As per a recent news report, over 10 crores of Indians own cryptocurrencies. The number, in all likelihood, may go even higher during this festive season. However, similar to trading in equities and commodities, crypto trading is fraught with risks and pitfalls. In order to get long-term benefits from crypto trading, market enthusiasts need to develop strategies that can make trading fun and safe at the same time. Let us start by going through strategies that can help you get favorable returns.
The act of speculating on cryptocurrency price movements via a contract for difference (CFD) trading account, or buying and selling the underlying coins via an exchange is known as cryptocurrency or crypto trading. CFD trading is a type of derivative that allows you to bet on Bitcoin (BTC) price changes without possessing the underlying currencies. For example, you can go long (buy) if you believe the value of a cryptocurrency will rise, or short (sell) if you believe the value will fall.
Both are leveraged instruments, which means that you only need a little deposit, known as margin trading crypto, to have total exposure to the underlying market. However, because your profit or loss is still determined based on the total size of your investment, leveraging trading crypto magnifies both earnings and losses. Furthermore, cryptocurrency options are used by investors to reduce risk or increase market exposure.
Crypto options trading refers to the “derivative” financial instrument that derives its value from the price of another asset — in this case, the underlying cryptocurrency. Before even thinking about venturing into crypto trading, it is important that one has a comprehensive understanding of the assets and technologies involved. Bitcoin is the soil from which thousands of other cryptocurrencies have grown.