How to Trade Ethereum Classic in 2024 - Complete Guide

What Is Ethereum Classic Trading and How Is It Different From a Standard Purchase?

People looking to invest in Ethereum Classic have two options: you can buy ETC tokens from an exchange and hold them in a wallet as a long-term investment.

This route assumes the price of ETC will go up significantly in the future, making it a worthwhile investment. As a bonus, some exchanges even let you take out loans using your held tokens as collateral.

The second option is to trade Ethereum Classic on broker platforms. This route doesn’t require you to own any ETC coins. It involves using blockchain-based derivatives whose value is tethered to the price of Ethereum Classic. It is a short-term method to profit from Ethereum Classic without actually owning any coins.

Ethereum Classic brokers typically offer traders three options:

• CFDs–A Contract for Difference (CFD) is an agreement between a broker and a trader where the trader takes a position on the future value of Ethereum Classic. The trader speculates that the market price will go up or down between the times when the contract was opened and closed.
• Futures–A futures contract is a binding agreement to buy or sell Ethereum Classic at a fixed price at a predetermined date in the future (hence the name). It’s essentially a contract to buy or sell ETC derivatives with an expiration date.
• Options–Options contracts are similar to futures, except the trader has the option (not the obligation) to close the contract at any moment. There is no rigid expiration date, and a trader can cut their losses if they think the contract will lose them money.

Trading is an inherently risky activity, and that risk goes up proportionally if you use unregistered brokers. New traders should always use registered brokers that comply with financial regulators.

This will protect you from potential scams, theft, or fraud. Established brokers also offer a vast range of services, including different types of derivatives and a wide variety of risk profiles. Knowing what to expect from a broker can help you develop an effective trading strategy.

Newbie traders often turn to social trading until they figure out their trading strategies. Social trading involves copying the movements of established investors to minimise losses. It’s an excellent way to learn the market, but it has some downsides.

For starters, seasoned investors have safety nets in place to protect them from catastrophic losses. They also have the capital to soak up all the broker fees that will eat into your much smaller profits.

Our Step-by-Step Guide on Ethereum Classic Trading

To help new traders, we’ve compiled information every trader needs to know to become a successful trader.

1. Combine Fundamental and Technical Analysis

No one can accurately predict what will happen to the price of Ethereum Classic. However, seasoned traders can pick up patterns that allow them to profit in the long run. Traders typically rely on two types of analyses: fundamental analysis and technical analysis.

Fundamental analysis involves evaluating industry news and technical developments that could potentially impact the success of Ethereum Classic. It is a method used by traders to try and establish the intrinsic value of ETC. Quality sources of information for this type of analysis include:

• News–This can significantly impact the value of a digital asset. Pay attention to any news concerning the Ethereum Classic project, updates from the team, and completed goals on the roadmap.
• Active addresses–The number of active addresses on the network can be used to gauge how much it is used. While it’s not a reliable metric on its own, it can still reveal information about network activity that can factor into your valuation of ETC.
• Network value-to-transactions (NVT) ratio–NVT ratio attempts to interpret the value of the network based on the value of its transactions. It is calculated by dividing the network value by the daily transaction volume. The result can tell you whether an asset is undervalued or overvalued. A lower ratio means the asset is undervalued and vice versa.

Technical analysis involves analysing historical price charts of Ethereum Classic to identify patterns and predict future market behaviour. It works on the premise that history has a habit of repeating itself. Common technical analysis indicators include:

• Moving averages (MA)–Moving averages take data from a set period and use it to produce the average price of Ethereum Classic for the data set. The purpose of the equation is to decipher trading charts and establish trends.
• Relative Strength Index (RSI)–RSI is a momentum indicator that measures the magnitude and speed of price movements. The formula divides the average gain price over a set period (the default is 14 days) by the average loss and then plots that data on a scale from 0 to 100.
• Bollinger Bands (BB)–Bollinger Bands are an oscillator measure that indicates whether the market has high or low volatility. They are composed of an upper, middle, and lower band that react to market price action. Their purpose is to identify how prices are spread around an average value.

It’s a good idea to combine both methodologies to try to predict the market’s movement. There are no guarantees, but a mix of both will yield the best results.

2. Choose a Trading Strategy

Successful trading comes down to what strategies you employ. There are several strategies available. Below is a sample of some of the most popular:

• Day trading–This strategy involves making several trades throughout the day and trying to profit from short-term price movements. Day traders spend a lot of time watching the market, and they usually close all their trades by the end of each day.
• News trading  Cryptocurrencies are extremely sensitive to news. When, for example, the news announces new government regulation or a cryptocurrency exchange has been hacked, prices may plummet. On the other hand, if an influential company announces it will be incorporating Ethereum Classic into its online store, then ETC price may trend upwards.
• Hedging–Hedging is a strategy used to offset losses and reduce exposure to risk by taking an opposite position.
• Swing trading–Swing trading involves keeping a close eye on a correction in market trends. It requires constant vigilance to catch the signs of a “swing” that will cause the market to correct itself. Opportunities like this don’t happen very often.
• Scalping–Scalping is a form of day trading that involves making quick trades based on small price changes. The strategy is based on the idea that making small profits repeatedly limits risks. Scalpers make dozens of trades in one day.

There are many other trading strategies for crypto traders. Each one has its benefits and drawbacks. In the end, it’s up to you to choose which one works best and then stick to it.

3. Select an Appropriate Platform for Your Needs

A fundamental step in starting your trading career is to find the right platform for trading ETC coins. All the strategies in the world won’t help you if the platform you’re using sucks.

Start by deciding whether you want to use a derivative exchange or an actual broker. Although both offer similar services, brokers are geared toward experienced traders. They offer larger trade volumes with smaller fees and provide advanced trading tools and contracts.

On the other hand, derivative exchanges are easier to use while allowing for risky trades through leverage trading. They are a better choice for novice traders with high-risk profiles.

Whatever service you choose, always go for a registered and compliant platform with financial regulators. Not only are their chances of getting shut down for non-compliance low, but they also tend to be less prone to fraud or scams.

4. Setting Up Your Account

After you’ve picked a platform to use, the next step is to set up your account. You will be required to provide a username, password and email address for verification purposes. Once you have provided your login credentials and verified your email address, you will need to complete the identity verification process.

All reputable brokers and exchanges require users to perform Know Your Customer (KYC) verification. Regulators require the KYC process as a measure against fraud and other illegal schemes. To comply, users need to provide documents such as a government-issued ID and proof of residence.

Once your identity is verified, you can deposit fiat or digital currencies into your account (via bank transfer, credit/debit card, etc.) and start trading.

5. Prepare Your Trading Position

The next step after funding your account is to choose a trade option. Different platforms offer different trade options. Every platform also has an interface showing things like options for buying and selling Ethereum Classic, trading graphs, order books, executed trades, etc.

Trading terms can be overwhelming when you’re just starting. Below are a few popular trading terms that you should know about:

Short or Long Position?

Traders either go long (bet that the price of ETC will increase) or short (bet that the price will decrease). If your analysis indicates that the price of Ethereum Classic will rise soon, then you take a long position. If you think it’ll dip, then you take a short position.

Shorting can be very profitable if done right. Let’s say you make a contract to borrow 1,000 ETC when the token price is $15 and sell it for $15,000. If the price falls to $10 before the contract expires, you can repurchase the borrowed ETC for $10,000 and return the 1,000 ETC to the broker to fulfil your end of the bargain. You’ll remain with $5,000 to reinvest.

Shorting is the riskier position to take, but it can be an incredibly effective way to grow your portfolio. Please note that a typical trade does not usually go as smoothly as the provided example.

Limit or Market Order

A market order is an order to buy or sell Ethereum Classic at the current market price. You can enter the amount of ETC you wish to buy and sell, and the order is executed immediately. Market orders are suitable for situations when having your order filled is more important than getting a specific price.

A limit order is an order with a specific price limit that isn’t executed immediately. If you’re looking for a better sell or buy price for ETC, use limit orders.

For example, let’s say you want to sell ETC for a higher price than the current market rate; you can use a limit order to set the price and amount you want. It might take time, but the order will be filled when the limit is reached.

Trade Position Amount and Leverage

Your trade position amount refers to the amount you place in an order. Many platforms offer ‘leverage’ to help traders increase the size of their trade position. Leverage refers to how much the trade position can increase. It can be used in both short and long positions.

For example, 100x or 1:100 leverage will increase a $1,000 ETC position to a $100,000 position. This sounds great on paper, but it comes with serious risks. While leverage trading can increase your trading power, it also amplifies your potential losses and could end up costing your entire margin.

Risk Management: How to Decide the Right Stop-Loss and Take Profit values for your Ethereum Classic Trade

No matter how large your portfolio is, you need to exercise proper risk management, or you may end up suffering catastrophic losses. Your progress can be wiped out in seconds without good risk management.

Stop-loss orders are used to mitigate losses and close a trade if the price reaches a certain level. The ‘stop loss’ is meant to stop any loss beyond a certain point. You must have a stop-loss every time you place a trade just in case the market moves against your position. It’s an essential part of risk management.

Tie your stop-loss to the market’s support and resistance levels. The support level is the point where the price stops falling (floor) and goes back up, while the resistance level is the point where the price stops rising (ceiling) and goes back up. Use technical analysis to determine ETC’s support and resistance levels.

Rather than picking an absolute level to stop, consider using a trailing stop-loss. With a trailing stop-loss, the stop-loss value is tied to a certain percentage or dollar amount below the market price.

When ETC’s price drops, the trailing stop-loss moves down along with it. When it finally stops dipping, the stop-loss value is adjusted and remains at the new level.

Review and Execute Your Ethereum Classic Order

After you’ve set everything up, from the type of order to the size of your order, it’s time to execute the trade. Before confirming the transaction, make sure to review everything one last time. Check to make sure you’ve chosen the correct amount, leverage and stop-loss value. When you’re sure everything is right, place the order.

Close your Trade for Profits or Limit your Losses

Depending on the order type, an order can either be closed manually, or it’ll close automatically if it’s a stop-loss or take-profit order. Stop-losses can help mitigate loss by automatically closing the trade if a minimum threshold is reached.

Take-profits allow you to maximise profit by closing a trade once your target profit is achieved. Stop-losses and take-profits are supported on all order types, so make use of them whenever possible to manage your risk and maximise your profit potential.

Other Considerations

The content on this page covers many concepts, but we haven’t touched on things that may be important when choosing a trading platform. These include a platform’s reputation, history, security features, trading fees, deposit/withdrawal options, trade monitoring tools, etc.

Other considerations include the current state of Ethereum Classic, improvements on the Ethereum blockchain, cryptocurrency news, government regulation, etc. Keep all of these things in mind because they can impact the market and your potential profits.