How to Trade Stellar in 2024 - Complete Guide

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

The primary thing you need to find out about trading Stellar is that there are two unique procedures. The first one includes buying and holding Stellar in a secure Lumens wallet so you can sell it after months, or even a longer period of time, to make the most of long-term price appreciation. The other procedure is day-to-day trading, where you bet on the value of XLM through financial instruments like futures and CFDs.

While you can rely on a diverse assortment of XLM derivatives, three are used widely for Stellar trading on exchanges and broker sites.

• CFDs – An abbreviation for Contracts for Difference, a CFD is a derivative that mirrors the value of a fundamental asset, which in this situation is Stellar. Rather than purchasing Stellar, you can bet on its price movement through CFDs and realise gains.
• Futures – This is a derivative that requires the trader to close their position on a pre-specified date. When their price expectation is right, they make a financial gain. Otherwise, they sustain losses. 
• Options – This particular derivative is very much like a futures contract, with the exception that traders aren’t committed to closing their position. In the event that the position turns out well for them, they can decide to close their order, or else they can forego the option by paying a minor fee, called a premium, for the contract itself.

The best part of derivatives is that you can purchase and sell them immediately without going through the motions of owning and storing currencies. When contrasted with purchasing XLM coins and holding them, this is a substantially easier and speedier procedure to bring in profits.

When you are picking a brokerage website, it is suggested that you go for a broker that is enlisted and compliant with regulations and legal guidelines. Trading on such a platform limits your risk and guarantees that you will not need to confront any scams. The types of derivatives accessible and related trading features rely upon the country you’re in, alongside the locality in which your broker is registered. 

Numerous novice traders use copy-trading, offered by many social brokers, to duplicate the positions of prominent traders. This could turn out to be a good or bad strategy, as, on the one hand, you are more likely to make effective trades, yet on the other, you don’t have the volume and risk mitigation tools that are accessible to high volume traders. That is the reason it is suggested that you should only employ copy-trading when it is appropriate for your circumstances, including your capital, fees, and different other trade components.

Our Step-by-Step Guide on Stellar Trading

For your information, we have created a definitive guide that takes you through the ways of trading Stellar on different platforms.

1. Combine Fundamental and Technical Analysis

With regards to cryptocurrency trading, you need to learn two significant sorts of assessments: fundamental and technical. If you have the ability to collect and analyse the correct data, your chances to open profitable positions will be higher. 

The primary type of assessment revolves around qualitative data and is called fundamental analysis. 

• News – As Stellar is one of the mainstream digital currencies, there are many variables that can change its value. As a trader, you should know about everything essential identified with the coin, including the latest news, innovation, developments, and the analyses of industry pioneers to make trades that are largely profitable. 
• Supply and Demand – At the time of writing this guide, in excess of 22 billion XLM tokens are available for use. A significant increase or decline in the accessible amount can bring about value changes. There is a total supply of 50 billion Lumens.
• Follow the General Rules of Economics – If Stellar’s demand witnesses an increase, the value will rise, while in the event of a supply increase, the value will fall.

Technical analysis is tied in with doing the math and discovering trends through statistics, facts, and figures. This permits you to settle on proof-based trading choices with a higher likelihood of making financial gains. There are various markers that you can depend on for your trading. However, the most utilised ones are: 

• Moving Averages – When you use the past values of Stellar over various time spans to compute an average, it’s known as a moving average. Contingent upon the coin’s price performance, it might increase or reduce. A moving average permits traders to assess how XLM price is moving and how it’ll conceivably carry on in the coming days. 
• Relative Strength Index – This specific pointer gives you an idea of what the market is thinking about XLM through oversold and overbought signals. For example, if the XLM value is witnessing a surge with an overbought sign, this implies that value may fall in the near future. Also, an oversold sign combined with a decrease in value implies a potential value increment. A value of 80 or higher indicates overbought conditions, while an oversold asset will have an RSI of 20 or lower.
• Moving Average Convergence Divergence – This marker highlights the contrast between a 12- and 26-period exponential moving average (EMA). Stellar’s MACD will tell us whether buyers or sellers are dominating the market.

When you become a more experienced trader, you can use a wide scope of technical analysis tools and pointers, such as Fibonacci levels and candlestick chart patterns.

2. Choosing a Trading Strategy

Every trader is hoping to acquire financial gains, but their strategies will differ. Contingent upon your circumstance and conditions, you need to pick the correct technique to maximise your chances. 

• HODL: ‘Hodl’ is an inside joke of the digital currency circle that became popular when a disappointed Bcoin trader misspelt ‘hold’. The process includes purchasing and holding XLM coins for a long period of time to earn potentially huge profits. 
• Day Trading: The instability of the crypto market also has an impact on Stellar, which creates various opportunities for traders to benefit from. The highs and lows can be used by traders to open and close their trades, amplifying their monetary benefits. 
• Swing Trading: Swing trading also exploits market instability, but it features longer duration positions that can last from a couple of days to a few weeks. You will depend on technical assessment for swing trading, aiming to recognise a change in the market’s direction. 
• Hedging: This is a risk minimisation procedure used by many prepared brokers. It involves opening a position against your original trade so you can still make a profit and protect your losses in any market scenario that occurs.
• Scalping: This strategy is actually similar to day trading, aside from the fact that positions don’t last more than a couple of minutes. The gains are similarly smaller, but you can open and close multiple positions in a day.

3. Select an Appropriate Platform for your Needs

When you need to be a productive trader, you have to make sure that you are using the correct service for trading Stellar. The primary choice that you need to make is whether you should go for a crypto exchange or a broker. While there are likenesses, brokerage websites have a trading-focused interface and permit bigger volumes. Then again, exchanges offer a superior assortment of digital assets, and you can open higher risk positions through leveraged orders. Whichever platform you pick, it is a good idea to go for an option that is registered and fully compliant. 

Services that aren’t enlisted or don’t stick to KYC and AML guidelines can be closed down with no earlier notification, and they can end up being scams as well.

4. Setting Up Your Account

Once you have selected your platform, you will need to make an account through registration. You will need to verify the account through an email. You will also be required to verify your identity for compliance with AML and KYC regulations. 

After identity confirmation, you will have the option to deposit your initial capital using fiat or digital money, contingent on the service you’re using. Simply go to the site’s wallet and select the payment method that is ideal for you.

5. Prepare your Trading Position

After you have set up your account and deposited your seed capital, you can begin trading by going to the trade option. You will see various kinds of interfaces at various sites, yet there will be a couple of similar sections, including the order book, buy and sell functions, and so on.

When you are simply beginning your Stellar trading journey, you may be somewhat overwhelmed by all the technical language. Some of the basic ideas are discussed below.

Short or Long Positions?

When you think that the value of Stellar will rise, you purchase XLM coins at a low and endeavour to sell them at a higher price. This is known as a long position. In the event that you think the XLM value will go down, you borrow XLM from a broker, sell them, and repurchase as the market declines. This is known as a short position or shorting and can be a risky position to open, as you will incur losses if the market recovers. That’s why risk management is essential if you are engaging in shorting.

Limit or Market Order

An order that uses Stellar’s market price is known as a market order. As you don’t set the value, you can just see buy and sell choices in the order section. In the event that you need to find better value for your XLM trade, you can use a limit order, which requires you to enter the price at which you want to place your order and the quantity of XLM coins. The significant distinction is that market orders can be executed immediately, yet limit requests may require some time until the market arrives at that specific value point.

Trade Position Amount and Leverage

The capital you put into an order is your trade position amount. You can amplify its use by opening a leveraged position, where you borrow capital from the brokerage or exchange. On trading services and websites, leveraged trading is communicated through ratios. For example, 10:1 or 10x means your position will be amplified by a factor of 10. If you have invested $1,000, your gains or losses will be determined as though you have put in $10,000.

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

When the market doesn’t react as per your assumptions, you can use a stop-loss to limit your losses. To start a stop-loss order, you need to give two key values, including the stop value at which the order is made and the price at which you wish to sell your XLM tokens. Depending on your technical analysis, you can use stop-loss orders beneath a support level when you believe that Stellar’s value is going to witness a surge.

Review and Execute Your Stellar Order

Before you open your position, make sure that you have entered every one of the values accurately and have selected the appropriate choices. When you’ve checked each part of your order, click on the Sell or Buy button.

Close Your Trade for Profits or Limit Your Losses

On the off chance that you have done an intensive basic and technical evaluation, you are probably going to make a financial gain. You can either close your order by yourself or use the take-profit option which shuts the order for your sake when a specific price point is reached. Using the take-profit and stop-loss functions can assist you with risk minimisation.