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What You Need to Know About Crypto Trading in the Philippines?

2021-03-29

The fundamental economic concept of trading involves the purchase and sale of assets. These may be any service or good wherein the buyer provides the seller with compensation. There are cases wherein the transaction may involve exchanging various goods and services among different trading parties.

For the financial markets, the assets that people trade are what they refer to as financial instruments. These include the bonds, stocks, options, futures, currency pairs on the Forex market, cryptocurrency, margin products, and many more. In case these terms are relatively new for you, try not to worry as we'll eventually explain them to you.

Trading is a term that people commonly use for short-term trading. Here, traders have their exit and enter positions entered actively over relatively short time frames. Yet, this assumption may be slightly misleading as trading may refer to an extensive range of various strategies like trend trading, day trading, swing trading, and many more. However, try not to worry as we'll have each of them discussed in better detail.

What does cryptocurrency trading mean, and how does it work?

Involved in cryptocurrency trading is the speculation on various price movements through the CFD trading account. It can also be about selling and buying underlying coins through an exchange. We'll give you more information on cryptocurrency trading, including what moves the markets and how it works.

CFD trading with cryptocurrencies

The derivatives called CFDs in trading allow people to speculate on the price movements of cryptocurrency without owning any underlying coins. If you think that it would eventually fail, you can go short and 'sell.' However, if you believe that the cryptocurrency would ultimately increase in value, you can go long and 'buy.'

Since both can be leveraged products, you need to have a small deposit put up. Also known as margin, it can help you become fully exposed to the underlying market. You can have your loss or profit calculated according to your position's full size for the leverage to magnify both losses and gains.

The Use of An Exchange in Buying and Selling Cryptocurrencies

You buy the coins themselves whenever you use an exchange to purchase cryptocurrencies. You have to make an exchange account, let the asset's total value put up to open a position, and allow cryptocurrencies to get stored inside your wallet until it's okay for you to sell.

With these exchanges, you may need to go through a steep learning curve as you have to get a grip on the involved technology and become aware of how you can make sense of the information. Many exchanges have limits on the amount you can deposit, and it may become expensive to maintain the accounts.

How do cryptocurrency markets work?

Since cryptocurrency markets are decentralized, a central authority, like the government, doesn't back or issue them. They instead run across an extensive network of computers. Yet, you can have cryptocurrencies stored in 'wallets' as well as sold and bought through exchanges.

Cryptocurrencies are not like any traditional currency as they mainly exist as a shared digital ownership record stored on a blockchain. Whenever a user wants to have cryptocurrency units sent to another user, they send it to that person's digital wallet. The transaction will not be final until it gets added and verified to the blockchain that happens when it undergoes the process referred to as mining. That is how they usually create cryptocurrency tokens.

What is blockchain?

Blockchain refers to the shared digital registry of recorded information. When it comes to cryptocurrencies, it records every cryptocurrency unit's transaction history that shows the changes in ownership over time. Blockchain works by having the transactions recorded in 'blocks.' At the front of the chain, new blocks get added. Any ordinary computer file does not have the unique features of security that blockchain technology has.

Cryptography

Cryptography links blocks together through the use of computer science and complex mathematics. If there is any attempt to have data altered to disrupt the cryptographic links between the blocks, the network's computers can immediately identify these as fraudulent.

Network Consensus

Instead of having it in a single location, the blockchain file always gets stored on various computers throughout a network that everyone can read. Since that is the case, it can be hard to alter and highly transparent. It does not have any weak points that can be vulnerable to software or human error and hacks.

What is mining in cryptocurrency?

Cryptocurrency mining involves the process wherein new blocks get added to the blockchain, and recent transactions in cryptocurrency get checked.

Creation of a new block

Valid transactions get compiled by mining computers into a new block. These computers also attempt to have the cryptographic link generated to the previous block by looking for the complex algorithm's solution. Whenever a laptop becomes successful in link generation, a block gets added to its version's blockchain file, and it allows the update to get broadcasted all over the network.

Checking of transactions

From a pool, mining computers can choose pending transactions and check to ensure that the sender has enough funds to make sure that the transaction will be complete. Involved here is reviewing the transaction details and comparing them to the blockchain's stored transaction history. Another check will confirm that the sender authorizes the transfer of funds using their private key. 

What makes cryptocurrency markets move?

Markets in cryptocurrency move because of supply and demand. However, since they are decentralized, they tend to stay free from any political and economic concerns that could affect any traditional currency. Even if there is so much uncertainty when it comes to cryptocurrency, here are the factors that have a significant effect on their prices:

  • Market Capitalization - This involves the value of every existing coin and how users perceive this to develop.

  • Supply - This involves the total amount of coins and the rate at which they get destroyed, lost, or released.

  • Key Events - Included here are significant events like economic setbacks, security breaches, and regulatory updates.

  • Integration - It involves how cryptocurrency can easily get integrated into the current infrastructure like the payment systems in e-commerce.

  • Press - Here, it shows how cryptocurrency gets portrayed in the media and the amount of coverage it gets.

How does trading of cryptocurrency work?

Through a CFD account and IG, you can work on trading cryptocurrencies. The derivative products will allow you to speculate if the cryptocurrency you choose will increase or decrease in value. 

As leveraged products, CFDs allow you to have a position opened for just a part of the trade's total value. Even if you can increase your profits with leverage products, the losses may become magnified whenever the market ends up moving against you.

What is a lot in cryptocurrency trading?

Frequently, cryptocurrencies get traded in lots. These are cryptocurrency coins in batches that get used to making sure that the trade sizes are standardized. Since cryptocurrencies are highly volatile, there is a tendency for the lots to be relatively small. Most of them are only a unit of the cryptocurrency base. Yet, specific cryptocurrencies get traded in more oversized lots.

What gets spread in cryptocurrency trading?

The difference between cryptocurrency's quoted buy and sell prices is called the spread. Just like any financial market, whenever a position gets opened on a cryptocurrency market, you will get presented with a couple of prices. In case you want a long position opened, you can trade at the buy price that can be slightly higher than the market price. Whenever you want a short position opened, you can trade at the selling price, which can scarcely be lower than the market price.

What is margin in cryptocurrency trading?When it comes to leveraged trading, a vital part of it is the margin. People use this term to describe the startup deposit whenever you put up to maintain and open a leveraged position. Whenever you have cryptocurrencies traded on a margin, always remember that your required margin would change. It could depend on the size of your trade and your broker.

Usually, the margin gets expressed as the full position's percentage. For example, whenever you trade on BTC (bitcoin), you may need 15% of the position's total value to be paid for it to get opened. Instead of having to deposit $5000, you need to have $750 deposited.

What is PIP in cryptocurrency trading?

The PIP is the unit that they use to measure the movement in the cryptocurrency's price. It refers to the one-digit movement of its cost at a certain level. Valuable cryptocurrencies generally get traded in 'dollar.' Because of that, when a price moves from $120 to $121, it means that the cryptocurrency moved a single PIP.

Yet, some cryptocurrencies at a lower value may get traded at different scales, wherein a PIP can be a cent or even less. Whatever trading platform you choose, it is vital to read every detail to understand the level at which the price moves and have it measured before placing a trade.

What is leverage in cryptocurrency trading?

Involvement in leverage is the way to gain exposure to cryptocurrency in large amounts without paying the trade's total value upfront. Instead, you can have a small deposit put down that people refer to as margin. Whenever you have a leveraged position closed, you can have your profit and loss based on the trade's full size.

Even if leverage can have your profits magnified, it can also increase the risk of having amplified losses. Included here are losses that may exceed your margin on any individual trade. Thus, it is vital to becoming aware of managing your risk whenever you get into leveraged trading. 

What is investing?

Investing involves the allocation of resources like capital while expecting that you will generate profit. Included here is using money to kickstart and fund the land purchase or buy a business. When it comes to the financial market, the investment in financial instruments you would eventually sell at a higher price is involved. It would be best if you subsequently had it sold at a higher price.

When it comes to investment, core to its concept is the expectation of returns or ROI. Unlike trading, investing takes a long-term approach to accrue wealth. The investor has the goal to have wealth built over a long period that could take years or even decades. There are many ways to do this, but investors often utilize fundamental factors so they can find investment opportunities that have great potential. Since the approach to this is long-term in nature, investors are not concerned with price fluctuations in the short-term. Because of that, they can typically remain passive without becoming too worried about losses in the short-term.

The Difference Between Investing and Trading

Since investors and traders aim to generate profit in the financial market, they have methods to achieve this goal, but most are quite different.

Investors generally aim to generate returns over a long time which can take years or decades. Since there is a more significant time on their horizon, they tend to have bigger targeted returns for their investment.

On the other hand, traders aim to take advantage of the market's volatility. Since they enter multiple trades wherein they frequently enter and exit their positions, it may be okay for them to seek smaller returns for every transaction.

However, which one could be better or more suitable for you? You are the one to decide on this. Begin by making yourself educated about the markets and learning by doing. You can determine which one will better suit your trading profile, personality, and financial goals in time.

What is Fundamental Analysis?

The method used to assess the valuation of a financial asset is fundamental analysis. Fundamental analysts review both financial and economic factors to determine if the asset has a fair value. Included here are macroeconomic circumstances such as the business that connects with the industry's asset, conditions, and the existing state of the economy. These can often get tracked through the lagging and leading indicators of macroeconomics.

When the fundamental analysis becomes complete, analysts can eventually determine if the asset is overvalued or undervalued. This conclusion will be what the investors will use whenever they need to decide on their investment.

When it comes to cryptocurrencies, data science and its emerging field may be part of fundamental analysis. It involves the data on the public blockchain that they refer to as on-chain metrics. These metrics include transactions analysis, number of addresses, top holders, and the network's hash rate. Whenever the abundant available information on public blockchains gets used, analysts could make highly complex technical indicators that could measure specific aspects of the network's overall health.

Even if fundamental analysis gets widely used in Forex or the stock market, their current state is not suitable for cryptocurrencies. Since it is a new asset class, it does not have a comprehensively standardized framework for determining the market's valuations. Aside from that, the market gets primarily driven by narratives and speculation. Because of that, fundamental factors may typically possess negligible effects on the cryptocurrency's price. When the market becomes mature, they may develop other ways that are more accurate for crypto asset valuation.

What is Technical Analysis?

Since there is a different approach that works with technical analysis, it comes with the core idea that the historical price action could indicate how the market would likely be behaving in the future.

When it comes to technical analysis, analysts don't attempt to know the asset's intrinsic value. Instead, they check out the historical trading activity and try to search for opportunities based on this. Included here is the analysis of chart patterns, volume, price action, the use of technical indicators, and a lot of the other tools for charting. This analysis has the goal to have the weakness or strength of a given market evaluated.

Because of that, technical analysis may not only be a tool that predicts the probabilities of price movements in the future. It can be a great framework that is useful for risk management. Since technical analysis provided a model to analyze the market structure, it can be easier to measure and define the management of trades. The first step to manage it is to measure the risk. Because of that, some of the technical analysts may not strictly be considered traders. They can have technical analysis used as a framework for managing risks.

You can have technical analysis applied as a practice to any financial market. That is what cryptocurrency traders widely use. How does technical analysis work? Like I mentioned earlier, cryptocurrency markets have a valuation that gets driven mainly by speculation. Thus, technical analysts may consider them as an ideal playing field for they can thrive by just considering the technical factors.

Which is better between technical analysis and fundamental analysis?

It could entirely depend on your strategy in trading. You may even use both, as most market analysis methods work best when combined with other indicators or methods. Through this, you will have a better chance of seeing highly reliable opportunities for investment. Having them combined with various trading strategies can help in eliminating biases in the process of decision-making.

You can sometimes refer to this concept as confluence. Multiple strategies are what confluence traders combine into one as they can harness all of the benefits. Here, the idea is that having trading opportunities with integrated approaches can be so much more potent compared to those that only have one strategy.

Know About Crypto Trading with Binance

The prominent cryptocurrency exchange in terms of users and trading volume is Binance. It announced a P2P (peer-to-peer) trading platform in PHP or Philippine Peso. The company aims to provide Filipinos access to cryptocurrency in their local currency.

It can now be possible for Filipino Binance users to sell and buy ETH, BTC, BNB, USDT, EOS, and BUSD using the Philippine Peso. Binance has a P2P platform that allows Filipinos to do this without any transaction fees. Integrating this will enable the user to trade crypto in their preferred prices and payment modes. They can even have their crypto assets transferred to a Binance wallet without an added cost.

Because of the platform's zero transaction fees, it offers an escrow service. It aims to ensure that all of the cryptos will go to the users' wallets. Binance has a P2P platform that lets users gain more access to various financial services. Included here are spot, margin, lending, and futures trading of Binance.com.

Since its launch in October 2019, Binance's P2P platform has supported approximately 31 fiat currencies. It was also able to process trades of more than $1 billion. For their Global P2P Merchants Program, the company now actively searches for local merchants with reliable crypto and fiat access. Here, verified merchants enjoy a lot of benefits. It includes exclusive support for customers, VIP discounts, ad transactions and postings, and security deposits without any fees.

Start learning about Binance P2P trading by trading through Binance now.