Ripple Trading Guide For Beginners
Ripple has become one of the best-known cryptocurrencies during its existence of just under a decade. Created by Ripple Labs, Ripple is based on a distributed open-source protocol, and delivers extremely fast payments. Its affordability, flexibility, and efficiency in this area have led to the cryptocurrency being advocated as an ideal cross-border payment system.
In 2017, Ripple briefly became the second-largest cryptocurrency, with a market capitalisation in excess of $73 billion. At that time, it was very much considered one of the big three cryptocurrencies, alongside Bitcoin and Ethereum. While other tokens have overtaken Ripple since then, the altcoin remains one of the most prominent on the market, with a particularly compelling use case.
There are many Ripple investors who remain hugely committed to this token, so in this article we’re going to examine some of the issues related to investing in this cryptocurrency.
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3 Reasons to Trade Ripple Now!
The last year or so has been one of the biggest bull markets that cryptocurrencies have ever experienced. This has occurred partly due to the ongoing Covid-19 pandemic, although there have been other factors as well. Ripple has increased in value less than some of the other cryptocurrency tokens, but has still experienced a positive trading climate. With the coronavirus continuing to circulate, restrictions still in place, and economic recovery far from certain, it is believed that this bull market may continue for some time.
The long-term prognosis for Ripple would seem to be extremely positive, mainly due to the incredible use cases that Ripple already possesses. Ripple is deemed an ideal system for cross-border payments, due to its speed, efficiency, and stability. Indeed, the mainstream financial system has already embraced Ripple in a way that is slightly unusual for cryptocurrencies, with many banks and other financial institutions speaking openly about its potential. Ripple is also already widely used as a token, and its blockchain has been particularly praised. All of this adds up to a cryptocurrency token with an excellent future, and one that could very well escalate in value in the years to come.
Cryptocurrencies have outperformed all other asset classes during 2020, increasing in value far more than other traditional stores of value such as gold and silver, and certainly being hugely superior to equities. This has led to a raft of Wall Street investors and other institutions beginning to pour money into the cryptocurrency space, which is naturally a massive positive for the niche. As professional and institutional investors continue to increase their stakes in cryptocurrencies such as Ripple, we can expect to see the coin continue to increase in value and market capitalisation.
Ripple Trading Vs. Investing
Ripple has become hugely popular as a trading mechanism, but it is also possible to invest in XRP as well. However, before you can make any Ripple trading decisions, it is first necessary to understand the fundamental differences between trading and investing.
As an excellent way to transfer money, Ripple is ultimately a digital currency. It can very much be seen as a commodity, and commodities traditionally attract investors looking to hold them over a long period of time. This is a typical investing move, which is intended to benefit from price discovery over a period of time. Investors who opt for this form of interest in Ripple believe that the cryptocurrency has strong fundamentals.
This contrasts with trading, which almost inevitably takes place over a much shorter time period. Investing in Ripple involves buying and selling the cryptocurrency, often rapidly, in an attempt to take advantage of short-term fluctuations in price. Unlike some other commodities, those investing in Ripple don't receive any physical tokens. The usual way to trade this cryptocurrency is to utilise crypto derivatives, such as CFDs, futures, and options.
CFD contracts are based on differences between opening and closing trading prices, which are then settled in the favour of the investor. Futures are a form of derivative, which require parties involved to transact and process it at a predetermined future date and price; hence the name futures. Options contracts are based on the value of underlying securities, such as stocks or XRP tokens. Those investing in options can buy or sell a particular asset as required at the cost of the contract’s ‘premium’.
Trading strategies for Ripple are dependent on several factors, not least the type of contract that has been entered into. Market behaviour, risk profile, and the wider economic outlook can also impact on the way that Ripple prices fluctuate. This means that investors must weigh up all of the existing data, and craft a market approach that is suitable to this environment. There is no solitary strategy with Ripple that will always pay dividends.
Ripple Analysis: The Key to Success!
If you are interested in investing in Ripple, you have several ways in order to potentially make money. And there are also several approaches to analysing and benefiting from the Ripple market.
Several ways of analysing Ripple are used by investors, with technical analysis and fundamental analysis being at the heart of this subject. These two forms of analysis can be seen as conflicting in nature, but both have credibility and a sensible foundation.
Technical analysis appeals to those who love to analyse data, as it requires investors to assess stock charts and other technical information in-depth. Investors use this information to predict the way that the market will react, often using patterns and other commonly observed market phenomena.
Fundamental analysis is different to technical analysis, in that it is more focused on the true value of assets within the marketplace. Fluctuations will occur in any commodity or asset, but longer-term price discovery relies on factors such as breaking news, regulation, technical development, and other relevant issues and information. Fundamental analysis requires investors to assess these different factors, and then make price discovery predictions based on this important information.
Other issues that may impact the price of Ripple include the overall economic situation at the time, sentiment towards Ripple and cryptocurrencies generally, whether altcoins are experiencing a bull market or bear market, and various macroeconomic factors. Balancing all of these elements is really the challenge of investing, and those who have made a significant amount of money in cryptocurrency and other fields have effectively mastered this skill.
Choose a Trading Strategy
Anyone trading currencies such as Ripple has several strategies and methodologies available, so we will discuss some of these in the section.
- Swing trading
Swing trading is a popular approach to investment which takes place over a relatively short period of time. It can be applied to any stock, equity, commodity, or financial instrument, and involves a good deal of technical analysis. Swing traders attempt to identify opportunities in the XRP market by analysing price trends and patterns.
As such, swing trading is not necessarily based on fundamental market factors, and instead benefits from more unpredictable price fluctuations. Swing trading usually takes place over a matter of days, but can sometimes extend into weeks or even months.
- Day trading
Day trading is the most dynamic form of investing in cryptocurrencies, with all trades associated with the strategy intended to be completed within a 24-hour period. Day trading thus requires extremely close monitoring of the market, and is usually conducted by investors with a significant amount of knowledge.
Day trading is effectively nothing whatsoever to do with market fundamentals, and instead based on small variations in the market behaviour. Day trading can be considered more speculative than other approaches to investment, but it is a way of profiting from Ripple over a short timeframe.
- Technical Analysis
When investing in Ripple, technical analysis can be extremely useful. This involves using historical price charts and market statistics in order to predict the direction of the market. Traders that engage in technical analysis believe that they can identify market patterns from previous price trajectories and other data.
Finally, scalping involves placing a significant number of trades over an extremely short period of time, with the hope of taking advantage of tiny movements in the market. Scalping is highly technical, but less risky than other forms of investing, as spreading money over several small trades can be considered a form of risk management.
Sign Up on an Online Broker or Derivatives Exchange
Investors trading Ripple can utilise several different platforms, and among these are both online brokers and derivatives exchanges. Online crypto brokers use contracts to give investors exposure to Ripple, whereas crypto exchanges will also offer direct exposure to XRP tokens via spot markets.
Brokers are often more geared towards novices and traditional investors, whereas exchanges may seem more daunting. Cryptocurrency exchanges will also typically offer “degenerate” levels of leverage (up to 100x and higher), whereas brokers boast unique features like copy trading, allowing beginners to mimic the trades of veteran traders.
It is not particularly difficult to deposit funds via one of the many cryptocurrency exchanges or brokers online, particularly as these tend to be focused on inexperienced traders. There is a simple process involved, which consists of merely a few steps.
Traders begin by registering with the site, which involves confirming one's identity as part of KYC (Know Your Customer) regulatory compliance, and following some basic instructions. Ripple investors will then add a payment method, with debit cards, credit cards, PayPal, Skrill, Neteller and other common options usually available.
You can then deposit funds, although investors would be advised to invest in a hardware wallet for storage if dealing with actual tokens rather than derivatives. Exchange platforms make it possible to store Ripple and other cryptocurrencies, but for extra safety cold storage is recommended.
Open Your First Ripple Trade
Implementing your first trade in Ripple may be an unfamiliar process, but it is not as daunting as it may seem. However, it is important to understand the process in some depth before you buy XRP.
When investing in Ripple, you must first decide whether or not you will hold on to actual tokens. If you intend to do so, acquiring a cold storage cryptocurrency wallet is vital. The cryptocurrency space has never been safer, but theft is still possible if one does not protect digital assets adequately. Of course, this is equally applicable to other forms of investing, and definitely should not be seen as a cause for alarm, but equally there are many fraudsters out there, and this reality cannot be ignored.
Deciding on your Ripple strategy is also advisable before beginning your investment journey. Trading plans should take into consideration both entry and exit strategies, along with your overall goals. Familiarise yourself with the market, and monitor security, macroeconomic issues, and important news on a regular basis.
Short / Long Position
Another option with cryptocurrencies such as Ripple is to take a long or short position on the token. Taking a long position essentially means purchasing the cryptocurrency, and then holding Ripple over a period of time, in the belief that it will increase in value. Conversely, those short-selling Ripple believe that it will decline in value. Shorting is actually quite an involved process, however it is vastly simplified by broker platforms, making it a feasible option even for complete beginners.
Both of these positions can be held over a long period of time, or indeed realised over a matter of a few days. But they would tend to be seen as long-term strategies.
Crypto investors can also engage in CFD contracts, which are derivative products based on financial leverage. These offer a great deal of flexibility, and mean that you can invest more money than you actually have at your disposal, effectively trading via credit. Many smart traders trade CFDs in order to hedge, enabling losses to be offset. Considering that the cryptocurrency market can be a little volatile, this is certainly a welcome aspect of the CFD contract.
There are downsides to CFD contracts as well, though. CFD contracts attract rigid margin requirements, while losses can be magnified, particularly for those investors who intend to leverage.
Any Ripple investor also needs to be familiar with all order books. These keep a record of all buy and sell orders associated with a security or financial instrument, such as Ripple. Order books are also responsible for listing all current market participants. Order books are used by virtually every cryptocurrency exchange, as well as many other markets and asset classes.
There are also a variety of other times available for trading with Ripple. These enable you to communicate your trading strategy to brokers. Limit and stop orders indicate that the market price is not favoured by the investor, and that an investor would instead prefer for trades to be executed when the price begins to converge on a desired value.
Leverage has previously been mentioned in this article, but it's important to expand on this concept further. Any investor can utilise leverage, but it tends to be particularly popular among professional and institutional investors. Leverage enables investors to trade vast quantities of money with only a relatively small initial stake. Effectively, those engaging in leverage are using credit in order to invest. This can be extremely profitable, but can also be considered risky, as it exposes investors to significant liabilities, as losses will be magnified in the same way as profits.
Another important trading principle is risk management. This is definitely advisable in the cryptocurrency sector, as the market can be somewhat more volatile than other comparable fields. Risk management helps investors to protect their accounts against losses, meaning that they're entering the market with a sense of security.
Risk management is taken extremely seriously by professional investors, but it can be neglected by amateurs. Nonetheless, risk management definitely should not be ignored, as it is an important principle that prevents debilitating losses from occurring.
Removing emotion from the investing process is always valuable, and risk management can play a major part in this process.
Expert Insights: Common Ripple Mistakes and How to Avoid Them“ Investing in Ripple has become hugely popular, and thus a range of strategies and principles have emerged for this purpose. It is important to pay very close attention to these, as it is the best way to avoid losses if you're an inexperienced trader. The number one principle that all Ripple traders should follow is that only ever risk in investment what you can afford to lose. This is the absolute foundation of all trading, and it also definitely applies to cryptocurrencies and Ripple. It is also advisable to steer away from deregulated platforms, no matter how attractive they may appear. Without regulation, the danger of losing your initial investment escalates rapidly, and you will have no recourse should this occur. Generally speaking, cryptocurrency investors should also reject a highly leveraged approach, as this is really a risky strategy only suitable for experienced investors. Finally, investors would be advised to keep a close eye on market fundamentals at all times, as these will always impact price discovery. Do not allow emotion to cloud your judgement, stay rational and calm, and monitor the markets and related information as closely as possible. ”- Chris Morris
Our Favourite Platforms to Trade Ripple
There are a variety of platforms available to trade Ripple, but we have already identified many of the best on the market. In this section we will offer our recommendations regarding Ripple trading platforms.