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EducationalJanuary 26, 2021

5 Hacks for Your Crypto Trading Needs

Shubham Goyal
Product Specialist
January 26, 2021

With India going under Covid-19 induced lockdown at the beginning of 2020, the crypto trading volume in India has grown significantly. Ever since the Supreme Court of India ruled in favor of cryptocurrencies in March, 2020, lifting the crypto ban in India previously imposed by the RBI (Reserve Bank of India), an overwhelming number of individuals have shown interest in cryptocurrencies. In the previous year, crypto exchanges in India have seen sign-ups rising around 10 times as compared to the stats of 2019.

Bitcoin, the most traded cryptocurrency globally, became the most preferred alternative investment option for investors in India in 2020, outperforming all other asset classes and bringing over 200% returns. Notably, by the end of December 2020, around $60-65 millions worth of Bitcoin trades were happening in India on a daily average. According to YCharts, as of January 2021, the price of Bitcoin has gone over INR 40,000 even.

The numbers show that cryptocurrencies have finally proven to be safe and trustworthy to the average investor in India. Trading cryptocurrencies is the newest hype train at the moment – one you might want to board for diverse investment opportunities and profitable returns.

If you want to take advantage of the emerging crypto markets, however, you must be aware of the nuances of crypto trading. With this post, we give you 5 trading hacks that can help you make the best of every crypto trade you make!

5 Hacks for Your Cryptocurrency Trading Needs:

1. Technical Analysis in Crypto Trading:

Analyzing for the right entry and exit points is a critical part in cryptocurrency trading, especially keeping in mind how the market volatility is compared to any other investment. You can use technical analysis, or TA, to discern previous market trends and make profitable strategies based on them. The basic idea of TA is that when it comes to pricings and trends in the crypto markets, history repeats itself. So any price movements are rarely random; instead, they follow price trends previously seen.

While using the TA method for cryptocurrencies, the data crypto traders most commonly consider include market demands (past, current, and future) and supplies, trader experience with a particular crypto, and individual trader expectations. To perform TA, you can use a range of charting tools, also known as technical indicators. These help you to figure out previous market trends and come up with predictions for the market based on them. Some widely used technical indicators within the crypto community are momentum indicator, Bollinger Bands, The Fibonacci Retracement, RSI (Relative Strength Index), etc.

2. Margin Trading and Leveraging:

Margin trading is an instrument you can utilize to open and manage positions much larger in size than the amount of capital you wish to put up. How? Well, the additional amount for the position usually comes from the exchange platform you’re performing your crypto trade on, but it can also come from a broker or another crypto trader.

The amount of funds your exchange would provide to you is called the funding amount. Against your borrowed funding amount, the exchange would also charge an interest, of course. The rate of interest charged for the funds is called the funding rate, and the amount the trader puts up is called a “margin”.

By definition, leverage also sounds quite similar to margin trading. If you do leverage right, it can help you take up larger positions in the cryptocurrency of your choice and amplify your profits by a good amount. However, margin trading and leveraging are decidedly not the same thing.

Yes, both these instruments are interrelated, and both involve borrowing funds. But while margin stands for the amount you need to deposit as collateral to keep your trading position open, leverage refers to the amount you can borrow to boost your open position. So essentially, margin indicates the amount used to create leverage, and it’s always relative to the degree of leverage a trader requires.

Crypto trading using margin and leveraging gives you the following benefits:

  • If you anticipate a price shift in the cryptocurrency of your choice, trading on margin will allow you to borrow money to increase your potential profit if your prediction does come true.
  • You can achieve maximum exposure by depositing a minimal amount in your account.
  • You get to have increased profits proportionate to your trading capital and your margin amount.
  • Short selling (profiting off of the declining price of a particular crypto) with a leveraged position is almost always sure to prove greatly profitable for you.
  • Combining leverage trading with the ability to go long or short can get you through any and all market conditions.

On Delta Exchange, you can trade with as little as 1% margin or 100x leverage.

3. Yield Farming:

In the world of decentralized finance, yield farming is one of the newest buzzwords. Basically, it’s a trading strategy that allows you to generate more returns with the cryptocurrency you own, instead of letting them lay around idle.

How do you go about yield farming? Well, there are liquidity pools (smart contracts coded to hold funds) on various exchange platforms like Compound or Yearn.Finance where you can add funds as an LP (liquidity provider). These liquidity pools are essentially marketplaces where users can borrow, lend out, and exchange their crypto coins. Why is being an LP advantageous for you? Because the liquidity pools are coded to provide you with rewards in return, usually in the form of a fraction of the trading fees the exchange platforms earn, proportionate to the amount of liquidity you provide.

Additionally, as an LP, you might get to earn the exchange platform’s native cryptocurrency which cannot otherwise be bought in the open market. The crypto token distribution rules might vary with the exchange platforms, but the basic idea of yield farming remains the same – as an LP, you will enjoy yields according to the volume of the liquidity you provide.

To know more about yield farming and strategies you can avail to double your profits, give our blog post on the topic a read!

4. Use Stop Orders and Limit Your Losses:

Traders place stop orders as a risk management technique to limit their losses. Knowing when to get out of a trade is as important as recognizing a profitable trading opportunity: a skill that unfortunately most cryptocurrency traders are lacking. Establishing a clear stop loss level can help you cut your losses.

To find out about stop orders in detail, and know how to use them, check out our blog post here!

5. Research, Research, and Research Some More:

Despite the recent surge in crypto trading, it’s still a fairly new investment route, and making mistakes is only natural. For instance, when Bitcoin saw a price rise in 2018, many traders were quick to go for broke, and they lost their money just as swiftly. With basic research, however, they would have found out that BTC was about to go bullish.

To perform successful crypto trades, educate yourself thoroughly first. Read up on both the history and the forecast of the crypto market you’re about to enter, and of course, make use of TA indicators. Doing proper research ensures you are entering and exiting the market at the correct times, and promises good returns.

And there you have it, 5 crypto trading hacks for major financial gains! We do hope you’d find this post of use!

Happy crypto trading!

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