How to Trade Ripple in 2024 - Complete Guide

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

Before you engage in Ripple trading, you should know that holding Ripple coins and trading them are two unique ways of investment that are quite different. When you purchase and hold Ripple, you are the proprietor of those XRP coins.

Yet, when you trade Ripple, you are basically betting on the value of XRP through monetary subsidiaries like CFDs, options, and futures. In this situation, you are not the owner of Ripple coins but have the right to the capital you’ve invested including any profit or loss you earn on the trade.

This removes the burden of having to own and safeguard those tokens.

At the time you begin Ripple trading, you will immediately see that among different financial products, three are often used by traders:

• CFDs – Short for Contracts for Difference, CFDs are financial instruments that reflect the cost of a digital resource like Ripple. They permit the trader to bet on the value of the asset as opposed to going through the long cycle of buying, owning, and reselling it.
• Futures – These are time-restricted instruments that a trader is required to settle at a pre-specified date. In the event that the cost of Ripple increases or diminishes as per your expectation, you keep the benefits; otherwise, you have to bear the loss.
• Options – These resemble futures aside from the fact that traders aren’t required to execute the buy order. When traders buy options contracts, they have the choice to execute an order at a specified date if they believe they have procured sufficient profits. If not, they can choose not to execute the trade by paying a small fee.

The greatest benefit of cryptocurrency trading through financial derivatives is that they permit you to purchase and sell very quickly. Owning and holding XRP coins is a significantly more tedious and costly procedure than simply trading with derivatives.

When you are choosing a brokerage website for XRP trading, ensure that you pick one that ensures compliance with KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations and is legally registered. This way, you will save yourself from any deceitful schemes or scams.

Trading platforms present a wide scope of features so that you can have a superior trading experience. Remember that the derivatives accessible to you, along with their feature sets, are dependent upon your country and the country in which your platform is registered.

Copy trading is often a popular technique for new traders as it empowers them to imitate the moves of experienced traders.

It’s anything but a good idea to follow big traders with closed eyes, as they have sufficient capital in the game to give them financial security that new traders don’t have. Besides, their trade volume is sufficiently high to have low expenses and commissions, while small volume traders need to give up a greater portion of their profits to fees.

Our Step-by-Step Guide on Ripple Trading

We have built up an informative guide on how you can trade Ripple that will build up your knowledge about the market and how it functions.

1. Combine Fundamental and Technical Analysis

In the event that you need to make your own predictions, you need to figure out how to assess two kinds of data streams. When you can do that, you will actually be able to make educated trading decisions.

The primary type of analysis is qualitative and is called fundamental analysis. This focuses on the general properties of XRP and various worldly factors that could affect its price.

• News – Since Ripple is traded all around the globe, there are various kinds of information that can affect the cost of XRP. This is the reason it is suggested that you stay aware of the most recent market advancements, updates, news, and opinions by crypto pioneers and analysts so that you’re better prepared to make good trades.
• Supply and Demand – Some of the significant drivers of Ripple’s cost are market forces. The total stock of XRP has a limit of 100 billion tokens, out of which in excess of 45 billion are in circulation today. Any contraction or expansion in Ripple’s supply can drive the coin’s price movements.
• Follow the General Rules of Economics – Keep an eye on the components that can affect the coin’s market supply and demand. In case of a surge in demand or decline in supply, the cost of Ripple will go up and in the event that demand declines or supply rises, the price will go down.

The second sort of data that you need to consider is of a technical nature, and you will be assessing hard numbers including indicators, diagrams, and charts.

The quantitative methodology permits you to build up a judicious and proof-based point of view towards your trading decisions. It empowers you to anticipate XRP prices with improved precision. The most used technical indicators include the ones mentioned below.

• Moving Averages – This specific marker stems from values of Ripple that have been taken from past price-related data. Moving averages allow traders to figure out how the value of Ripple has moved and where it’s going.
• Relative Strength Index – If you need to know whether Ripple has been oversold or overbought, this is the pointer you should take into consideration. The relative strength index enables traders to discover the collective market sentiment so they can tell whether to buy or sell XRP. A value increase combined with an overbought sign will typically imply that there’s a downturn to come, while a reduction in price with an oversold signal is usually a sign of an upcoming bull run.
• Moving Average Convergence Divergence – When you assess the contrast between a 26- and 12-period exponential moving average, or EMA, it is called Moving Average Convergence Divergence, or MACD. It is an important pointer that shows when traders want to purchase Ripple.

In the event that you need to turn into a full-time trader, there are other markers too which you can depend on. A good starting point here is the Fibonacci retracement theory.

2. Choosing a Trading Strategy

There are various trading techniques that you can use to receive financial benefits. Nonetheless, you should assess your circumstance to distinguish which Ripple trading plan suits you the best.

• HODL – The word ‘Hodl’ became popular after a baffled Bitcoin trader incorrectly spelt ‘hold’. The procedure is just as it sounds: you purchase Ripple through an exchange and hold it for a long time until the cost has arrived at a point where you can realise a big profit.
• Day Trading – Just like some other crypto tokens, XRP can be very volatile, making it an ideal asset for traders who want to capitalise on the instability. Value fluctuations give an ideal chance to traders to open and close positions and make quick profits.
• Swing Trading – This sort of trading is similar to day trading but is conducted over a slightly longer period, which can run from a couple of days to a few weeks. To execute this strategy, you need to do a precise technical assessment of indicators to anticipate a ‘swing’ in price movement.
• Hedging – This is the process of securing your trades by opening a position in the opposite direction to your main Ripple investment. This allows you to reduce losses in the event of unfavourable market conditions.
• Scalping – This is another technique that works like day trading with one exception – the trade duration is very short, lasting from a few seconds to a few minutes. You don’t bring in a lot of profits with each trade, yet you have the opportunity to do numerous orders in a short time.

3. Select an Appropriate Platform for Your Needs

One of the choices you need to make is that of your preferred trading service. You can either go for an exchange or a broker.

Both have their own pros and cons, as the broker offers a more day trading-friendly interface while an exchange enables you to take higher risks with leverage. Whichever you choose, make sure that your trading service is registered and adheres to KYC and AML regulations.

Trading services that aren’t legally registered or don’t follow KYC and AML regulations are frequently scams, and can also be closed down by regulators at any time.

4. Setting Up Your Account

When you have chosen your trading service, you need to make your account by signing up. For this step, you should enter your email address and you will receive a confirmation email.

After you’ve confirmed your email address, you will have to verify your identity for consistency with Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines. You can present any kind of legitimate proof including a driver’s license and passport, and you may also require some proof of address.

After verifying your identity, you can deposit your initial capital, which can be as little as $100. You can do so using both fiat and crypto payment methods.

5. Prepare Your Trading Position

The following step is to go to your chosen platform’s trading section, where you’ll see the trading interface. The interfaces on trading services can be different from one platform to another. That being said, you’ll generally see some expected features like the order book, ‘Buy’ and ‘Sell’ options, and so forth.

Short or Long Positions?

As a trader, you will open a long position when you trust that Ripple’s value will go up. Opening a long position means purchasing low and selling high. Then again, when you feel that the cost of Ripple will fall, you open a short position.

Shorting allows you to bet on a downward price movement, and involves selling XRP that you have borrowed from a broker, then repurchasing it after the price falls. This allows you to write off the initial debt and keep the difference as profit.

Shorting can be very risky, as you will lose money in the event of a price rally. Always ensure your technical analysis is sound before entering into a short position.

Limit or Market Order

A market order is executed using Ripple’s market price. You don’t have to type in the price, and you’ll only see buy and sell options when using market orders.

On the other hand, if you need to purchase at a specific price, you can use a limit order, which enables you to specify the cost of Ripple at which you want to buy XRP. It may take some time to execute a limit order, as the market converges with your chosen price.

Trade Position Amount and Leverage

This is the capital that you’ve used to start a trade. When you need to amplify your financial gains and are certain about a bullish trend, you can use leverage trading, which is represented on trading services in terms of proportions.

For example, 5:1 leverage corresponds to a 5x amplification of your capital. In the event that you use 5x leverage with an initial balance of $100, your profit (or loss) will be determined as though you’ve put in $500.

Just make sure that you are limiting your risk before you participate in leverage trading, as overleveraged traders are frequently blindsided by unpredictable market moves.

Risk Management: How to Decide the Right Stop-Loss and Take Profit values for Your Ripple Trade

When the market doesn’t react as per your expectation, you can use stop-loss orders to limit your financial risk. To do this, you’ll need to enter two values. The first is the stop price, at which the position is activated, and the second is the limit price, which determines the price at which the order will actually execute.

Review and Execute Your Ripple Order

Before you execute any orders, ensure that you’ve entered the correct values and enabled the features and options that you expected to. Human error in trading can be very expensive.

Close Your Trade for Profits or Limit Your Losses

When you evaluate your trading techniques exhaustively and execute them well, you have a higher chance of making a profit. That being said, you can reduce your risk by using the take profit feature, which permits you to close the position when Ripple arrives at a specific value and you’ve made sufficient profits.