Cryptocurrencies: how do trading platforms work?

To get started in cryptocurrency trading, the best solution is to use an online broker, also called a broker. But be careful, to choose the best platform of this kind, several elements must be taken into account.

Bitcoin, Ethereum, Ripple, Dogecoin, LiteCoin … cryptocurrencies are popular and represent an attractive financial asset. When it comes to crypto investing, several schools compete against each other. One vision is to save cryptocurrency with a long-term goal, which is called stacking. Another strategy is to bet on the price movement down and up to buy at the right time and then sell at a high price. This is trading, a much shorter-term technique that can allow you to make profits quickly.

CFD trading via a broker

To trade cryptocurrency, the best solution is to use an online broker, also called a broker. To choose the best platform of this kind, several elements must be taken into account: the amount of the various fees, the compatible financial assets, customer service or the tools and functionalities made available to the user. eToro is one of the most well-known online brokers, but we can also mention AvaTrade, Libertex, Admiral Markets, XTB and many others.

By going through one of these services, you will then be able to access the famous CFD (Contract for Difference) trades. It is essentially a matter of concluding a contract with a broker, who will act as an intermediary for the trading. This is a popular method that is used in the world of finance far beyond cryptocurrencies, for trading commodities, currencies, stocks, indices …

CFD trading does not involve the real asset (we only speculate on the evolution of its value) and works independently of the market, which makes it more flexible than direct buying and allows you to benefit from more leeway: access to foreign markets, leveraged trading, fractional shares and short selling. Leverage in particular is a very popular mechanism, which allows you to quickly increase your investment capacity in order to react quickly to market fluctuations. Concretely, the trader borrows money from his broker to increase the return on his investment. A device to be used sparingly, therefore, taking into account what we can and cannot afford.

Buy & Hold vs Day Trading vs Scalping

Thanks to the tools made available by brokers, the crypto trader will be able to set up his trading strategy. Three main axes stand out in this area.

Buy & Hold is the process of keeping assets for the medium or long term and betting on general trends rather than micro-movements. This technique is less stressful than the others because the investor does not have the feeling of losing or winning money as soon as the price moves. It involves having confidence over time in the acquired cryptocurrency.

Day trading is well suited to CFD trading as well as leverage. As the name suggests, this is about buying and reselling cryptocurrency in a single day, and therefore speculating on the change in its price in terms of hours only. Most brokers charge overnight funding fees, which means you are charged low interest if you want to hold assets overnight. Day trading avoids these costs.

Scalping is the most aggressive, but also the most intense and stressful trading method. Done well, however, it can lead to very interesting short-term gains. We use the same principle as Day Trading, but this time, it is not on a fluctuation of the price over hours that we are going to bet, but rather over a few minutes, or even a few seconds.
Online trading platforms and brokers abound, so be sure to educate yourself thoroughly about them and the benefits they offer their clients before embarking on such transactions.

Define automatic actions

To limit the risks when trading with CFDs, especially if you activate leverage, any good online broker offers tools to define thresholds beyond which you choose to resell your assets, and whatever the market is in your favor. or unfavorable.

With Stop Loss, you decide on a low value limit for the cryptocurrency (s) you are trading with. If the price of the crypto goes down and reaches this threshold, your assets are sold automatically in order to limit losses. One of the advantages of CFDs is that the user has control over the Stop Loss, which he decides for himself. By using other mechanisms, Stop Loss can be predefined and immutable.
In the same vein, Take Profit is a threshold beyond which your assets are automatically sold. But this time the cryptocurrency has risen in value and you choose to sell for a profit before taking the risk of the price falling again.
It is strongly recommended, even essential, to set up a Stop Loss for trading purposes. Taking Profit is more optional and will depend on your goals.

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