Over the last couple of years, several celebrities, athletes, and even political figures have announced that they added cryptocurrencies to their investment portfolios and are regularly trading digital currencies to make a profit. Jumping on the crypto bandwagon seems like a good idea if you’re looking for a way to make some extra cash. Trading crypto pairs has become a popular endeavor lately, especially as coins like BTC have been amassing value steadily.
Before planning to trade crypto pairs full-time, you should consider doing it as a side hustle. But don’t be fooled; even as a side gig, it will still take a lot of time and resources, as you need to stay in touch with the market nonstop because the crypto world never sleeps. You will feel the thrill and freedom of trading pairs like ETH/BTC, and you will also deal with the challenges the volatile crypto sector poses.
This article talks about the journey you will start when choosing to trade digital currencies in your free time. After a while, you might want to do this full-time.
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What are crypto pairs?
There is no secret to trading crypto pairs successfully; you need to research and understand how they function so you can create an effective strategy. A crypto trading pair is a combination of two assets you can trade between each other on a crypto exchange platform. The listings offer information about the value of the first asset in relation to the second. For example, for the ETH/BTC pair, the listed price is the exchange rate between Ethereum and Bitcoin. Let’s say that the trading pair is listed on your choice exchange platform at the price of 0.1. It means that one ETH is worth 0.1 BTC.
Suppose you traded Forex before, you’ll find it easy also to trade cryptocurrencies because they function similarly. You only have to keep in mind that cryptocurrencies are more volatile than fiat money. Reliable exchange platforms usually list the most traded crypto pairs ETH/BTC, BTC/ETH, BTC/USDT ETH/USDT. However, you can also trade pairs with lower trading activity and liquidity, but make sure to research them thoroughly before. For instance, you can monitor the EUR to SOL pair to explore trading opportunities between European fiat and Solana.
When you understand how a crypto pair functions, you make informed decisions and can set better entry and exit points to boost your profit chances. For example, if the market shows signs that Bitcoin will perform better than Ethereum in the following period, you might want to trade the ETH/BTC pair to make a return on your investment.
It’s crucial to keep an eye on the pairs you want to trade, to create the proper strategies to navigate the market and take advantage of the best opportunities. Pick the pairs with the best spreads and engage in active trading.
How can you trade crypto pairs?
You must register on an exchange platform that allows you to swap one cryptocurrency for another. Crypto pairs consist of a base asset and a quote asset. For example, in the ETH/BTC pair, ETH, the first crypto listed, is the base asset, and BTC, the second crypto listed, is the quoted asset. Its price will tell you how much BTC you need to buy 1 ETH. Let’s take this scenario and discuss it more. Suppose you have some ETH in your portfolio and decide to swap it for BTC. The first thing you do is check what is the listing price of the ETH/BTC pair to understand how much you have to pay for 1 BTC. If you have the necessary funds, you sell the established amount of ETH for BTC.
The average platform requires you to take three steps when you want to trade crypto pairs:
– You pick a pair you want to trade from the list of pairs available. If you want to trade popular pairs, you’ll find them on almost any exchange platform. However, if you prefer less traded pairs, your choice of medium of exchange might be more limited.
– You check the rate for the chosen pair.
– You place the order to sell your base asset for the quote one.
Types of crypto pairs available
If you are new to the crypto world, you should know there are several types of assets available. Hence, a crypto pair can mix two of these types of cryptocurrencies.
Here are the most common types of crypto trading pairs:
– Crypto-to-crypto – both the base and quote currencies are cryptocurrencies. You can swap one cryptocurrency for another without having to convert to traditional currencies first.
– Fiat-to-crypto – these pairs involve a traditional currency and a digital currency.
– Stablecoin pairs – the pair includes at least one stablecoin like USD Coin or Tether. They are meant to prevent the increased volatility associated with the crypto sector.
Prepare yourself to deal with the risk
When trading cryptocurrencies, regardless of the asset you choose, it’s paramount to set stop-loss and take-profit levels to prevent trading out of fear of missing out. These levels guide your actions and protect your investment, enhancing your chances of locking in profit. The stop-loss will sell your cryptocurrencies automatically when they reach an established low price to prevent further losses. The take-profit, on the other hand, sells your assets automatically when you reach the desired profit.
Use these tools together with others to remove emotions from your trading activities and lower the risk associated with your activities. Remember, you are doing this with the purpose of making some extra cash, so it’s not worth risking your finances. You should learn discipline because the crypto sector is volatile, and you can easily get swapped by trends. Risk management strategies make the difference between a successful crypto trader and one getting their portfolio wiped.
Diversification is vital when trading currencies, so in addition to the popular pairs, you should also put some money into less-traded pairs. Spread your funds across multiple crypto pairs to minimize the impact one poor-performing one might have on your finances.
Final words
Welcome to the dynamic crypto world! Hope you will navigate it effectively!
