With The Introduction Of Bitcoin, A New Concept Was Added To The World Of Economics And Trading: Digital Currency Trading.

As digital assets slowly take over the world, trading in these assets has become increasingly popular.

Now it is no longer surprising if your father or maybe even your grandfather asks you what the meaning of trading is in searching for ways and means of crypto trading!

In this article, we will first explain the trade thoroughly. Also, we introduce the methods of trading and profiting from transactions and say on what basis the trader analyzes the market.

Then, we examine the types of trading and the difference between trading and investing. In the following, we will explain the secret of success in trading and what tips can make us better traders.

Whether you are a person with minimal information and knowledge of crypto trading or a relatively professional trader, we suggest you stay with us until the end of this article.

What is a trade, and who is a trader?

In Collins Dictionary, the word tradeThe act of wholesale or retail sale of goods and services in local markets or international markets, is defined in the form of export and import. Based on this, a trader is a buyer or seller of goods or services in different markets.

But if we want to examine the meaning of trading exclusively in digital currencies, the market in question will be the digital currency market. The purpose of trading in digital currency is the buying and selling of crypto assets, and the trader or digital currency trader buys and sells assets and services known as digital assets.

Specifically, speculating on digital currency price movements to profit from market fluctuations is called digital currency trading. The trader must be able to predict the best time to enter and exit the market to make maximum profit.

For example, you might buy two units of a digital asset for $1 and then sell it for $2.50. Thus, you are a trader who has made a profit of $1.50 from your purchase and sale.

How is trade or exchange made in digital currencies?

The best way to enter the digital currency trading world is to create an account on an exchange or a valid trading platform. Thus, automatically wallet (Wallet) you have also made in the business with which you buy and sell.

A trader wallet is a virtual safe from which you withdraw or deposit your assets. Note that it is better to create a personal wallet whose private keys you have and transfer your excess holdings in exchange for it.

Note that most digital currency exchanges’ private keys (Private keys) don’t give you your wallet. The private key is your means of accessing your assets, and without having a private key, the risk of losing your help is very high.

What are the trade steps?

After creating an account, you need to deposit some money into your account wallet. Your capital may be in the form of fiat currencies or digital currencies. Iranian users can only buy digital currency in domestic exchanges by depositing Rials.

To enter money into foreign exchanges, you must first buy a stablecoin or digital currency such as Bitcoin and Ether with Rial. Then, deposit the digital asset to the foreign exchange and exchange it with the desired help.

You probably know what cryptocurrency you want to trade now, and you’ll be up and running in just a few clicks. You can instantly click the buy or sell button and enter the exchange or trade process.

Also, it is possible to place orders on some trading platforms. On these platforms, you can register your order in the exchange so the business will automatically buy or sell for you after the price reaches the desired point.

The final step is to save the profit you made in the trade. At the first opportunity, transfer the profit from your transactions to your wallet and, under no circumstances, keep a significant amount in exchange for a long time. Never forget or ignore this step.

Types of trade in digital currencies

Many types of digital currency trading and professional traders use various strategies to increase their profits and productivity from market movements. In the following, we mention different kinds of digital currency trading you can follow and use according to your goals.

Day Trading

In day trading, you enter and exit the trade within 24 hours. This type of trading is usually done to profit from volatile currencies, where the trader pays attention to the market’s short-term movements within a day.

The day trader often looks at various strategies and tools of “technical analysis” to determine the best market entry and exit points.

Range Trading

Sometimes the market does not follow a specific up or down trend. In this case, we are dealing with a range or neutral market. Market traders range from resistance levels(Resistance) or support (Support) to determine their market entry and exit points.

A resistance level is the saturation point of buying demand that the price usually returns to after reaching (hitting). This means traders realize that the asset cannot grow further, and the need to buy decreases.

The support level is also called the point of saturation of the demand for sale, which the price returns to after hitting it, and it indicates a decrease in the market for purchase. Generally, range traders enter the trade in the support area and exit in the resistance area.

Scalping

Scalping trade is called immediate buying and selling of digital assets in high volume. For example, if you buy a Solana token for $24.20 and sell it for $24.28 a few minutes or seconds later, you have scalped. You might think that 8 cents aren’t worth the effort of making a deal, But as we explained, to increase the profitability of scalping trading, you need to trade in large volume.

In the example above, if you bought and sold 1 unit of Solana, you would have earned only 8 cents, which may even be damaging if you include the transaction fee; But if you buy and sell 2,000 units of Solana, the difference in the price of 8 cents is equal to a profit of $160 for you! Note that in the same way, if the market falls, you will have to leave your trade with a double loss.

Swing Trading

In swing trades, the trader usually does not worry about sudden fluctuations in the market. In swing trading, the trader considers a more extended period, such as a few days or weeks, for his trades. Then, according to his Analysis, he enters the transaction and exits after the asset price reaches the desired level.

In these transactions, if the trader has proceeded based on logical Analysis and knowledge of price patterns, he has probably identified the price ceilings and floors well. He is trying to make the most of mid-term or long-term market fluctuations.

Position Trading

Positioning is almost similar to investing and is done on long-term horizons. In this type of trading, the digital currency trader may remain in the same position for months or years after entering the buying or selling position. Traders in a particular place often seek to increase the asset’s value over the long term.

Of course, positioning is not exactly equal to investment. Investors often consider buying and holding their property a store of value. But the position trader enters the position to gain profit and exits it after some time (however long).

Types of Analysis in digital currencies

Market analysis refers to traders’ methods and tools to evaluate profitable market opportunities. The two main digital currency market analysis methods are 1—fundamental Analysis (Fundamental Analysis); 2—technical Analysis (Technical Analysis).

Fundamental Analysis focuses based on digital currency projects and technical Analysis of market movements in specific time frames based on historical price patterns.

Design: Farshad Motkalami © Erzdigital

In general, investors and long-term traders prefer to use fundamental Analysis. For this purpose, they fundamentally understand the fundamentals of the digital currency project, including the underlying technology, the network consensus algorithm, the token economy, the method of token distribution and rewards, the development team, project collaborations, the number of users and the acceptance rate of the project, and most importantly, prominent and influential news and events. They analyze the market.

Shorter-term traders often use technical Analysis and aim to predict price direction for appropriate positioning. This method uses historical data to identify technical analysis indicators and price patterns. In this method, the digital currency trader determines the best timing to enter and exit the market to gain maximum profit from price fluctuations.

What is the difference between investing and trading?

Trade and investment are intertwined concepts that are sometimes used interchangeably. Trading can be considered a type of investment, and investors use trading methods to increase their profit and capital.

However, investing is generally a long-term strategy to gain profit from digital assets, and investors believe that the price and value of the investment will increase in the long term. Investors are often more patient than traders, and sometimes without bothering to determine the right time to exit the deal, they keep their assets for years in the hope of increasing their value as much as possible.

Trading is a short-term strategy that uses market fluctuations over relatively shorter time frames to speculate on price. This speculation is sometimes done in the downward trend of the market. Traders struggle more to make profits in a shorter period; Therefore, they often spend a certain amount of time learning and teaching digital currency trading.

What are the critical trade terms?

If you plan to become a professional trader, you must know the essential words of the trade and what terms you deal with in this field. Next, we introduce five commonly used times in this field:

• FOMO: FOMO, an abbreviation of the term (Fear of Missing Out), is a trader’s fear and anxiety about losing an opportunity. Fomo can be a factor in making irrational trades without precise Analysis and simply because of not falling behind the wave of buyers or sellers of assets.
• Hodl (HODL): Hodl, which is a misspelling of the word Hold (Hold), meaning “hold,” is a widely used term that refers to the long-term holding and investment of digital currencies.
• ATH and ATL: Two other terms you’re likely to come across when valuing digital assets are “ATH” or “All-Time High,” meaning “the highest price the asset has ever seen,” and “ATL” or “All-Time Low,” representing “lowest.” is the asset’s date price.
• Bear and bull markets: A falling market is called a bear market. Conversely, rising markets are known as bull markets. Thus, traders who hope the market will increase are called Bullish Traders, and traders who plan their strategy anticipating a price drop are called Bearish Traders.
• Loss limit (Stop Loss): The loss limit or “stop loss” is the range that the trader considers to reduce the amount of his loss. No trader wants to lose his trade. But the fact is that there is always a percentage of transactions with loss, and wherever you prevent the loss, it is profit! By setting and ordering a loss limit in the exchange, the trader can avoid excessive losses and allow the trade to be closed automatically in case of failure.

If you are looking for the meaning of another term in the world of trading, we suggest that a glossary of digital currency websites take a look.

How to become a successful trader?

Many people may claim to know the main secret to success in trading, but there is no specific formula to guarantee the trader’s permanent success. Any trader with any level of experience and knowledge may misanalyze market behavior and lose some or all of their capital.

However, there are general methods that can reduce a trader’s probability of failure and make him a relatively more successful trader. In the following, we briefly mention some of these solutions:

Have a trading strategy.

Determine your trading goal and plan to manage your capital, and determine your entry and exit points. Backtesting, which is called testing and evaluating the effectiveness of a trading strategy based on historical market data, is one of the methods that can help you choose the best possible trading strategy.

Control your excitement.

Stick to the trading strategy and rules you have set for your trade, and don’t get caught up in the market’s temporary emotions. Try to know your feelings and excitement when trading and avoid the fumo. Digital currency traders face dozens of hot and buzzing news in this field every day. But only professionals can calmly measure the accuracy of the information and stay true to their initial strategy.

Look into the trade as a part-time or full-time job.

If you want to become a professional, trading should not be your game or hobby. Commit to acquiring more knowledge in the field of market analysis and increase your experience in this field as much as possible. Trade is a business that has its capital, cost, loss, profit, tax, stress, uncertainty, and unique risks. So, to progress in this business, you must take it seriously and try to improve.

Design: Farshad Motkalami © Erzdigital

Manage your capital.

Like many other traders worldwide, you may be putting money into the digital currency market you have saved after days and nights of hard work. However, we must say that the risk of the crypto market is very high, and you may lose all the capital of your years of effort overnight. So it would be best to have a comprehensive plan for money and risk management of your transactions.

Be updated.

A successful trader constantly gains experience, knowledge, and updated information from the market. Learn different market analysis methods and improve your understanding of analysis and trading tools. Also, follow the latest market news and assets and participate as much as possible in crypto-related discussions on social networks such as Twitter.

Never trade money you can’t afford to lose.

Trading is a world of unpredictable events, and no professional or novice trader has not tasted failure and loss. So definitely, one of the riskiest things you can do is put money into the market that you need or don’t want to lose.

What are the advantages and disadvantages of trade?

Trading digital currencies are full of profit and loss. Before you seriously think about trading, it is better to familiarize yourself with the advantages and disadvantages of this space.

What are the advantages of trading?

• Hedging: Decentralized networks like Bitcoin and other digital currencies can store value and adequate risk coverage against fiat currency market inflation and excessive money printing by central governments. When traditional markets such as the stock market are depressed, investing in the crypto market can be one of the alternative options for professional traders.
• Elimination of intermediaries’ fees: digital currency transactions are carried out peer-to-peer without the involvement of third-party entities. Therefore, these assets’ trading fee is much lower than other financial products and does not include miscellaneous costs such as stock exchange brokerage fees and government taxes.
• Global Network: Anyone with some money and internet access can create an account and trade in digital currency networks. The digital currency market allows people without traditional banking services to enter the trading world. Financial status, work background, and relationships with prominent people in the conventional financial system do not affect people’s access to blockchain networks.
• Continuous access: You don’t need to wait for the market to “open” or “close” to trade cryptocurrencies. At any time of the day and with a few clicks, you can access your digital currency balance in the market and buy and sell.

What are the disadvantages of trade?

• Brief historical background: Digital currencies are still not mature, and some problems of blockchain networks, such as poor scalability or unreasonable fees during network traffic, have not been fully resolved. Unlike precious metals and other traditional assets, digital currencies have a relatively short history and have yet to stand the test of time. This issue makes more traditional traders or people not interested in new technologies less trust this space.
• Volatility and high risk: The freshness of the digital currency market, in addition to the importance of the principle of supply and demand in this market, makes crypto assets volatile and associated with high risk for traders. Stock and asset prices in traditional markets often change slowly. Meanwhile, the percentage of daily change in the price of some digital currencies sometimes reaches three digits. Although extreme price swings can make some traders overnight billionaires, the same swings in bear markets can cause traders to lose a lifetime of hard-earned capital.

Frequently asked questions

What is trade?

The buying and selling of goods or services are called trade or trading. In digital currencies, trading is buying and selling crypto-based assets and products, often done in short periods to profit from market fluctuations.

Who is the trader?

A trader is a person who uses different methods and tools to analyze the market to determine the best time to trade and the best possible points to enter and exit the market. The trader may explore the market and buy and sell in different time frames.

What are the types of trading methods?

Traders can use different trading methods to earn profit and trade in the market. These methods include periods of several seconds (scalping) to several weeks (swing trading). They are based on different trading strategies planned based on technical or fundamental market analysis.