What is cryptocurrency trading?

Crypto trading is simply speculating on cryptocurrency price movements using a CFD trading account or buying and selling the primary coins through an exchange.

What is cryptocurrency trading?

Crypto trading is simply speculating on cryptocurrency price movements using a CFD trading account or buying and selling the primary coins through an exchange.

CFD trading on cryptocurrencies

CFDs trading are derivatives, which allows you to speculate on cryptocurrency price movements without taking ownership of the primary coins. You can take a long position ('buy) if you think a cryptocurrency will rise in value, or take a short position ('sell') if you think it will fall.

Both are leveraged products, implying that you only need to put up a small deposit called margin – to gain full exposure to the underlying market. Your loss or profit is still calculated according to the full size of your position, so leverage will increase both profits and losses.

Buying and selling cryptocurrencies through an exchange

When you buy cryptocurrencies using an exchange platform, you purchase the coins themselves. You will have to open an exchange account, put up the complete value of the asset to open a position and store and save the cryptocurrency tokens in your own wallet until you are ready to sell.

Exchanges, on the other hand, bring their own steep learning curve as you will need to get along with the technology involved and learn how to utilize the data. Many exchange platforms also have limits on the amount you can deposit, while accounts can be quite expensive to maintain.

How do cryptocurrency markets work?

Crypto markets are decentralized, which implies that they are not backed or issued by a central authority such as a government. Instead, they run across a series of computers. Nonetheless, cryptocurrencies can be bought and sold through exchanges and stored in 'wallets.'
Unlike traditional currencies or paper currencies, cryptocurrencies exist only as a shared digital record of ownership and stored on a blockchain. When you want to send cryptocurrency units to another user, you will send them to that user's digital wallet. The transaction process is not considered complete until it has been verified and added to the blockchain via a process called mining. This process is also how new cryptocurrency tokens are normally created.

What is blockchain?

A blockchain network is a shared digital register of recorded data. When talking about cryptocurrencies, it is the transaction history for every unit of the cryptocurrency, which shows how the ownership has changed over time. Blockchain works by recording and keeping transactions in 'blocks,' with new blocks added at the front of the chain.

What moves cryptocurrency markets?

Crypto markets move according to demand and supply. However, as they are decentralized, they appear to remain free from many of the economic and political concerns that affect fiat currencies. Although there is still a lot of uncertainty around cryptocurrencies, the following factors can have a lot of impact on their prices:

• Supply: This is the cumulative number of coins and the speed at which they are released, lost, or destroyed
• Market capitalization: It is the value of all the coins in existence and how users see this to be developing
• Press: This is the way the cryptocurrency is conveyed in the media and how much exposure it is getting
• Integration: the length to which the cryptocurrency easily integrates into pre-existing platforms and infrastructure such as e-commerce payment systems
• Key events: These are major events such as regulatory updates, economic setbacks, and security breaches

How does cryptocurrency trading work?

With IG, you can trade cryptocurrencies through a CFD account – derivative products that allow you to speculate on whether your chosen cryptocurrency will fall or rise in value. Prices are displayed in traditional currencies such as the US dollar, and you can't take ownership of the cryptocurrency itself.

CFDs are leveraged products, which implies that you can open a position for only a fraction of the full value of the trade. Although leveraged assets can magnify your profits, they can also magnify losses if the market goes against you.

What is the spread in cryptocurrency trading?

The spread in the cryptocurrency market is the difference between the sell and buy prices quoted for a cryptocurrency. Just like many financial markets, when you open a position on a cryptocurrency market, you will be presented with two prices. If you want to open a buy or long position, you trade at the buy price, which is just above the market price. If you want to open a sell or short position, you trade at the selling price – slightly below the market price.

What is a lot in cryptocurrency trading?

Cryptocurrencies are often traded in lots – batches of cryptocurrency tokens used to standardize the size of trades. As cryptocurrencies markets are very volatile, lots tend to be quite small: most are just one unit of the base cryptocurrency. Nonetheless, some cryptocurrencies are traded in bigger lots.

What is leverage in cryptocurrency trading?

Leverage is the act of gaining exposure to large amounts of cryptocurrency without having to pay the full value of your trade upfront. Instead, you put down a small deposit, called margin. When you close a leveraged position, your profit or loss is based on the full size of the trade.