How to Trade Zcash in 2024 - Complete Guide
Zcash (ZEC) is a privacy-focused cryptocurrency based on Bitcoin’s codebase. It was launched in 2016 by a team of cryptographers and has managed to remain among the top 100 cryptocurrencies globally by market capitalisation.
This guide will teach you how to trade Zcash. Trading involves buying and selling ZEC derivatives for a profit using price predictions from market analysis. Crypto trading is a time-consuming activity that requires you to remain on top of market trends. This guide will provide practical advice for analysing the market and developing good trading strategies.
What Is Zcash Trading and How Is It Different From a Standard Purchase?
Zcash trading involves buying and selling derivatives whose worth is tethered to the market value of ZEC tokens. It is different from buying Zcash from crypto exchanges to hold as a long-term investment. That is a valid investment strategy with perks like the ability to take out loans against your held ZEC tokens. However, trading doesn’t require you to own any Zcash.
Brokerage firms allow users to immediately buy and sell trading contracts. It’s a much faster way to turn a profit than if you held ZEC in an exchange wallet. Cryptocurrency brokers usually offer traders three options:
- CFDs – A Contract for Difference (CFDs) is a trade contract that lets traders bet on whether the price of Zcash will go up or down. The contract reflects the fluctuating value of ZEC tokens. If a CFD holder sees the price of ZEC tokens go up, they can sell their contract and turn a quick profit.
- Futures – Futures is a binding agreement to buy or sell ZEC tokens for a specified price at a future date. They come with an expiration date.
- Options – An options contract is similar to a futures contract, except a trader isn’t bound to buy or sell it before an expiration date.
New traders should stick to registered broker platforms; they comply with financial regulators and tend to be less prone to fraud and scams. Good brokers also provide a variety of features, including different derivative types, trading tools, leverage trading and risk profiles. With all this in mind, it’s a good idea to come up with a trading strategy before you start using a broker.
Newbies often use social or copy trading when they first try out Zcash trading. Social trading involves copying the movements of established traders. Some brokers can even automate the process for you. It’s not a bad idea if you’re dipping your toe into trading for the first time, but it also has potential pitfalls. Seasoned traders often trade in very large volumes and have safeguards in place to protect them from catastrophic losses. A minor loss for them might cost you your entire trading portfolio.
Where Can I Trade Zcash?
Zcash can be traded on several broker platforms. Below is a list of some of the best ones.
Online Brokers
Online brokers are platforms where you can trade Zcash using derivatives—contracts whose value is tethered to the market price of Zcash. You don’t have to hold ZEC tokens to participate in trades. In fact, with very few exceptions, almost every crypto broker offers traders derivatives instead of actual Zcash.
Benefits of Using a Broker to Trade Zcash
Using a broker platform is the easiest way to profit from Zcash without having to own any ZEC tokens. While holding Zcash as a long-term investment can be profitable down the line, trading derivatives is a much faster way to get profits in the short term.
New traders may be cautious about trusting online brokers, which is understandable considering all the known incidents of scams, theft, and fraud involving these platforms. Good broker firms are transparent about complying with financial regulators. They are obligated to protect users from bad practices, fraud and outright theft. Additionally, in the event of a bankruptcy or something similar, traders may be eligible for compensation.
Broker platforms have many benefits: they are fast, easy to set up and operate 24/7. The best ones offer robust security features to protect users from hacks and criminal activity. They also have a plethora of trading instruments to help traders succeed in trading, including Stop-Loss and Take-Profit settings for risk management.
Derivatives Exchanges
Brokers aren’t the only platforms that trade in derivatives. Cryptocurrency exchanges have also taken an interest in trading, and many of them now offer derivatives. During the early days of digital currencies, exchanges were primarily used to buy and sell Zcash and other digital currencies. These days exchanges like OKEx, Huobi, Binance and Bitmex all offer derivatives in addition to buying and selling ZEC tokens.
Benefits of Using an Exchange to Trade Zcash
Broker platforms are great for seasoned traders who want speed, high liquidity, and good automation tools. However, they might be a bit too much for users trying out trading for the first time. Exchanges are a simpler alternative with many advantages.
For starters, you can use an exchange to also buy ZEC tokens instead of just buying or selling derivatives that are tethered to the price of Zcash. Secondly, exchanges carry a wider variety of digital currencies, which gives traders more options in terms of deposits and withdrawals. Availability of more cryptocurrencies also means better flexibility in terms of trading pairs.
Exchanges are also much simpler to use. They’re a great way for newbie traders to open trades without having to deal with the complex contracts typically offered by brokers. Many also offer features like leverage trading, which gives traders the chance to get high profits from a small initial investment.
Our Step-by-Step Guide on Zcash Trading
Trading can be intimidating for the uninitiated, so we’ve created a detailed guide with information on how you can start trading Zcash.
1. Combine Fundamental and Technical Analysis
Fundamental analysis is all about using economic data to establish the value of Zcash. This includes things like the state of the global economy, new blockchain innovation, competition between companies, government regulation and any other breaking news that could affect the value of Zcash.
Technical analysis involves analysing historical price action to forecast the future and identify potential market opportunities. It uses technical indicators to predict price trends. Some of these indicators include:
- Moving averages–This indicator shows the average price of an asset over a set period. It can be used to pinpoint signals of a bullish or bearish market.
- Trade volume–This is a basic indicator, but high trade volume is a great way to determine if the market is going to trend upward.
There are many more technical indicators that traders use. It’s a good idea to combine both technical and fundamental analyses to create a holistic trading strategy. It can help you better predict Zcash’s price movement.
2. Choose a Trading Strategy
The goal of every trader is to make money, and there are several trading strategies you can use to try to achieve that goal. Below is a small sample:
- Swing trading–This strategy involves holding positions for a few days or even several weeks to take advantage of price fluctuations. It’s a long-term trading strategy that depends on technical analysis.
- Day trading–This is probably the most well-known trading strategy for cryptocurrencies. It is similar to swing trading, except it involves entering and exiting positions within a few hours. The goal of a day trader is to capitalise on small price movements that happen in a day to make a profit.
- Trend trading–As the name implies, this strategy involves using fundamental analysis to take advantage of directional trends. Traders who use this strategy hold positions for long periods, typically at least a few months.
- Scalping–Scalping is similar to day trading, except it works on a much smaller time scale. It involves exploiting tiny movements that occur in seconds or minutes to make very small profits.
- Hedging–This is a strategy that takes an offsetting position. It involves taking an opposite trade just in case the price of ZEC falls beyond a certain level. It’s a great way to mitigate risk and diversify your portfolio.
There are dozens of trading strategies used by crypto traders. Some platforms even offer tools to automatically set up specific strategies. It’s ultimately up to you to decide what works best for your portfolio.
3. Select an Appropriate Platform for your Needs
Finding the right platform for trading Zcash largely depends on your goals. Do you want a dedicated trading platform with high trade volume and advanced trading features? Or do you want something more simple that still offers advanced options like leverage trading? If it’s the former, then go with a broker platform. If it’s the latter, then a derivatives exchange may be a better fit for you.
Whatever option you choose, make sure your chosen platform is registered and complies with financial regulators. Unregulated platforms are a hotbed for scams and fraud, and you should avoid them at all costs.
4. Setting Up Your Account
Setting up a trading account is a fairly standard process. You provide a username, password and email address for verification. The one additional step you have to take once your account is verified is the identity verification process.
Regulated platforms require users to go through the Know Your Customer (KYC) process to verify their identity and location. KYC is required by financial regulators to prevent fraud, money laundering and other criminal activity. The typical KYC process will require you to provide a copy of your government-issued ID and proof of residence. Some platforms may also ask you to provide a source of your income.
After you’ve verified your identity, you should finally be able to make deposits in fiat or cryptocurrency to fund your trades. Most platforms accept a variety of deposit methods, including bank account transfer, direct crypto transfer, credit/debit card and PayPal.
5. Prepare Your Trading Position
Once your account is funded, go over your trade options. Every platform has a trading interface that shows you your options, trading graphs, order books, open positions and more. Below are some examples:
There’s a lot of new information here, and all of it may feel overwhelming if you’re new to Zcash trading. Below is some common industry-specific jargon that every trader should know of:
Short or Long Position?
Whether you should take a short or long position will depend on how the market is doing. If you believe the price of Zcash is trending upwards based on your analysis, then you take a long position. If the market is bearish and is trending downwards, then you take a short position.
Going short is a great way to profit from a bear market, but short positions can also be risky because you stand to lose a lot more than with long positions.
Limit or Market Order
A market order is an order that’s completed right away at the current market price. A limit order allows the trader to set a buy or sell price. It is only executed when the price of Zcash matches or is better than the set price. Limit orders are preferred by some traders because they offer more control.
Trade Position Amount and Leverage
Trade position amount refers to the amount you put in the order. Some platforms let traders control much larger positions by using ‘leverage’ to increase their trade position. With leverage, a trader gains more exposure on the market by receiving credit from the broker or exchange.
For example, a platform may offer a 1:100 or 100x leverage for trading ZEC derivatives. That means if you’re holding $500, you can trade up to $50,000 worth of ZEC tokens. The platform will loan the rest of the money to help you to take a much larger position. The exposure gained from leverage can translate to higher potential profits, but it can also go against you and amplify your potential losses. Fortunately, most platforms won’t let traders lose beyond their available margin.
Risk Management: How to Decide the Right Stop-Loss and Take Profit values for your Zcash Trade
A good trader always has a risk management strategy in place to prevent losses. Every trade should have a stop-loss and take-profit value.
A stop-loss value refers to the price level where you want a losing position to automatically close. By having a fixed stop-loss value, you know exactly how much money you are risking on any open trade. A take-profit value is the opposite—it’s the level where you close a gaining position after you hit your desired profit target.
Your stop-loss and take-profit values should be tied to the market’s support and resistance levels. The support level is the point where the market price for ZEC regularly stops falling and bounces back up (i.e., the floor). The resistance level refers to the upper threshold where the price stops climbing and falls back down (i.e., the ceiling). Technical analysis can help you determine Zcash’s support and resistance level at any given moment.
Instead of picking an absolute figure for your stop-loss value, consider using a trailing stop-loss, which is tied to a percentage below the market price. Trailing stop-loss orders will automatically adjust as the resistance level moves up. The closing position is continuously updated to mitigate potential losses and maximise profits.
Review and Execute Your Zcash Order
Review every detail of your order before you confirm the transaction. Make sure you picked the correct order type for the right amount with your desired leverage. You should also make sure to input stop-loss and take-profit values as risk management measures. Once you’re confident everything is correct, place the order and execute the trade.
Close your Trade for Profits or Limit Your Losses
A trader has the option to close their trade manually or automatically using stop-loss and take-profit settings. Using these settings can help you mitigate your losses and maximise your profits. Your order will be closed automatically once your chosen lower or upper limit is reached. You don’t have to spend every waking hour monitoring the market.
For example, if you’re looking to sell for a profit, set up a limit order to automatically sell your ZEC derivatives when the price of Zcash is higher. Alternatively, you can use a stop-loss order when the market price dips below support levels.
Other Considerations
There are many other variables that can affect your decision when choosing a trading platform that we haven’t covered in this guide. These include trading fees, deposit/withdrawal options, security features and available trading tools.
A good platform will be honest and transparent about its cost structure. For extra security, it should offer users multi-factor authentication to prevent fraud and theft. Reliability is also another important consideration, so check to see how the platform handled periods of unexpected market volatility. Do your due diligence if you want to get the most out of Zcash trading.