Experienced traders, regardless of the market being traded, understand that what and when to trade is critical. Timing is everything. Some of the largest gains in stock market history were realized on the day of its greatest crash. Skill and experience is needed to successfully buy the bottom and sell when an asset’s price rises. Knowing which assets will deliver the market moves needed to turn a profit is equally important, but timing is hard to master.
Researching What to Trade
The term “trading pairs” is used to describe a trade between two crypto currencies and can be tricky to understand. Using trading pairs is how traders swap coins without ever leaving the crypto market. For example, let’s assume you have USDT (Tether) and BTC (Bitcoin), and you want to buy LTC (Litecoin). Tether is a stablecoin pegged to the US dollar and the price changes very little, so think of it as cash.
LTC/BTC Trading Pair:
If Bitcoin’s price increases by 10% and Litecoin’s cash value doesn’t move – at that point, you can buy more Litecoin with your Bitcoin than your Tether. If your goal is to accumulate more Litecoin because you think its price will increase, and Bitcoin’s will not – then your trading pair is LTC/BTC vs. LTC/USDT.
Knowing which “trading pairs” are best and when to enter/exit a trade takes time and experience to master.
A trade doesn’t always go as planned, though. If you use your Bitcoin to buy Litecoin, only to see Bitcoin continue to go up another 10% while Litecoin gains 2% – then you just missed an 8% gain by using BTC instead of USDT. In this example, the trader needs to have a feel for what Litecoin and Bitcoin are likely to do in order to choose the best trading pair. There are times when staying in cash (USDT) or Bitcoin is the better option and this is where expertise enters the equation. When to trade can be determined by using tools, indicators, and services that prove not to be “so easy” for beginners.
There are over 2,000 assets in the crypto market besides Bitcoin, but not all are suitable to trade. Market capitalization, volume, price, and popularity play a role in selecting the right trading pair. Most successful traders stick to the Top 20 or Top 50 coins because they have good liquidity.
The main factor in choosing a suitable trading pair is liquidity. Those coins with low liquidity will not result in always having buyers. USDT has become a popular base cryptocurrency because it is pegged to the USD while providing all the benefits of crypto. The most widely used base currencies are BTC, LTC, ETH, USDT, and BNB.
Learning How to Trade
While timing is hard to master, some traders also realize that moving slowly with lower amounts can provide a larger margin for error. By entering a trade slowly, using small percentages of capital, a position can be added to at higher levels to generate a more averaged price.
If, for example, a trader has 0.1 BTC to trade and enters a position with only 0.025 worth of the other coin in the pair. If the coin continues to go up, the trader buys another chunk, and so on until the 0.1 BTC is spent. At this point, the trader can average the buy price to calculate the final gain when the trade is exited. Should the coin’s price drop, not all of the 0.1 BTC will have been invested, and the same can be done to buy the coin in small increments on the way down.
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Traders use both fundamental analysis and technical indicators to make buying or selling decisions. New investors that don’t have the time to learn when to trade can be better served by copying the trades of experts. This option not only ensures a higher level of success than what a novice might otherwise achieve, but it also offers the chance to learn from a professional simply by observing.
Knowing when to Trade?
The cryptocurrency market is traded across a number of exchanges, not on regulated exchanges like stocks and commodities. Unlike the stock market, crypto trades 24/7, and successful traders transact when global activity is high. Peak trading hours are usually between 8:00 AM to 4:00 PM in a trader’s local region.
So why is this important in a market that never closes? Because each global market reacts differently to news headlines and happenings. News stories that might elicit a quick market reaction in the USA could have little to no effect on the Asian markets, and vice versa. Some countries, like South Korea, play a big role in moving the prices of certain crypto coins. When to trade so easy is not necessarily so easy to determine. However, when opting to copy the trades of experts, an investor can benefit from the actions of multiple traders from different parts of the world.
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Trading cryptocurrency is a speculative, complex undertaking that involves volatile assets. What and when to trade is not as easy to determine as it may appear. Many new to crypto have bought as a result of nothing but FOMO (Fear of Missing Out), only to lose when the coin takes a nosedive. Just as you would not buy real estate assets on a whim, without checking the area, property taxes, surrounding neighborhoods, schools, etc. – neither should you buy crypto assets without learning the market and exercising caution. Contrary to popular belief, the time to buy is not when everyone else is buying. Amazingly enough, the best time to buy Bitcoin is when everyone else is selling it, and as close to the point where they stop as possible.