As mainstream acceptance of blockchains and cryptocurrencies continues to grow in 2023, the prices of tokens have also witnessed a substantial boost. IOTA’s native token is no exception and has attracted many new and experienced traders who want to capitalise on market volatility. If done correctly, trading IOTA tokens can run you into some serious profits.
If you are just starting your journey as a new trader, this guide will teach you how to trade IOTA. You will learn about fundamental and technical analysis that can help you make potentially accurate predictions about IOTA’s price. You will also be able to make more informed decisions regarding trading strategies.
Many new traders believe trading and investment to be the same. That's not true. Crypto investment involves long-term ownership of IOTA coins, holding them in anticipation of a price increase. On the other hand, crypto trading refers to the process of betting on IOTA prices using derivatives such as futures, options, and Contracts for Difference (CFDs). When you trade cryptocurrency, you don't own IOTA, only a contract that gives you the right to the capital you've invested plus any profits or losses you might make once the trader is closed or terminated.
There is a wide range of IOTA derivatives that you can use to open your positions. That being said, there are three that are immensely popular in crypto trading circles.
You can buy and sell IOTA much more quickly and conveniently with derivatives. If your objective involves earning short-term profits, then derivatives provide you with a much more convenient path than actually purchasing and holding IOTA, which can be a complicated and drawn-out process.
You have to bear in mind that when you select a broker for trading, you should choose one that's registered and ensures adherence to Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations. If you are trading IOTA through regulated trade platforms, it is doubtful that you'll run into any frauds or scams. Certain derivatives' availability and accompanying features depend on the country you are in, along with the country the brokerage service is registered in.
One of the most popular trading strategies for new traders is copy trading, where they replicate the trades of seasoned professionals using a feature offered by several leading social brokerage platforms. You have to remember that while this improves your chances of opening profitable positions, it can also be quite risky. Experienced traders often trade in high volume, and their transactional expenses are pretty low compared to their total trade amount. Moreover, they also hedge their positions to minimise their risk. That's why you mustn't blindly follow a particular trader but do your own research.
To ensure that you make an informed decision, we have assessed all the popular trading platforms and shortlisted the best. Here are our brokers and exchange recommendations for trading IOTA coins.
When you trade through a cryptocurrency broker, you don't actually buy the token you're trading. You just purchase a contract that gives you the right to the capital you've invested along with any profits or losses you might make when your position is closed or eventually terminated. Brokers offer different types of derivatives, including futures, options, and contracts for difference (CFDs).
One of the primary reasons traders choose trading through derivatives is speed and convenience. Since you don't have to buy cryptocurrencies, you don't need to deal with the issues associated with owning and storing IOTA. Apart from that, you can increase your profits through leveraged trading and start trading with seed capital as low as only $100. Brokers also comply with KYC and AML guidelines to provide you with a safe and secure trading environment. They have to maintain a high level of transparency in terms of transactional costs.
In the beginning, crypto exchanges only focused on buying and selling cryptocurrencies like IOTA. Recently, the increased potential of cryptocurrencies as an investment and trading option has pushed exchanges to offer trading derivatives as well. Most exchanges now offer CFDs, futures, options, and other derivative products. If you have created an account on one of the leading platforms, such as Binance, Poloniex, or Coinbase, you don't need to make a new account to place your first trade. Moreover, exchanges also enable you to leverage your positions which means you can invest more capital than you have. However, leveraged trades are highly risky, and you need to minimise your risk when opening such positions, as they will multiply losses as well as profits.
Cryptocurrency exchanges are comparatively more feature-rich and versatile and enable you to buy and sell a wider variety of coins, including IOTA. You also get the option to withdraw your IOTA tokens whenever you need them. Apart from that, you also get more payment modes to withdraw and deposit your funds. Exchanges are generally more user-friendly than brokerage websites which can be complicated and intimidating. With a crypto exchange, you can open highly leveraged positions, plus you get the services of a broker and an exchange combined in one.
For your clear understanding and guidance, we have come up with a detailed guide that takes you through the process of trading IOTA on exchanges and brokerage websites.
Cryptocurrency trading involves qualitative and quantitative analyses that enable you to improve your success rate. The qualitative or fundamental analysis includes the following:
Quantitative analysis includes observing and analysing data and statistics to draw insights that can help you make evidence-based trading decisions. Key technical analysis indicators include:
Every trader wants to maximise their profits, but they need to deploy a wide range of strategies to get to that point. Let's discuss the most popular trading strategies so you can identify which one suits your needs and trading objectives the best.
Before trading IOTA, the first decision you need to make is to choose the best platform for your circumstances and trading objectives. Profitability and potential of trade success differ from platform to platform, and you need to understand all aspects to ensure you are optimising your profits. Broker platforms are more trading-focused than exchanges and usually enable you to trade in larger volumes. But if you choose an exchange that offers derivatives, you can get access to a better variety of cryptocurrencies and altcoins such as IOTA for trading. On exchanges, you also can take higher risks through leveraged positions.
Whether you choose a broker or an exchange, you need to ensure that it is registered and adheres to KYC and AML regulations. Platforms that are either not registered or don't comply with KYC and AML regulations can be closed without any notification, and they are also prone to fraud and scams.
Once you have chosen your platform, the next step is to sign up. Use a strong password and provide a secure email address. Your account will be verified through an email. After you've gone through account verification, you will also need to verify your identity for KYC and AML regulations. You can provide any government-issued ID for identity validation, along with a picture of yourself and some proof of address.
The next step involves depositing your seed capital that will be used to finance your trades. You can use both digital and fiat currencies to fund your account, depending on the platform you choose.
Once you have made an account on a trading platform and deposited your funds, you can begin IOTA trading by clicking on the 'Trade' button. You will see a wide range of interfaces on different trading platforms, but there will be several common components, including the order book, a trading section, and a price graph.
When traders think that the IOTA coin's price will surge, they can open a long position, which involves buying at a lower price and trying to sell high. But if the trader believes that the price will decline in the coming hours, they can open a short position, where they sell high, then buy lower afterwards. This is also called shorting and is a strategy that must be executed with robust risk management: if the price of IOTA goes up instead of down, short trades will incur losses.
If an order uses the market price of IOTA for trading, it's called a market order. You only have to enter the amount you want to buy or sell to execute market orders. On the other hand, if you want to buy at a different price, you can create a limit order where you will have to enter the price at which you want to buy IOTA. It may take time to execute limit orders, as they will only succeed when the market price aligns with the value you have entered.
Your trade position sum is the amount you have invested in a trade. You have the option to maximise the usage of your trade position sum by opening a leveraged trade that enables you to benefit from a bullish pattern. Trading platforms mention leveraged trading in terms of ratios. For example, 10:1 means you have 10x leverage, and if you invest $100, your profits or losses will be calculated as if you've put in $1,000.
If the price of IOTA coins doesn't respond according to your prediction, you can use a stop-loss order to limit your losses. Stop-loss orders are easy to initiate as all you have to do is provide two values - the first is the stop value at which you want to activate your loss mitigation trade. The second is the limit price at which this trade will actually execute.
Before initiating your order, make sure that all the values you've entered are correct and you have chosen all the right options. This may take time initially, but it'll turn into a habit as you become more experienced.
Traders who have carried out their due diligence and technical analysis are more likely to have profitable trades. You can close the position manually or use take-profit orders, which terminate automatically once IOTA has reached a certain price. You can reduce your trading risk by using a combination of take-profit and stop-loss orders.
One of the most critical decisions in your trading journey will be your choice of platform. If you plan to trade a lot, make sure you choose somewhere with a competitive fee structure to avoid charges eating into your profits excessively, for example. Always do your due diligence as well itoavoid losing out to scammers.
Carefully review all of the advice in this guide, and you should be able to discern what trading style will serve you best. Get your hands dirty and start exploiting IOTA’s price movements for profit when you are ready.