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EOS Trading Guide For Beginners

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Author: Saad Ullah

EOS tokens power the EOS network, a highly configurable and scalable blockchain that makes it easy for developers to build decentralised applications (dApps) on. The EOS blockchain is relatively new in the game when compared to other major crypto projects but has quickly cemented its position in the market and the tokens are a popular digital asset for crypto trading. Currently, EOS ranks in the top 20 cryptos in terms of market cap.

If you are following the price of the coin and find that EOS trading is something you want to do, you are in luck, as this guide is all about how to trade EOS.

3 Reasons to Trade EOS Now!

1

Developer Friendly

The EOS blockchain has been created to make it easy for developers to create and deploy their applications and that has been an attraction for blockchain programmers. Presented as an operating system, the EOS platform is coded in the mainstream-friendly C++ language and it has attracted a lot of developers to build their applications and a strong community means that EOS will only grow stronger over the years.

2

DeFi

2020 saw the rise of DeFi where a whole new set of financial instruments are created that use smart contracts. Blockchain-based ecosystems which support the contracts can offer DeFi services and EOS is one of them. Even in 2021, there is still significant interest in DeFi and EOS coins can rise in value as more DeFi platforms launch on it.

3

EOS 2.1

EOSI 2.1, the latest iteration of the blockchain network, was released in December 2020 and it brings in a plethora of updates to the EOS blockchain that caters for issues and drawbacks faced earlier. The updates such as scalability for large-sized applications, node optimisations, data pruning and others will bring in increased stability, speed and efficiency to the network.

EOS Trading vs. Investing

EOS employs Delegated Proof of Stake (DPoS) consensus model that sees stakeholders voting for block producers, of which the top 21 nodes are granted the right to note down transactions and earn significant rewards. If you are interested in making profits with EOS tokens, you are probably better off either investing or trading the coins. For a novice, there might be no difference between the two as both investing and trading are all about buying low and selling high to make profits. However, beyond this simple explanation, both are very different. Investing entails that you actually spend money to buy EOS. This means that you are in possession of the coins and hold on to them using a crypto wallet, until a time when you decide the price of EOS is sufficiently high to be profitable enough to sell. On the other hand, in trading you never actually buy EOS. What you buy or sell are different contracts that are powered by the EOS coin’s value.

Though you never get custody of EOS, trading has its own advantages. You never need to understand the complexity of setting up wallets, learning about keys and keeping your private key secure, and paying transaction fees every time you move your digital asset. Trading gives you the ability to leverage the price of EOS as the underlying assets that power different contracts - all in the traditional and familiar environment of trading you are comfortable with. As a trader, you can quickly buy and sell the contracts much faster than you would be able to do so in an investment situation. Since the contracts derive their value from EOS (in this case), they are called derivatives. This gives derivative trading platforms the ability to create financial instruments that offer much more than simply investing in EOS can.

CFDs, or Contracts for Difference, are very common contracts that allow a trader to open a position at a certain time and value of EOS and then close it in the future. With CFD trading, you pocket the positive difference in the prices, very similar to what if you bought EOS low and sold it high (but without the cumbersome process of holding EOS tokens). Futures are another popular derivative contract that sees the trader agreeing to buy the underlying EOS at a predetermined rate at a specified time, regardless of the market condition. Since futures are an obligatory agreement, many people turn towards options, which are just like futures but allow the trader to back out of the agreement (losing the premium in the process). Perpetuals are yet another exotic derivative that have no time limit and can continue on indefinitely.

The type of contract you select, the risk profiling you do, local laws and regulations and more can all affect your outcome in a trade. So it is best to plan ahead and decide on a trading strategy that suits you the most.

EOS Analysis: The Key to Success!

Apart from sheer luck, the only way you will be able to make a profit on trading EOS is to do a proper analysis of different aspects and inputs to make well-timed moves. Should you fail to do your homework, your chances increase of losing your money.

Fundamental analysis requires you to look at qualitative data that can affect the mood of traders and the EOS community. This can be a very dynamic range that includes opinions by traders or influencers, market sentiment, planned upgrades (EOS 2.1, for example) and so on. Technical analysis is a more scientific approach that uses numbers, graphs and charts to establish a shift in prices and predict future outcomes. The figures can be processed using simple algorithms such as MACD, Moving Averages, Stock to Flow, or complex prediction models such as RSI and price floors and ceilings.

There are other factors that you need to account for in your analysis too. Competitor’s upgrades or announcements, any regulatory changes, hacks, scams, or rug pulls on completely different platforms or cryptocurrency exchanges can have a significant impact on the EOS price globally.

Trade EOS Today!

Choose a Trading Strategy

Before venturing on to practically trading EOS, you should make a few strategic decisions on how you will be placing and closing your orders on your trading platform. There are numerous strategies you can use, each having its own pros and cons. The aim of the game remains the same though: to make a profit. Following are a few of the most used strategies by traders.

  • Day Trading

Day trading is all about making short term orders that will benefit you in a few hours maximum. The idea is to make as many trades as possible over a day and at the end, close all positions to recover the traded amount and the profits made. Typically day trading orders range from a few minutes to hours.

  • Swing Trading

A midterm strategy, swing trading is about being patient and trying to capture bigger profits by waiting days, maybe even weeks to close orders. The concept is to wait until a sizable movement has been made in the EOS coin value.

  • Position Trading

The deep end of the pool is occupied by the position traders, who go in for the long haul. They place orders and then patiently wait for EOS to go ‘to the moon’. Position trading can last for months, sometimes even years if the traders are not satisfied to close their orders for the available profit.

  • Scalping

If position trading is one extreme, scalping is the other end of the spectrum. Scalping is literally shaving off the top. Traders using this strategy make many trades a minute, lasting from a few seconds to a couple of minutes maximum. The idea is to capture the tiny movements in the cryptocurrency market. Using this, a trader keeps on raking in tiny profits each minute. The goal is to gain enough profits that they amount to a significant one when combined at the end of the trading day.

  • Shorting

Taking a short position is an effective strategy that can help you to make profits even when the market is taking a downturn. This is an advanced derivative option many trading platforms offer. A trader basically bets on the market falling and makes a profit if the prediction is correct. Shorting can be combined with any of the aforementioned strategies in a bear market to take full advantage.

Sign Up on an Online Broker or Derivatives Exchange

With your understanding of the EOS coin, the cryptocurrency market, analysis, and available strategies, you can go ahead and get yourself registered on any of the different trading platforms that allow EOS trading.

There are two ways you can start your trading. You could prefer to register on an EOS derivatives exchange or use an online crypto broker. In both cases, you will be trading derivative contracts based on EOS. The only difference is that on an exchange, you buy or sell directly and a broker just acts as a middleman. This might seem an unnecessary step but using a broker carries its own advantages. A broker can offer you higher leverage and even allow your balance to go into the negative (if your relationship is good enough).

Deposit Funds

When you have decided and registered on your preferred trading platform, it is time to fund your account so you can get down to placing your orders. Depending on the platform, you might have filled out a KYC or AML form during or post-registration. If not, you will probably be asked to do so if you attempt to send money over. This will involve uploading a copy of your government-issued ID and a proof of address to verify your identity.

Funding your trading account is an easy process. You will find the option normally within your profile/settings options or under a dedicated wallet tab. Since derivatives are all about using the price of EOS to determine the derivative value, you will be most likely asked to fund using fiat money, such as dollars. The most common method is transferring money through banks and wires. Some platforms will also accept debit and credit cards, PayPal, or even cryptocurrencies themselves. 

Each funding method will have its own details given by the platform, such as the bank account (for bank and wire transfers) and wallet addresses (if cryptocurrencies are supported). Jurisdiction dependent, their AML regulations may also restrict fiat transfers to those from bank accounts and cards that are under your name only.

Open Your First EOS Trade

Done with registration and funding, you are just one step away from placing your first EOS trading order. You will find a lot of information on the trading screen and we understand that as a new trader you will feel swamped with all the information. Don’t worry, we will break it down all into simple sections so you can understand these.

You will find two sections of rows (either side by side or stacked on top of each other), one in green and the other in red text. This is the order book where all placed orders are recorded and matched. Orders are displayed aggregated according to the price asked, with the total amount of EOS between them. Using the order book, a trader can quickly check to gather different information such as the sell or buy pressure, how quickly orders are being executed (liquidity) and so on. A buying pressure with orders not being matched will show that the average price is rising, but at the same time, traders are willing to hold and reduce market liquidity.

In every broker or cryptocurrency exchange, you will always find at least three order types: market, limit, and stop-limit orders. Market orders are the plainest ones, where you simply buy or sell at the going market rate. A limit order lets you decide the price at which you want to trade EOS. Giving a fine-tuned control, a stop-limit lets you decide what should be the market rate when your limit order is placed. The stop-limit order is also mentioned as stop loss or stop buy order as it can help you to semi-automate your orders to mitigate losses or open a favourable position, even when you are not actively using the trading interface. Advanced order types may also be offered by the platforms, such as trail, fill or kill, and iceberg.

One of the best features of trading cryptocurrencies is the ability to use leverage. The trading platform allows a user to place order values that are much higher than their funds allow. This gives the trader more exposure to the contracts and the ability to earn higher profits. When the position is closed, the leveraged money is returned along with the loan interest. It lets you drastically increase your profits but only use this if you can afford to take the high risk of losing money rapidly, as the higher chances of profits also translate into deep losses when the trade goes against your prediction.

Normal trading gives you profits when you buy low and sell high. This is called taking a long position. But what if you wanted to make profits in a bearish market? Normally you would just liquidate and wait for the cryptocurrency market to bottom out so you can buy low again. Shorting is where you open a position, betting that the EOS price will fall. If it does, the difference is your profit. This means you still get to make profits in a downward market.

With all the options explained and at your disposal, you must factor in the risks of each into your trading plan and match them with your selected strategy. Risk management is key here. Though losses are inevitable at one point or another, you can cut down the chances significantly with a good risk management strategy.

Armed with all this information, you are all set to place your first trading order. Select your derivative, the type of order, any leverage you want and simply press the buy button!

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Experts Insights: Common EOS Trading Mistakes and How to Avoid Them

Over the course of your trading experience with EOS, you will start to learn how to read between the lines of the immense amount of information you will glean on a daily basis to make sure your positions are always in a favourable environment. The initial weeks or months will be a different story as you will be in the learning phase. This doesn’t mean that you cannot mitigate losses. There are a few classical mistakes that new traders make and you can easily avoid these. The first and foremost is using an unregulated trading platform. A properly registered one is in compliance with rules and laws, such as offering trader protection. Using an unregulated one will always put your invested money at the risk of being scammed. Avoid the impulse to jump on the bandwagon. A bit of sideways action shouldn’t scare you to buy or sell in panic. Your analysis should guide you, not your emotions. Start your trading journey with small trades. Learn the ropes before placing a large order. At the same time, never place an order that you are not willing to part with. Cryptocurrencies such as EOS are volatile and can quickly drop or increase in value. If you are using leveraged trading, this can quickly push you into the red and the platform will make a margin call to recover its money, leaving you with nothing. The game here is to play it safe and only take risks for which you can cover potential losses. Over time your experience will start to guide you and you will be able to make larger and more profitable trades.