reality for the upcoming time. Therefore, these actions are better suited for medium and long-term investments.
What Qualities Should a Good Cryptocurrency Trader Have?
The chance to enjoy solid profits attracts many people who would like to try their hand as a trader and conquer the cryptocurrency markets. However, it is worth being aware that this is a profession requiring specific predispositions necessary in everyday work.
The basis is, of course, an interest in finance, backed by knowledge and constant monitoring of the market situation. A trader must know how the financial markets they want to trade on work. Cryptographic exchanges operate 24/7, which means that the opportunity for profit arises constantly. At the same time, however, there is a need for continuous control of trends and rates, as it is necessary to close the transaction of specific financial instruments at the right moment to avoid losses. The popularity of mobile devices has brought many benefits to the development of trading – they have led to better access to knowledge about financial markets and facilitate trading itself. General access to the Internet and online trading has aroused enormous enthusiasm among individual investors in recent years, making more and more people want to find themselves in the field of trading. However, it should be mentioned right away that it is not a profession for everyone.
A good trader must be patient, able to act under pressure, and be prepared that the unregulated working hours will often require certain sacrifices. Sometimes it is also worth using additional support and automation, which can be provided by trading bots, like our effective EazyBot. You just need to specify the exchange you want to trade on, choose a currency pair, and the tool will take care of executing transactions and closing them at the right moments.
Who Can Become a Trader? The basis of a trader’s operation is always a thorough analysis of data (tailored to a specific time horizon). This means the need for constant self-education and current market monitoring. Moreover, a trader must be able to act in stressful situations, flexibly adapt to circumstances, and make quick decisions on which the possibility of making a profit or incurring a loss depends. It is also important to be able to manage risk efficiently and responsibly, which minimizes the possibility of incurring a loss.
Professional Trading and Earning as a Trader – Summary
Trading is based on the purchase and sale of financial assets. A trader can work on their own account or act as a broker for other investors. Their task is to generate profits based on the difference in the purchase and sale price of various assets, including cryptocurrencies in recent years. This takes place on the classic stock exchange (or markets based on investment funds), the Forex market, or cryptocurrency exchanges. This type of work requires extensive knowledge, practical skills, time commitment, meticulous approach to technical analysis, as well as reliability and responsibility, regardless of whether one chooses to operate on cryptographic exchanges or trade traditional currencies. Thanks to this, the best traders achieve such good results. Beginner traders, however, often need a lot of time to generate profits and be successful.
Remember that every investment can involve a high risk of loss. Therefore, it is necessary to manage capital rationally and not unnecessarily expose funds (responsible risk management in the transaction of buying or selling financial instruments), and at the same time analyze the market to achieve increasingly greater profits.