NEO Trading Guide For Beginners
Formerly called Antshares, NEO is a blockchain ecosystem much like Ethereum. The development of NEO as an alternative blockchain network started in 2014, created by the duo Da Hongfei and Erik Zhang. Today, it stands amongst the top 25 cryptocurrencies. The network uses a two token model, the main one being the NEO token, and NEOGAS which acts as the fuel.
The popularity of NEO has made it one of the preferred coins for crypto traders. NEO trading is a major activity and if you are interested to trade NEO, we have put together this guide specifically for this purpose.
Table of Contents
3 Reasons to Trade NEO Now!
Though nowhere near the size of the DeFi market commanded by Ethereum, the NEO network has its fair share of DeFi platforms. One of the few ecosystems that support DeFi, NEO could be a big platform for these decentralised financial systems as it uses the common Java and C# programming languages for smart contract coding, making it easier to deploy.
A deflationary model-based smart economy, the NEO network has a total of 100 million NEO coins in existence, with 50 million distributed during the ICO phase. The rest are locked for developer use and are released slowly (15 million NEO tokens per year). This creates slow release and increased adoption is driving up the value of NEO coins. Even the GAS tokens are under the same deflationary model, with the same totality of 100 million NEOGAS that will ever be available.
Efficient and Fast
While large blockchain networks struggle with the energy-hungry Proof of Work (PoW) consensus algorithm, the NEO network uses the much more efficient Proof of Stake (PoS) variation, with decentralised Byzantine Fault Tolerance (dBFT). Requiring very low electrical cost, this mechanism means that the GAS requirement for transactions is very low, while there is a large throughput of transactions (up to 10,000 per second).
NEO Trading vs. Investing
With all the NEO coins pre-mined, there are no miners in the NEO network who will mine new coins. The network is secured through approved nodes and that means only they get to rake in the transaction fee and block rewards.
For the public, this means that trading and investing in NEO tokens is the only viable method for capturing the rising NEO coin value and making profits. You can become either an investor or a trader of the NEO tokens. Both methods have the same end game of giving you wealth, but they come with a difference. Investing in the coins means you actually buy NEO. Mostly done through a cryptocurrency exchange, investing means you will need to understand blockchain technology workings such as setting up crypto wallets, private and public keys, and so on. You will need to then hold on to the NEO, waiting for the right time to sell them off for profits. Though cryptocurrency exchanges do have their own internal wallets for you to use, you will be better off holding the tokens in private NEO wallets. This security means you have to keep shuffling coins in and out of your wallets whenever you want to sell. This makes the whole process cumbersome.
Trading is an alternative method of profit generation where you don’t purchase NEO, but enter into agreements that use NEO coins’ price as the underpinning value. These NEO price-derived contracts offer much more simplicity and flexibility than trading. With no NEO coins directly involved in these financial instruments, derivative platforms are able to offer a simpler, yet extremely powerful environment. Without the need of setting up blockchain-based wallets and only numbers being sent back and forth, trading can be very fast-paced in comparison. Plus, since derivative contracts are used, the options to generate profits are much higher.
Contracts For Difference or CFDs are complex instruments that can give traders the ability to earn on the price differences of NEO. In simple terms, a trader can buy a CFD at a certain NEO coin price and when the digital assets rise in price, the trader can close the contract. The price difference between opening the contract and closing it becomes the profit of the trader. Futures are also a popular derivative contract type that many traders use. Futures entail that the trader is obligated to buy NEO tokens at a predetermined rate when the contract expires. If the homework is accurately done, this can mean a trader gets NEO at a cheaper rate than the rest of the market at contract expiry, which can be then sold off for profits.
Many traders are not comfortable with Futures’ obligatory aspect and may turn towards either Options or Perpetuals. Options and Perpetuals are derivative contracts just like Futures, but they differ where the former gives the trader to close the agreement beforehand and walk out without any obligation to buy the NEO coins. Though this saves a trader from potential losses, the user does let go of the premium, which can be a better trade-off. There is no such allowance in Perpetuals, but they don’t have any expiration date and a trader can let the contract run indefinitely, paid for just with a funding fee.
With different contracts, risks to the trader, and regulations involved, it is most prudent that a trader should plan in advance and lock in on the most beneficial strategy.
NEO Analysis: The Key to Success!
You will need to depend a lot on lady luck to make profits from trading NEO if you just randomly place orders in hopes of making it big. This is a sure-shot way of losing your money. The best way to mitigate your chances of losses is to analyse NEO carefully before placing an order.
Two types of analysis can be done. Both are independent and different in nature but work in conjunction to offer the best possible NEO coin price prediction and help define your strategies.
Fundamental analysis is all about qualitative information that can affect the global trading mood. This can include information on what the NEO development team is doing, the market’s feel, any news about the NEO network, launch of new platforms on the NEO blockchain, and other macro picture influences. Technical analysis, on the other hand, is all about numerical data. Taking different figures from the past and running trends to make a mathematical projection can help determine which way NEO’s price will go. There are different types of technical analysis that you can run as a trader. There are simple indicators, such as Weighted Moving Averages, Relative Strength Index, and Moving Average Convergence Divergence. Some indicators such as Stock to Flow, Floors and Ceilings, and Golden Crosses can be complex. In all, these different types of analysis should be done in tandem to get a fair idea of what the market will look like in the coming days and weeks.
You will also need to account for other factors that are not directly connected with NEO but can have an impact on it. News, hacks, scams, and upcoming regulations should be carefully watched and studied as well.
Choose a Trading Strategy
With the ability to make different analyses, it is time that you decide on which trading strategy you will opt for. There are lots of trading startegies, but not every one will fit your trading style. The analysis you have learnt in the previous section will have a role to play in selecting the strategy.
- Position Trading
Position trading is all about patience. Traders who opt for the long term game select this. Position traders open contracts for long spans in an attempt to capture the largest possible gains. Since a significant favourable movement can take time, one trade in this mould can last for months, even years, the traders waiting for NEO to fly.
The polar opposite of position trading is scalping. A very intense method, scalping is just like shaving off the little bit at the top. NEO, as a cryptocurrency, is very volatile and keeps on moving up and down all the time. Scalp traders try to take advantage of this by opening several orders in succession and closing them only a few seconds later when the price has moved in their favour. Through this, the small profits they make can be significant in value when combined.
- Day Trading
As the name suggests, day trading is when you finish up your trading activities at the end of the day. The strategy is to select the most promising moves, open orders (as many as you can handle) and close them, liquidating all your money before calling it a day, only to start afresh the next day.
- Swing Trading
Swing trading is very much like position trading but done over a shorter time period. Instead of months, swing traders place their orders and wait for the market momentum to “swing” NEO’s price in their favour. Typical swing trading orders last anywhere from a few days to weeks.
- Short Trading
This is more of a technique than a complete strategy, but shorting can be very useful when carefully done. This is basically opening orders with a bet that the price of NEO will fall. Used in conjunction with the above-mentioned strategies, a falling market can still generate profits for the trader.
- Leveraged Trading
Similar to shorting, leverage trading is used as part of the already mentioned strategies. A trader is given an extension in terms of how much money he or she can put in an order. Once the order is closed, the loaned amount is returned to the platform, along with the interest. The remaining principal amount and profit go to the trader. Be careful though: losses will likewise be amplified.
Sign Up on an Online Broker or Derivatives Exchange
With the strategy defined and set, you have completed the theoretical part of trading NEO and with the information at hand, you are ready to trade NEO. However, there is one thing that needs to be done: registering on a NEO trading platform.
There are two choices here for you. You can opt to use an online cryptocurrency broker or a derivatives exchange. Both offer the same types of services, that is trading NEO coins, but with a slight difference. On an exchange, you will be trading NEO directly, while a broker will act as a proxy for the underlying price of the NEO tokens. At first glance, using a broker may not seem that practical since it is just adding an unnecessary step, but where a derivatives exchange offers benefits, a broker has its own. Brokers are more in tune with their clients (you, as a trader) and offer more flexibility than derivatives exchanges can, such as higher leverages, access to trading bots, short/long positions and more.
Take your time to decide on the platform you would like to use, a broker or an exchange. After that, you should head over to the platform you are comfortable with and sign up.
After registration, the next step is to fund your trading account. You will need to clear your platform’s KYC and AML checks before you are able to do so. Depending on the platform you register with, it can be a part of your registration process or you will need to clear it before you can start transferring money. Make sure you have gone through the process to avoid unnecessary delays. This will likely involve uploading a copy of your government-issued ID and some proof of address.
Since trading on derivative exchanges and brokers takes place with NEO based contracts and not the cryptocurrency itself, you will find the environment very familiar as these platforms will accept fiat money. You will find the funding options in either your account settings menu, or a specific wallet section. Depending on the platform, you will be able to deposit fiat using a bank transfer or using your debit or a credit card. Some platforms might even accept other forms of payments such as PayPal. A few might even accept cryptocurrencies.
Every funding type will have its details that you should look into. Bank transfers, for example, will have a bank account number, the bank or an IBAN (International Bank Account Number), that you can send money to. If using cards, you can be presented with a page asking for specific information such as card number, CVV code, and your other card details. Whichever method you choose to fund your trading account, send a small amount to make sure that you have the correct settings. When successful, you can transfer a larger amount. Always use the most secure method available, and opt for security over convenience wherever possible.
Open Your First NEO Trade
With all the registration and funding done, you are all set to trade. To begin, first head over to the trading interface and get yourself familiar with the UI. Trading has become very complex over the past years and the trading interface can be intimidating at first. You will be presented with different numbers and options.
The order book is the ledger where all pending orders are placed for everyone to view. The order book is divided into two parts, the sell orders and the buy orders. Each row in the order book contains information such as the asking price and the total totality of NEO orders against it. The order book can help you determine where the traders are leaning to and you can adjust your trades accordingly.
The main buy/sell section is where the action happens. You can place different kinds of orders for NEO. The most common types are market order (you buy or sell at the market rate), limit order (you can define the NEO price for your order) and stop-limit (you can decide on the market rate when your limit order is to be placed in the books). There can be more types, such as trail, fill or kill, take profit, and others. These can help to automate your trades and provide safety nets in the event of sharp market movements.
Leverage, when available, can be a powerful tool. You are given greater exposure to the order through the platform lending you money. When you close your order, the borrowed amount is returned (along with an interest fee) and you pocket the profit. Leveraged trading can lead to losses as not many traders can afford to take the high risk of losing money rapidly due to leverage going in the red, so be careful with this.
Shorting is another option you might find. This is basically going in reverse of normal “long” trading. You bet on the NEO price to fall and if it does, you make money. Shorting can be an ally in the selling market but like long trading, can lead to losses if your prediction is not correct.
Before placing your order, take into consideration all the risks. A small incorrect decision can mean losses.
Experts Insights: Common NEO Trading Mistakes and How to Avoid Them“ As you trade and gain experience with NEO derivatives, you will learn the tricks of the trade. The starting days have to be dealt with cautiously as there are a lot of moves that you might make impulsively. That being said, it doesn’t mean that you cannot mitigate your losses. All it takes is to be careful. The first thing you must do is not panic. Trading is a game of calculated risks, but it doesn’t mean you have to be emotional about it. Don’t be quick to place orders or close your positions. Let your analysis run your trading, not your heart. Don’t forget to register on a verified platform for your trading. Using an unregulated platform will be appealing, but it will always carry the risk of scamming you. A properly registered platform will be a much safer bet, despite the verification hoops you may have to jump through. Always trade small amounts in the initial stages as you get familiar with the environment. Only when you are confident that you have a good grasp of trading should you go for larger amounts. Even then, never put all your eggs in one basket. Always go for diversity. The same goes for leveraged trading. A 100x leverage multiplier can be very tempting. Who wouldn’t want to increase their profits a hundredfold? But a negative move can quickly erode your position, and wipe out even your starting position. The key is to make safe bets and avoid jumping on the bandwagon. ”- Saad Ullah
Our Favourite Platforms to Trade NEO
Following is a list of our carefully examined and curated platforms where you can trade NEO with confidence.