Where & How to Trade Cardano (ADA) in 2023

Within the Cardano ecosystem, you can earn ADA either by creating a stake pool or delegating your ADA into one. However, not all would be interested in earning Cardano staking rewards as it can be a bit complex to do so. If you are one of these people, you can still capture the increasing price of ADA by trading or investing in Cardano.

Investing is when you will actually buy Cardano. This means you will need to register on a cryptocurrency exchange and buy ADA. Depending on your exchange, you will need to learn a bit about wallets and public and private keys to purchase Cardano and hold it. Investments can be a bit cumbersome to handle as you are buying and selling ADA directly.

Trading ADA on the other hand is a much better alternative if you are looking to take all the advantages of Cardano coin and still be free from the hassle of owning ADA. When you trade cryptocurrencies, you do not buy the coins, but complex contracts that use the ADA price as a point of reference. Since the contracts’ values are derived from the digital asset as an underlying value, these are normally referred to as derivatives. Derivative platforms give traders an atmosphere that they are most familiar with, doing away with cryptocurrency wallets, unfamiliar trading pairs, and crypto-native terminology. 

Since trading is powered by derivative contracts, traders can use them to net the varying Cardano price and generate profits without ever holding ADA in the first place. One of the most commonly used derivatives is a Contract for Difference. CFDs are complex instruments that not only factor in the price of ADA, but numerous inputs. To explain it briefly, buying a CFD contract when there is a dip in ADA price and closing it at a higher Cardano value means you net the differences in the price at the two points as your profit.

A trader can also go for a Futures contract which allows the person to commit to buying ADA (or settling in fiat) at a predefined rate on an agreed date and time. At the time of contract expiry, the trader buys in as per agreement with the actual market rate having no role to play apart from determining profits (the bought ADA is cheaper) or losses (ADA price is down in the market).

Futures are a time-bound type of contract that are obligatory for the trader to honour. People who want to have the benefit of Futures without the obligation to buy can always opt for Options, a type of Futures contract that gives the trader the right to buy, but not an obligation. Perpetuals are another type of Futures contract that have no expiration time and traders can use these for long term strategies.

Cardano Analysis: The Key to Success!

Opportunities don’t happen, you create them. This holds true for profitable Cardano trading. Your success relies on analysing Cardano. Without it, you are bound to lose your money. There are two types of analysis you can perform on Cardano: fundamental and technical.

Fundamental analysis is all about finding the feel of the market. Cardano and its ADA token are affected by how people are thinking about them. Any news or a press release (keep an eye on the Alonzo upgrade, for example) by the development team, a prediction by an influencer, upcoming holidays or events, and new regulations can have an impact on the crypto trading environment. The determination of the extent is more like a black art that requires intuition. As with any qualitative analysis, there is no right or wrong value, but a predicted range.

Technical analysis is a game of numbers. Using past data such as ADA prices, trading volume, and charts, users can run different analyses through simple calculations of averages, MACD, RSI, or even complex indicators such as Fibonacci retracements, wedge formations, supports and ceilings, and candlestick patterns. These different mathematical models can give very accurate future predictions that have a high probability of achieving their intended target. The accuracy of any technical analysis depends on the accuracy of the data and the precision. Data from different time scales can also have an impact. A daily moving average will not take into account the small dips and troughs that an hourly one will, for example. The selection of your data scale is very important and should tie up with your overall trading strategy.

Apart from these two analyses, there are a few other factors that as a trader you should always be aware of and keep an eye out for any developments here. Cardano’s price can be affected by different news and information that may not be directly tied to ADA but will leave its mark. This can be any regulatory updates, press releases, or technological updates by competitors. Even a rug pull or a hack that is not even connected remotely to Cardano can change the market sentiment and send its price plummeting. Then there is the global aspect. Cryptocurrencies such as ADA are not confined within a jurisdiction or a country and run in a borderless manner. That means that any news from one side of the world can have its effect on Cardano in all regions.

In the end, you will need to find that perfect balance of different forms of analysis. Each will give a different value and intensity. As you trade, you will find out which analysis takes a higher priority and under which conditions. Remember, there is no universal rule and what you interpret will be different from another trader’s version.

Now that you know how to do different kinds of analysis, it is time to pick a trading strategy. Your selected strategy will have an influence on what analysis you will need to rely on more than the other. The combination should be a perfect fit. You can decide on the following most used trading strategies.

Day trading will see you sitting in front of your computer as the market opens (though cryptocurrencies trade round the clock, some brokers can limit the trading hours to match mainstream timing) or at least when your trading day starts. The aim in day trading is to do quick trades, as many as possible, and wind up before calling it a day — liquidating all ADA positions. Money is poured into fresh Cardano trades the next trading cycle. Liquidating orders is an essential part of day trading as it allows to protect the trader from market moves during off trading times.

If you find the concept of day trading too hectic, you can always opt for a trading style that can last for days or even a week. Swing trading is a relatively midterm time trading that is geared towards capturing larger Cardano price movements coalesced over days and weeks.

If you are still not sure of the time commitment involved and your analysis shows that there is a market boom being created but is not yet within your grasp, you can go for position trading. The longest timed trading strategy, people will place orders in the hopes of capitalising on that one big move and will sit and wait for months, even years. Swing trading also moves the scales of the analysis. Where a day trader would look at the hourly or minutes chart, a position trader will use weeks and months’ timelines, negating the small ADA price movements as simple distractions.

There is a strategy that works in complete polar opposite to position trading. Scalp trading is all about raking in tiny profits through making several low buy and high sell trades that have a life cycle of a few seconds to a few minutes at the most. Over the trading session, the small profits are collected into one sizable payout at the end of the day.

Sign Up on an Online Broker or Derivatives Exchange

Now that you have your trading strategy locked down, it is time to start buying and selling Cardano derivative contracts. Head over to a trading platform of your choice and register to get down to business. 

Depending on your selection, you will sign up on a derivative exchange or register with an online crypto broker. There isn’t much difference between the two. The end game is the same: trade the complex contracts available and make profits. There is just one extra step in the whole trading process when it comes to brokers. Cryptocurrency exchanges allow you to directly monitor your trades, place orders, and deal directly with the ADA tokens themselves. When it comes to a broker, the service operates solely through contracts but often offers an environment more dedicated to trading. The broker will be able to offer you leverage, access to advanced trading solutions such as trading robots, and give insights to upcoming trends and even allow ‘copy trading’, where you can follow the moves of pro traders.

While registering, make sure you complete any KYC and AML checks. Some platforms will have it as a part of the sign-up process, while others will require you to complete it before you can place a trade. In all cases, you will need to clear the checks by uploading some ID and a proof of address, to verify that you are who you say you are.

Deposit Funds

Depositing funds is the next logical step: you cannot trade without any money. You will need to navigate to your wallet or the deposit section of the trading platform (usually as a separate wallet or parked under your account settings) and select a payment method.

Cardano trading with derivatives involves using the ADA price only, not the coins, so any option you will find will be one or another form of fiat currency transfer. Many trading platforms prefer the most common bank transfer or payment through your debit or credit card. In either case, you will have all the information you will need to fund your account. For a bank transfer, for example, you will find the supported bank, the account number, and the currency type. For using your plastic cards, you will need to input your card number, expiration date, the name it is registered to, and the CVV code.

To make sure your funding goes through without a hitch, try to transfer the smallest amount possible and/or acceptable first. If the transaction is successful, you can comfortably send over larger amounts. This saves you from any unforeseeable unfortunate circumstances. Also look for any other funding options that might be easier for you, like PayPal, or at times even selected cryptocurrencies.

Open Your First Cardano Trade

Once you are sure your account is funded, the next step is the last one (or the first of many): placing your trade order. Head over to the trading or market option and select Cardano (or specifically its coin’s ticker, ADA) and the fiat trading pair you want. You will be presented with the complete trading interface for Cardano. There will be a few different information presented for you and you will need to have an understanding of these to place an order.

Sitting on one side, you will find the order book which will list all placed buy and sell orders, but that are not executed as yet. Each row of the order book will display the bid or ask price, along with the total amount of orders for that ADA value. You can use the order book to determine market trends.

You can use the different order options the platform will provide. Usually, there are three, such as a market order (you buy or sell at the going market ADA price); you can select a limit order to define your desired bid or ask Cardano price if you are not happy with the current market rate; a stop limit is a finer control as it allows you to tell the platform the market rate at which your limit order should go in the books.

A leverage option will allow you to potentially increase your profit earnings through using the broker or the platform as a lender and borrowing money for your trade. Once a profitable trade is completed, the borrowed amount along with its interest will be returned and you get to keep all of the profits. A fair warning here: an unfavourable leveraged trade will give the platform the option to sell your position to recover their money, leaving you penniless and even bankrupt. Use with caution, alongside appropriate risk management strategies.

If your Cardano trading platform offers long and short positions, you can use this to your advantage. Shorting allows you to trade in reverse, meaning you can bet that the ADA market will fall and make profits even from a bear market.