How to Trade Binance Coin In 2021
Binance Coin (BNB) is the native token of the cryptocurrency exchange Binance. Since its launch in 2017, it has quickly grown to become one of the most valuable cryptocurrencies. It has become popular among traders who buy and sell tokens for a profit using price predictions determined by market analysis.
This tutorial explains how to trade Binance Coin. It will teach you how to make price predictions using fundamental and technical analyses. Anyone interested in trading Binance Coin should understand that it’s a time-consuming activity: making real profits will require you to remain up to date on market trends and BNB-related news
What is Binance Coin Trading and How is It Different from a Standard Purchase?
Binance Coin trading involves buying and selling derivatives that base their value on the market price of BNB tokens. It is different from buying BNB tokens from an exchange. Usually, when you buy Binance Coin from an exchange, you have two options: transfer the tokens to an offline cryptocurrency wallet for long-term storage, or keep them in your exchange wallet and acquire loans using your tokens as collateral.
Trading doesn’t require you to hold any Binance Coins. Regardless of what you have in your wallet, you can instantly buy and sell BNB derivatives from brokers or exchanges. It’s a much faster way to make profits than holding on to your tokens as a long-term investment. Trading platforms offer traders three options:
- CFDs – Contracts for Difference (CFDs) are trade contracts that speculate on the price of Binance Coin. The contract is made between the trader and the trading platform. You don’t need to hold BNB tokens to buy or sell CFDs.
- Futures – A futures contract is a time-bound agreement to buy or sell BNB tokens for a predetermined price at a specific date in the future. The contract could expire in a week or in six months.
- Options – Options are similar to futures, except traders are given the right (rather than an obligation) to make a trade on the specified settlement date. This offers greater flexibility than futures contracts, and as such options contracts themselves have a cost, called a ‘premium’.
Always use registered platforms for Binance Coin trading. Brokers and exchanges that comply with financial regulators are less likely to defraud or scam traders. Profitable trading requires you to use a platform that aligns with your goals. While there is no way to guarantee positive returns, you can set yourself up for success by choosing trading platforms that offer educational resources and quick customer support. Some platforms even let users practice trades in a sandbox environment before using real money.
The services trading platforms offer will vary depending on factors such as location, available derivative types, and investor risk level. Keep all of this in mind when you’re defining your trading strategy if you want to get the best out of Binance Coin trading.
New traders often turn to social trading as they get their feet wet. Social trading involves copying the movements of seasoned traders. It’s a great learning tool, but it has some pitfalls. Veteran traders often have deeper pockets and can take bigger risks. The losses that are catastrophic for you may not be as big of a deal for them, so tread carefully.
Where Can I Trade Binance Coin?
There are many options available for trading Binance Coin. Below is the list of some of the best trading platforms for BNB trading.
Online brokers are trading platforms where traders can invest in Binance Coin by speculating on its market price. You don’t buy BNB tokens on these platforms; you instead buy derivative contracts that give you ownership of your original funds plus any profit/loss you make when the contract expires. With a few exceptions, almost every trading platform offers derivatives tied to the market value of BNB tokens.
Benefits of Using a Broker to Trade Binance Coin
Trading on an exchange involves actually buying the digital currency and waiting for its value to increase before selling it for a profit. It’s not a bad strategy, but brokers offer a simpler alternative. For starters, you don’t need to buy BNB tokens; you can simply buy any of the available contracts and then sell them once you reach your desired profit target.
Another benefit of using a broker is leveraged trading, which gives traders the ability to multiply their exposure to the market and increase profitability. Some broker platforms allow as much as 100x leverage. Since Binance Coin is a cost-effective digital asset, you can start trading with a low amount and amplify your position with leverage.
Broker platforms, or at least reputable ones, are also compliant with regulatory authorities. That means better security for users and legal rights in the event of a hack or other adverse event. Reputable brokers are also transparent about the different fees they charge. Experienced traders often prefer brokers because they offer clarity and a variety of trading tools for executing trades.
Cryptocurrency exchanges originally provided users with a simple platform for buying or selling digital assets. Over the years, they have evolved to offer a variety of additional services, including the ability to trade derivatives. You can now use exchanges to do what usually required a broker platform.
Binance Coin exchanges like Binance, OKEx, and Huobi are good examples of platforms that offer derivatives like futures and options. They also feature leveraged trading for traders with a greater appetite for risk.
Benefits of Using an Exchange to Trade Binance Coin
Whether you’re using a broker or an exchange, the goal of every trader is to generate profit. However, using an exchange has its advantages. Rather than just trading in contracts tethered to the price of Binance Coin, exchanges allow users to actually buy and hold BNB tokens. Traders can withdraw their tokens at any time.
Exchanges also tend to support a wider range of cryptocurrencies (e.g. Binance, which supports more than 150 cryptocurrencies), meaning traders will have more options for deposits and withdrawals. Traders will also have a better selection of BNB trading pairs.
Exchanges are easy to use; they offer novice traders a simplified way to execute trades without having to deal with the complex contracts brokers typically offer. Many exchange platforms also support leverage trading, which means even new traders can try their hand at amplifying their market exposure.
Our Step-by-Step Guide on Binance Coin Trading
The trading process can understandably seem complicated to novice traders. We’ve created a detailed guide with all the steps you need to take to start trading Binance Coin.
1. Combine Fundamental and Technical Analysis
Being a successful trader will require you to take a deep dive into all the available information about Binance Coin. Traders typically use fundamental and technical analysis to inform their trading positions. Here’s what those terms mean:
- Fundamental analysis uses internal and external factors to determine the value of Binance Coin. Traders then leverage that information to strategically enter or exit positions. This analysis consults news, developments, and other qualitative properties of BNB.
- Technical analysis uses price action and volume data to predict future price movements of Binance Coin. Traders use price charts, market trends, and patterns to identify the best points to enter and exit positions. This kind of analysis is quantitative in nature.
A combination of both methodologies is favoured by experienced crypto traders. It’ll give you a well-rounded understanding of the market and help you develop a complete trading strategy.
2. Choose a Trading Strategy
Trading strategies are fundamental to your success as a trader. There are many different kinds of strategies. Here are a few:
- Scalping – The price movement of Binance Coin can make minor fluctuations that occur in seconds or minutes. Scalping takes advantage of those minute changes to make very small profits. Scalpers execute numerous trades in one day, and those tiny profits can add up to a good amount in 24 hours.
- Day trading – Day traders capitalise on short-term price movements in a day, hence the name. Unlike scalpers, day traders open and close positions over several hours. Their goal is to make as many profitable trades as possible before the end of the day. It’s an active strategy that requires frequent monitoring of the market.
- Swing trading – This strategy involves capturing BNB price movements over a period of days or weeks. It’s a great strategy for beginner traders because it requires a more passive approach than day trading. The returns are also often more sizable.
- HODL - “Hodl” is a spelling mistake that became a meme and is now synonymous with staying strong when the market dips. “Hodling” or holding simply involves holding on to your BNB tokens for months (or even years) and selling when there’s a huge rush.
- Hedging – Hedging takes an opposite approach. It involves strategically opening positions that are the opposite of your main trades. Taking hedged positions is a good way to protect your wealth in case the market takes an unexpected downturn. When the price falls, you can immediately liquidate your BNB tokens and mitigate your losses.
There are many more trading strategies. Each has its benefits and drawbacks. It is up to you to decide which ones work best for you and then stick with them.
3. Select an Appropriate Platform for your Needs
Now that you know about market analysis and trading strategies, it’s time to pick a suitable platform for your trading needs.
Decide whether you want to use a derivative exchange or a broker. They both offer similar services, but a broker is a more dedicated trading platform. Brokers cater to experienced traders by offering a platform that complies with financial regulators and supports larger volume trades for smaller fees. On the other hand, exchanges also comply with regulators and offer some of the features you’d find on broker platforms, such as leverage trading. Traders with high-risk profiles will feel right at home on a derivative exchange, as will new traders who have previously purchased coins on an exchange.
Regardless of what type of platform you end up choosing, make sure it is properly registered. Numerous trading platforms have been shut down over the years for non-compliance, and some even turned out to be outright scams.
4. Setting Up Your Account
Once you’ve picked your ideal trading platform, the next step is to set up your account. Most platforms have a standard sign-up procedure that requires a username, password, and email address.
After you’ve verified your account, you will have to go through the Know Your Customer (KYC) identity verification process. The KYC process is required as a measure against money laundering, fraud, and other criminal activity.
Trading platforms will either make it a part of the sign-up procedure or ask you to complete it separately. Verifying your identity is a necessary step on any reputable trading platform. The typical KYC verification process will require you to provide a copy of your government-issued ID and proof of address. Some platforms may additionally request proof of your income source, and even a selfie to verify your identity.
Once you are verified, you should now be able to deposit cash or crypto into your trading account. Go to your account wallet and look for the ‘Deposit’ option. Trading platforms offer a variety of options to send funds to your account, including direct bank deposit, crypto transfer, credit/debit card, PayPal, and more.
5. Prepare your Trading Position
The next step is to choose your trade position. The platform should have a dedicated trading interface. While different platforms tend to have different interfaces, they all share similar elements. These include trading graphs, order books, executed trades, available trade options, your open positions, and so on.
Below are some examples of interfaces:
All of the different trading jargon may be a little overwhelming if you’re new to Binance Coin trading. Below are some common terms used in trading that you should know about:
Short or Long Position?
Buying BNB tokens with the expectation that the price will rise is called taking a long position. If your fundamental and technical analyses point at the price of Binance Coin going up, then you take a long position. It’s a quick way to make money and is the most common way to invest.
The opposite of a long position is to take a short position. If you go short, then you expect the price of Binance Coin to drop. Going short typically involves borrowing BNB derivatives and immediately selling them on the market. You then wait for the price to drop before you buy back the derivatives and return them to the broker or exchange. You get to pocket the difference.
Taking a short position is a great way to make a quick profit, but it’s also very risky. The price of BNB could suddenly rise just after you sold your borrowed coins, and you may end up making a steep loss buying back the coins to pay off your debt.
Limit or Market Order
A market order is a trade that’s executed as fast as possible at the current market price. A limit order is a trade that isn’t executed until a minimum or maximum price is available. For the latter, the trader gets to set whatever limit price they like. Limit orders are generally preferred for this reason; they give traders better control over the price of trades.
Limit orders can take time to execute because it may be a while before the market reaches the level you want. However, if your cost-benefit analysis is correct, then it will be worth the wait.
Trade Position Amount and Leverage
Your trade position amount refers to how much you place in the order. Some trading platforms also give traders an edge through leverage trading. Using leverage, a trader can gain more exposure to the market by opening a larger position than their trade position amount. The broker platform or exchange extends credit to the trader in this case.
Leverage is defined in ratios, such as 10:1, which would mean 10x leverage. For example, if you have $100, you could use leverage to open a Binance Coin trade for $1,000. The increased exposure could mean more profits, but the reverse is also true—your losses will also be amplified.
Risk Management: How to Decide the Right Stop-Loss and Take Profit values for your Binance Coin Trade
Traders are constantly assessing and reacting to risks. Having a proper risk management strategy is crucial for success. In crypto trading, that involves setting objectives, identifying risks, defining responses, and monitoring the market. A simple but effective way to minimise market risk is to set up stop-loss or take-profit values for your trades.
Using your analysis, try to place stop-loss orders below key support levels. The support level refers to the lower limit or “floor” of Binance Coin’s current market price. If the market drops below your chosen support level, your order will be automatically triggered and your positions closed, mitigating your losses.
A trailing stop-loss order is a variation that automatically adjusts as the market rises. Should Binance Coin fall below the most recent support level, the order would trigger. Trailing stop orders will continually move your closing positions higher to match market fluctuations. They’re a great option for passive traders who don’t want to constantly monitor the market and can help to ‘lock in’ profits as prices fly.
Review and Execute Your Binance Coin Order
The final step before you tap the ‘Buy/Sell’ button is to go over your order details. Make sure you’ve picked the right type of order and entered the correct information, including the trade amount position, leverage, limits, and more.
Once you’re sure everything looks right, tap the order placement button and open your trade position.
Close your Trade for Profits or Limit your Losses
Assuming your market analysis is correct, then your order should turn a profit. You should be prepared to either manually or automatically close your order no matter what direction the market trends. Traders normally use a combination of take-profit and stop-loss settings either to close an order once it hits their desired profit goal, or mitigate losses in a bear market.
For instance, when you place a limit order to buy, you could set a price that is lower than the current value of Binance Coin. The order will execute when the conditions are met. The reverse is also true—if you’re setting up an order to sell, set a take-profit value to ensure you get your desired profit.
Several other factors can affect your choice of trading platform, such as security features, trading fees, deposit/withdrawal options, quality of aggregate data, and more.
There are also independent factors to consider, such as how your chosen platform has historically dealt with unexpected market volatility. Did it hold steady and continue to operate as usual, or did it limit orders and lock users out? Take a look at external variables like news relating to Binance Coin adoption, new technical developments, government regulations or laws, and so on. All of these factors will have an impact on your trades.
Frequently Asked Questions
Binance Coin is a token on both the Ethereum blockchain and the Binance Smart Chain (BSC), launched in 2017 by the crypto exchange Binance. Using BNB tokens to trade on Binance has many incentives, such as discounted trading fees, limited-time airdrops, and more. Recently, the BSC has hosted the fastest-growing decentralised finance (DeFi) community in the industry.
No one can say for certain. However, Binance Coin is popular among investors because it is backed by Binance, which is one of the most popular cryptocurrency exchanges by daily trade volume.
Binance Coin has a very low barrier to entry. You could start trading with as little as $100.
A futures contract has an expiration date, while a perpetual continues perpetually. It’s a variation of futures that has no expiration date and is underwritten by a ‘funding rate’ between long and short traders. In a bear market, short traders pay long traders a small fee, while longs pay shorts in a bull market.