How to trade crypto

How to trade crypto

The idea of trading digital currency is similar to the foreign exchange trading. meaning you always buying digital currency against other digital currency. For example, if your trade EUR/USD and you want to buy the EUR meaning that you are buying EUR and you sell Dollar. In digital currency there is for example the pair of LTC/BTC (LITECOIN/Bitcoin) if you want to buy the bitcoin, so you need to do the short action meaning you buying Bitcoin and you sell the litecoin.

The rate of the pair is derived from the price of both assets. if litecoin worth 52.00 and bitcoin worth 4,000 $, so the formula will be price of litecoin/price of bitcoin = the rate price of this pair.
52/4000 = 0.013

Leverage

Leverage is buying power that you receive from your broker on the funds that you have in the account, there is different levels of leverage that they range are from multiply 10-400 times the money you have on the account.

How leverage helps you?

If you start an investment account with 1,000 $ your account will be worth 0.25 BTC. because Bitcoin is worth 4,000 $ and you have only quarter of it. so basically, you can’t buy 1 bitcoin because it’s worth more than what you have. so therefore, you have leverage let’s say for example 100 buying power, so now your account is capable to buy 25 Bitcoins because you its your investment * 100 buying power = 100,000 $.

So now you can trade on more assets and increase your profits and achieve more returns on your money. However, your account will be with more deviation and you should consider your trades more carefully since it can be used as a double sword.