About crypto trading in 2022

As a traditional stock like altcoin signals or crypto trader, or as a newcomer to trading, you may feel out of touch with the current hot topic of cryptocurrency CFD trading. As cryptocurrencies gradually become the center of attention of the entire financial world, it’s time to find out what steps you need to take to become a crypto trader – and at the same time be successful.

If you already have experience trading financial instruments in the markets, you are already one step ahead. While many standard trading rules apply in crypto trading, given the incredible volatility and therefore risk associated with trading Cryptocurrency CFDs, you should approach your trading strategy and risk management accordingly.

What separates a successful crypto trader from the rest? More importantly, how can you become a better crypto trader? Learn about it in our guide on how to become a cryptocurrency trader.
Option 1: Buy and sell cryptocurrency on an exchange
This is an option to buy cryptocurrencies directly on a crypto exchange, thanks to which you become the owner of the underlying cryptocurrency asset.

This option certainly has advantages, however, they are only relevant if you want to keep investing and storing cryptocurrencies for a long time, and not to conduct short-term trading. Buying and holding cryptocurrencies directly on an exchange can be risky, as exchanges can be hacked by hackers, they are often (not always) unregulated, and you will be charged a fee to buy and sell.

In this case, the trader must purchase the position for its full value and then store the cryptocurrency in a secure wallet until they are ready to sell it at a profit or loss. This option is very similar to traditional investing, where an investor buys physical assets, like shares of a public company, and holds them for a long time, expecting them to appreciate in value However, in the case of cryptocurrencies, their high volatility in the long term is the main reason why many traders and investors prefer short-term trading.

For example, the hourly chart below shows just how volatile the BTCUSD pair is:

Cryptotrader: BTCUSD chart
Source: Admirals MetaTrader 5, BTCUSD, H1 – Data range: October 13, 2021 to October 18, 2021 as of October 18, 2021 at 15:03 CET. Please note: past performance is not a reliable indicator of future performance.
Option 2: Cryptocurrency CFD Trading
The second option is to trade cryptocurrency CFDs with a regulated broker. This option is suitable if your strategy is short-term.

Such a crypto trader can use leverage, which will allow you to open positions of large volumes, while making a small deposit. You can learn more about the benefits and risks of leverage in the article What is Leverage in Trading?.

Cryptocurrency CFD traders can also “short” or “go short” Cryptocurrency CFDs, thus profiting when the market falls. Considering the uptrends and downtrends in the BTCUSD chart above, using CFDs could be the key to a successful strategy.

Of course, there are downsides to CFD trading. Any changes in the market represent a risk to your capital, so they need to be monitored. Liquidity risk also needs to be considered when trading CFDs as market conditions can change quickly and existing contracts can become illiquid. Of the two options above, trading cryptocurrency CFDs offers more benefits than buying cryptocurrencies on an exchange. However, this is just one difference to consider. Let’s look at other aspects to consider when learning crypto trading.

In conclusion

The right approach to learning how to trade cryptocurrencies is to get to know the markets on a demo account. Crypto traders can test their trading ideas and theories in a risk-free virtual trading environment by placing cryptocurrency CFD trades without using real funds.