Binance Coin Trading Guide For Beginners
Binance Coin (BNB) is the native cryptocurrency of the Binance exchange, a trading platform that is popular among the cryptocurrency community. Indeed, Binance has established itself as the largest exchange in the world in terms of trading volume.
The Binance Coin was founded by Changpeng Zhao, a Chinese software developer who has previously worked on high-frequency trading software. Although Binance Coin was founded in China, it has since relocated due to the regulation of cryptos in the nation.
Binance Coin is based on the Ethereum blockchain, and was established with a total supply of 200 million tokens. The altcoin enables users to receive discounts on the Binance platform, and Binance Coin boasts a range of advanced features.
Binance Coin has become rather popular with traders, so in this article we’re going to discuss all of the important issues related to BNB trading.
3 Reasons to Trade Binance Coin Now!
Cryptocurrency has experienced a major bull market in recent months, with the niche elevating in value rapidly, partly due to the Covid-19 pandemic. As a result, Binance Coin has increased significantly in price, and it certainly isn't the only cryptocurrency to experience this escalation in value. The challenging economic environment has been extremely bullish for cryptocurrencies such as Binance Coin, and even though there is something of an economic recovery, it is expected to continue for the foreseeable future.
Of all cryptocurrencies, Binance Coin has arguably experienced the most stratospheric rise to prominence. Created as a competitor to the Ethereum blockchain relatively recently, Binance Coin has shot through the roof in value, achieving a market capitalisation in excess of $87 billion, and becoming the third most highly valued token overall. Only Bitcoin and Ethereum have a higher value than Binance Coin, and this is extremely promising for the token going forward.
One of the interesting aspects of the cryptocurrency market place is the increasing involvement of institutional investors from Wall Street. Cryptocurrencies had a spectacular year in 2020, and have continued to increase in value in 2021, outperforming many of the traditional stores of value such as gold. Meanwhile, cryptocurrencies literally shot through the roof compared to equities and the stock market. In this climate, Wall Street has begun to invest heavily in Binance Coin and other cryptocurrencies, and as institutional money flows into the niche this must be bullish for its future.
Binance Coin Trading Vs. Investing
There are several ways to benefit from the popularity of Binance Coin, with both the trading and investing of the token possible. However, these two approaches are significantly different, so it is important to understand the way that they work, and their particular qualities.
Binance Coin is a major digital currency, and many investors hold the token in the manner of traditional investments. Currency markets have always experienced investors that purchase currencies and then hold onto them in anticipation of value increase. Binance Coin, and other cryptocurrencies, are no exception to this role.
Trading can be considered a more beneficial activity to enjoy profits from short-term price discovery of Binance Coin, due to the timescales involved. Investors have a vastly increased agility with this approach, as it makes buying the dips in the cryptocurrency and selling the peaks possible. When investing in Binance Coin in this way, investors are attempting to predict the market.
By comparison, investing involves holding onto the coin over a period of time, in the expectation that price discovery will occur in the longer term. This is a strategy that involves significant timeframes, and which is perhaps more suited to amateur investors. However, many professional and institutional investors also hold cryptocurrencies with the aim of profiting from them as they increase in price. This is a traditional form of investment, and one that essentially asserts that Binance Coin is a viable platform, which will continue to demonstrate this fact in the future.
When purchasing and holding Binance Coin, investors don't receive any physical tokens. It is instead more usual to trade Binance Coin via crypto derivatives, with CFDs, futures, and options all being popular.
CFDs (contracts for difference) enable investors to receive cash returns based on the difference between the opening and closing trade prices. Futures are somewhat more technical, being based on derivative financial contracts. These effectively require investors to transact the asset in question at a predetermined future date and price, at which point the investor hopes that their decision has been profitable. Finally, options contracts offer buyers the opportunity to buy or sell a particular asset, and then benefit from price discovery mechanisms.
Anyone hoping to trade Binance Coin must weigh up various factors. The type of investment made will be important, while market behaviour must certainly be considered. The general economic position can also have an impact, while news items can move the prices of cryptocurrencies quite rapidly. There is no one fundamental position that will always reap rewards with Binance Coin, or indeed any other cryptocurrency, equity, or investment.
Binance Coin Analysis: The Key to Success!
While Binance Coin has proven to be an extremely viable investment, it is also important to emphasise that all possible investment options need to be considered. There are a variety of ways to invest in Binance Coin, and all of these approaches merit consideration.
There are a variety of ways to analyse the potential price of Binance Coin, with technical analysis and fundamental analysis being two of the most popular. Technical analysis sees investors examine patterns on stock market charts, attempting to ascertain the future direction of the market. This approach is completely different to fundamental analysis, which is more focused on the true value of an asset, based on market fundamentals, breaking news, and other economic indicators.
Anyone investing in Binance Coin for the first time should also take other factors into consideration. Important factors could include the overall economic picture, whether cryptocurrencies generally have been in a bull market or bear market, and the overall sentiment towards stock, commodities, equities, and cryptocurrencies at the time of investment. It is certainly a challenging proposition to deal with this multitude of factors, but achieving this successfully is the foundation of successful trading.
Choose a Trading Strategy
In this section, we will examine some of the methodologies and approaches available for Binance Coin trading.
- Swing trading
This approach to trading is very much based in the short-term, with traders attempting to benefit from small-scale fluctuations in value. Swing trading can be applied to several markets, and all manner of investments, whether stock, equity, commodity, or financial instrument. Swing trading tends to take place over a few days, although it can involve longer time periods than this.
Swing trading is very much reliant on technical analysis in order to predict when fluctuations in price will occur. It is usual for swing traders to hold positions over more than one session, although this is not absolutely necessary. But swing trading is not really a long-term proposition, with virtually all swing trades being completed within a matter of weeks.
Overall, swing trading is intended to capture a significant tranche of a more generalised price movement in a particular asset.
- Day trading
Day trading is arguably the most popular form of trading, and involves completing all trades related to an asset class within a 24-hour period. Day trading requires a trader to make several purchases and sales within a single day, as traders closely monitor the market and respond to what they recognise as potential trends.
Day trading is significantly more speculative than other approaches to working with cryptocurrency, and is barely based on market fundamentals whatsoever. Many day traders utilise software, such as algorithmic traders, in order to execute their strategies. However, day trading also makes it possible to make profit in a very short period of time.
- Technical Analysis
This is an important aspect of cryptocurrency and Binance Coin trading, based on the examination of trends. Technical analysis uses stock charts and pattern recognition in order to attempt to understand the direction of the market. Those who engage in technical analysis possess a deep understanding of stock market trends.
Finally, scalping involves placing a significant number of trades in a very short period of time, with the hope of benefiting from tiny movements in the market. This is a relatively low-risk strategy, as less capital is invested, and spreading investments over numerous trades diversifies capital risk.
Sign Up on an Online Broker or Derivatives Exchange
Investors interested in working with Binance Coin have the option of signing up for an online broker or derivatives exchange. Brokers offer easy exposure to BNB’s price action through derivative contracts. This means you don’t need to worry about safeguarding the coins themselves. Cryptocurrency exchanges will offer you direct access to tokens via spot trading, which could become complicated for you, but many exchanges now also offer derivatives.
The fees may be different between the two types of platform, and the amounts of leverage and trading tools will vary too.
Depositing funds via an exchange is relatively straightforward, as most of these platforms have been around for quite some time, and wish to attract beginners.
Firstly, investors must register with the site, providing personal details and verifying their identity. Payment methods are then also confirmed, with debit cards, credit cards, PayPal, Skrill, and other common payment methods usually supported.
That's pretty much it, although you would also be advised to initialise a hardware wallet for cold storage of any coins you do purchase directly.
Open Your First Binance Coin Trade
Once you've progressed from the demo accounts to real-world Binance Coin trading, you are naturally making a massive step, so it is important to understand the process involved.
Before you go any further, you should decide whether or not you intend to hold tokens. If you do intend to hold the asset for a period of time, definitely procure a cryptocurrency wallet. Storing your tokens independently is recommended, as this eliminates the possibility of theft.
You should also finalise your investment strategy before going live. This is dependent on your entry and exit strategies, and what you hope to achieve from your trading activity. Ensure that you research the market diligently, and keep on top of any news related to cryptocurrency. Monitor the market on a regular basis, and always be disciplined in terms of your money management.
Short / Long Position
Taking a short or long position in Binance Coin means betting on whether or not you believe the currency will increase in value. This is a form of speculation, in which those who are short on the currency believe that it will decline in value, and those that take a long position believing that it will increase in value.
This form of investing can take place over a significant period of time, and are based on market fundamentals. Long trading is relatively simple, however shorting is a complicated process. Thankfully, good brokerage services vastly simplify this for the end user, making it much more accessible to amateur traders.
CFD contracts are another popular option for Binance Coin investors. This is a derivative product that often offers financial leverage, which can be used to make significant profits. While capital gains taxes are applicable to CFD contracts, they are available all over the world, and are thus one of the most accessible ways of trading Binance Coin.
CFDs are also frequently used for hedging, and so offer financial security. But there are downsides to CFD contracts as well. In particular, they often attract rigid regulatory requirements, while they can be considered a risky investment, potentially exposing investors to losses if calculations are made incorrectly.
Another important concept with regard to Binance Coin trading is the order book. This list of buy and sell orders gives a complete record relating to any security or financial instrument. This document includes the number of shares (or, in this case, BNB tokens) being bid on and offered at every price point. Market participants are also identified in this document. Order books are important, as they are frequently used by cryptocurrency exchanges, as well as being common in other markets as well.
When investing in Binance Coin, there are several order types available. These enable you to communicate detailed information to brokers based on your trading strategies. For example, limit and stop orders tell your brokers that you don't favour the market price, and instead, wish for trades to be executed when the price moves in what you consider to be a favourable direction.
Leverage has been mentioned elsewhere in this article, and can be considered a critical concept related to cryptocurrencies. Professional and institutional investors frequently use leverage, as it enables them to trade with larger amounts of money than would otherwise be possible. Leverage effectively means that you borrow money against a stake, effectively trading via credit. This can be hugely profitable, but naturally exposes investors to larger potential liabilities as well.
With this in mind, risk management should be considered important for any Binance Coin trader. The ethos behind risk management is to ensure that you don't overexpose yourself to the market, particularly considering that cryptocurrencies can be somewhat volatile. Nonetheless, if you manage these risks effectively, you will protect yourself against unpredictable or unfavourable market conditions.
Many traders overlook the importance of risk management, which is a major mistake. Even the most successful, knowledgeable, and skilled traders can experience money problems based on a couple of minor mistakes in the market. Risk management protects against such unsavoury scenarios, and ensures that investors are protected against negative outcomes.
All investment strategies should include due diligence and the restriction of emotion as part of their overall outlook. Risk management plays a critical part in this process.
Expert Insights: Common Binance Coin Mistakes and How to Avoid Them“ There are many strategies available to potential Binance Coin investors, and this naturally means that many mistakes can be made. If you're inexperienced in the cryptocurrency niche, you should definitely pay close attention to the section. Firstly, it's important to always follow one of the biggest truisms regarding investment - only invest as much you can afford to lose. Secondly, when trading Binance Coin you should definitely steer away from unregulated platforms. If you use an unregulated platform, your investment can disappear, and you have no hope whatsoever of recovering it. Beginners should also be wary of using a highly leveraged investment strategy, as it leaves them vulnerable to the vagaries of the market. You could end up with huge losses if you make the wrong market decisions. Finally, monitoring market fundamentals closely is incredibly important. These will drive the price discovery, and so they cannot be neglected under any circumstances. Emotions should be eliminated from trading where possible; do not allow your feelings regarding profit and loss to cloud your judgement. ”
Our Favourite Platforms to Trade Binance Coin
There are many platforms available for those wishing to invest in Binance Coin, which can be a little daunting for those new to the market in particular. But we have taken the time to research this matter in depth, in order to identify the most suitable platforms to trade Binance Coin.