Investing Techniques for Cryptocurrency Traders

Traditional traders a.k.a. day traders and swing traders have developed a formidable selection of trading strategies over the years. It’s a safe assumption that trading strategies exist for cryptocurrency too. A caveat is in order: no failsafe strategy can guarantee profits for any form of trading. There is an inherent degree of risk when trading volatile contrarian assets like Bitcoin, Litecoin, Ethereum, Ripple, and other digital currencies.

Multiple tracks currently exist for buying and selling cryptocurrency. These include the traditional methodology of purchasing the digital currency as an asset and storing it in a Bitcoin wallet. With this technique, cryptocurrency exchanges facilitate the purchase and sale of digital currency tokens. Profitability results when the underlying asset is sold for more than its purchase price. Profits are not realized until the asset has been sold, given the highly fluid nature of appreciation and depreciation with digital currency options. The ‘buy and sell’ approach requires the asset to appreciate over time.

Derivatives Trading of Cryptocurrency 

Before you pick a trading strategy, it is worth considering another trading option. Contracts for difference (CFDs) are derivatives trading instruments whereby a trader or investor purchases a contract that mirrors the performance of the asset. These CFDs do not confer ownership of any form of cryptocurrency – they are simple contracts which either expire in the money or out of the money. Cryptocurrency trading involves ‘Buy’ or ‘Sell’ options from a range of crypto trading possibilities.

Derivatives Infographic from Masterthecrypto

These include the likes of Ripple (XRP), IOTA, NEO, Litecoin, Crypto 10 Index, Bitcoin, Ethereum/Bitcoin, and Ethereum. The leverage offered on these options can be as high as 1:2, indicating that for every $1 that is invested, $2 worth of the underlying asset can be traded. With CFDs, there is no need to…

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