The cryptocurrency market is going through another phase of popularity as a number of digital coins, including Cardano (ADA), record stellar price gains. This has also attracted a large number of investors and traders who want to capitalise on the volatility of the market to make quick profits through Cardano derivatives.
This guide outlines in detail how you can trade ADA tokens. You will learn how to make future price predictions in an accurate manner, relying on basic evaluation and technical analysis of Cardano’s price. If you are looking to get into the trading market, bear in mind that it's a relentless pursuit that requires both patience and due diligence if you want sustainable profits and success.
Before you trade ADA tokens, you need to be aware of the fact that holding Cardano coins and trading them are two different strategies. When you buy and hold Cardano, you are the owner of those ADA tokens, but when you trade Cardano, you are simply speculating on the price of ADA through financial instruments like contracts for difference (CFDs), options, and futures. In this case, you don't own Cardano, just the right to the dollar amount you invested plus any profit or loss on the trade.
When you start trading Cardano, you will notice that among the available derivatives, three are most popular:
The biggest advantage of trading cryptocurrencies through derivatives is that they allow traders to buy and sell almost immediately. Owning ADA tokens is a much more time-consuming and expensive process.
When you are selecting a broker for trading ADA coins, make sure that you choose one that's regulated and registered. This way, you will be able to avoid any fraudulent activities or outright scams. Leading trading platforms bring you a wide range of features to curate a better trading experience. Bear in mind that the derivatives available to you and their features are subject to your country of residence as well as the region the selected broker is registered in.
Copy-trading, offered by many social platforms, is often the go-to strategy for new traders, as it enables them to emulate the success of experienced traders. However, it is not a sound strategy to follow big traders blindly because they have enough capital to provide them with a safety cushion, whereas new traders often don't. Moreover, their trading volume is high enough to have low trading fees and commissions, while small volume traders have to cough up a bigger chunk of their profits by way of transactional costs.
We have conducted a thorough and rigorous review of each popular trading platform, and the following is the list of the best brokers and exchange platforms for Cardano trading.
Brokerage websites are those trading sites that allow you to buy Cardano (ADA) derivatives when the price is low and sell when it's high. When you are relying on a broker for trading Cardano, you don't have the ability to actually buy and own ADA. Instead, you buy an agreement between yourself and the brokerage that entitles you to the capital you've invested plus any profits or losses you get on your trade when it subsequently closes. Apart from a few exceptions, almost every cryptocurrency exchange enables traders to buy and sell derivatives.
When cryptocurrency exchanges first started their business, the main focus was on buying and selling coins like Cardano instead of trading. However, that has changed in the last few years as most of the exchanges now offer derivatives to their customers, so they can buy ADA and trade it as well. There are a number of exchanges where you can trade Cardano without any need for a broker, Binance and OKEx being a couple of examples. Both platforms give you the option to either buy Cardano or trade Cardano coins through derivatives such as futures. They also offer support for leveraged trading.
We have developed an explanatory guide on how you can trade Cardano (ADA) that will develop your understanding of the cryptocurrency market and how it works.
If you want to create your own investment strategies, you need to learn how to evaluate two types of different information streams. If you can do that, you will be able to make informed trading decisions.
The first type of information that you should be able to evaluate is qualitative, which includes the basics of market forces and the factors that affect them:
The second type of information that you need to take into account is technical analysis, which involves evaluating hard numbers including statistics, charts, and graphs. The quantitative approach allows you to develop a rational and evidence-based perspective towards your trading-related decision making. It also enables you to predict Cardano’s price with improved accuracy. Some of the most popular technical indicators include the following:
If you want to become a full-time trader, there are other advanced technical indicators as well, which you can rely on, including Golden Crosses, Fibonacci retracements, and diagrams.
There are a number of trading strategies that you can deploy to earn profits. However, you will need to evaluate your situation to identify which Cardano trading plan suits you the best.
If you want to become a good trader with a high rate of successful trades, one of the decisions you need to make is about your platform. You can either go for a broker or a derivative exchange, where the former delivers a trading-oriented user interface, and the latter brings the ability to take bigger risks. However, whichever way you go, ensure that your trading platform is registered and regulated, so your personal data and financial assets remain safe and secure.
Trading platforms that aren't registered or don't follow regulations don't only pose an excessive risk but can be shut down by a regulatory body at any time.
Once you have selected your trading platform, you need to make your account by signing up. For this process, you will need to enter your email address, and subsequently, a verification email would be sent to you. After you've verified your account, you will also need to verify your identity for compliance with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. You can submit any type of valid identification, including a driver's license and passport.
After identity verification, you will be able to deposit your seed capital which can be as little as $10 on some platforms. You can do so using both conventional and digital currencies.
The next step is to go to the 'Trade' tab, where you'll see the trading interface. The designs and user interface employed by exchanges and brokers vary from platform to platform, but you'll always be able to see some common features like the order book, buy and sell functions, and so on.
If you are just starting to get into Cardano trading, you may feel a bit confused by some of the trading terminologies. We have clarified the basic technical jargon below for your clarification:
As a trader, you will open a long position when you believe Cardano's price is going to go up. Opening a long position involves buying low and selling high. On the other hand, if you think that the price of Cardano is going to fall, you open a short position. Shorting gives you the opportunity to earn money in a downward trending market, but it can be quite risky, as you stand to lose a lot if the price shoots up.
A trade order that's executed at Cardano's market price is a market order. You don't need to specify the price, and you'll only see buy and sell features when using market orders. However, if you want to buy at a specific price, you can initiate a limit order that enables you to mention the price of Cardano you're looking to buy or sell at.
This is the total capital that you've used to initiate an order. If you want to maximise your profit, you can rely on leveraged trading, which is marketed on trading platforms in terms of ratios. For instance, a 50:1 (or 50x) leveraged order means that if you have invested $100, your profit/loss will be calculated as if you've invested $5,000. Ensure that you are minimising your risk before you engage in leveraged trading.
If the market doesn't respond according to your expectations, you can use stop-loss orders to minimise your losses. For this to work, you'll need to put in two values - one is the stop value at which the position opens, and the second is the limit that defines the minimum price at which the order should be closed. Always set your limit price slightly below the stop price to ensure the order executes in a rapidly depreciating market.
Before you execute any order, make it a habit to ensure that you've entered all the values correctly and chosen the right options that you intended to. Human error can be very costly.
If you assess your strategies comprehensively and execute them well, you are more than likely to make a profit. That being said, you can cut down your risk by using the take profit option, which allows you to close the position when Cardano reaches a certain price, and you've made enough profits.