Cryptocurrency Investment StrategiesOctober 31, 2022
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Activities in financial markets vary. This is also true for cryptocurrency exchanges, where strategies are used to generate significant profits. One of the solutions many people opt for is online trading.
What is trading? What distinguishes it and how do you become a trader? How do CFD contracts work? How to invest to earn well? We will write about all of this below.
Cryptocurrency Trading – Where to Invest Besides the Forex Market?
Trading is an investment and trading strategy used in various financial markets. Many investors operate in spaces such as the Forex market and traditional stock exchanges. However, these are not the only places where trading is a viable option.
What can you earn from? Investors reach for all types of financial instruments – stocks, bonds, currencies, precious metals. A good trader can make profits through short-term investments. Their earnings depend on their ability to analyze the market and their chosen strategy. According to research data collected by Sedlak & Sedlak on the website wynagrodzenia.pl, the average earnings of professional traders are around 7,500 PLN gross. However, it is possible to achieve much better results.
For those involved in financial markets, cryptocurrency online trading offers interesting opportunities. Let’s focus on it to better understand what trading is and what makes a good cryptocurrency trader.
Online Trading and Cryptocurrency Trader – Definitions
What is cryptocurrency trading? It involves buying a specific virtual currency within a chosen cryptocurrency pair, then selling it at a profit in a short time. This near-term investment perspective distinguishes trading from classic investing, where the strategy is to buy and hold assets for many years. Various strategies can be employed in online trading, including financial leverage mechanisms, to multiply the profits.
The person engaged in trading is called a trader. They may trade on cryptographic markets professionally or use it as an additional source of passive income to diversify their investment portfolio as much as possible, providing greater financial security and budget stability.
CFD contracts in online trading – what does online trading involve?
Trading in various investment areas, including cryptocurrency markets, involves CFDs (Contracts for Difference), allowing investors at different stages of development to achieve substantial profits. CFDs are complex financial instruments used across multiple markets. When conducting a CFD transaction, one buys or sells units of a financial instrument (CFD contracts). If it’s anticipated that the price of an asset (e.g., cryptocurrency) will rise, one buys CFDs and opens a long position. Conversely, if a price drop is expected, one sells contracts and opens a short position. Thus, it’s possible to earn both when prices rise and when they fall, provided the market movement is correctly predicted.
CFDs are leveraged financial instruments, meaning only a fraction of the transaction’s full value is required to conduct a trade. The amount needed to open a position in CFD trading is called a margin deposit. It’s important to remember that due to leverage, CFDs can significantly multiply both profits and losses.
Types of Online Trading as a Form of Profitable Financial Instruments
Trading is one of the fundamental short-term investment strategies in the cryptocurrency markets. It comes in many forms, depending on factors such as the duration of the investment or the trading style.
In the first case, one can use strategies like scalping (minutes-long activities), day trading (one-day), swing trading (several days), or position trading (even several weeks). However, this is always significantly shorter than the classic investment perspective in the cryptocurrency markets, where investors plan to buy and hold virtual currencies for several years.
Another criterion for differentiating trading is the method of trading. An interesting example is social trading, where investment decisions are made based on the analysis of strategies of other, more experienced traders. If a trader wants to use external financial resources for investment, they can opt for prop trading, in which they collaborate with a prop trading firm that supports them in generating profits. This is one form of so-called margin trading (trading with leverage), where trading is done using borrowed money.
Not Just Forex Trading – How to Earn Money with Cryptocurrencies?
How to Start Trading Cryptocurrencies with a Short-Term Investment Perspective? The foundation is, of course, a good trading plan, which includes elements such as defining:
- budget and investment method,
- investment area (choosing the exchange),
- currencies for trading (bitcoin, altcoins, stablecoins, etc.),
- trading strategy.
Let’s not forget that both Forex trading and online trading on cryptocurrency exchanges require extensive knowledge and skills, including the need for continuous trend analysis (technical and fundamental analysis) and monitoring the behavior of selected cryptocurrency pairs on various exchanges.
It’s no wonder that for beginner investors who want to profit from trading CFDs or other financial instruments on crypto exchanges, finding the right broker can be extremely important. Trading online directly on cryptocurrency exchanges can often be too complicated. How to choose a person to cooperate with? The best would be a broker specialized in trading the cryptocurrencies of interest to the investor. They should also offer low spreads.
For both advanced and beginner traders who want to conduct their own activities, the use of bots, such as our EazyBot, can be a great support. What is it? These are tools that automate cryptocurrency trading on various exchanges. Just create an account and connect it to the chosen exchange to create your own bots that continuously monitor the crypto markets and control the rates on behalf of the investor to maximize profits. The aforementioned EazyBot can close up to 99% of profitable transactions, helping to generate a profit of up to 10% of the invested funds.
How to choose the right bot? It is worth selecting one that matches your trading style, strategy, and the exchanges where you want to buy and sell cryptocurrencies. You should also check the costs associated with using the bot, such as commissions and minimum deposit.
Financial Instruments for Less and More Experienced Traders – Effective Cryptocurrency Trading
What is trading? It involves short-term investments and activities aimed at making a profit from the difference in exchange rates, where financial leverage can also be helpful. It can be applied in various financial markets, including cryptocurrency markets, to increase savings or protect them from the effects of inflation.
Beginner traders can benefit from the support of brokers and the automation of cryptocurrency trading, provided by practical tools like EazyBot, to improve the effectiveness of their investment decisions. To learn more about how crypto bots work, we encourage you to read our article: ‘CryptoBot – What is it?’. With these tools, it is really possible to increase profits from cryptocurrency trading, even without extensive trading experience.
However, let’s not forget that every investment always carries a high risk and can generate financial losses. Therefore, before making investment decisions in the cryptocurrency markets, it is important to carefully consider your strategy to make trading truly profitable.