Where & How to Trade Stellar Lumens XLM in 2023

Since XLM coins are pre-mined and pre-selected nodes note down the transactions, you cannot earn by running a mining operation for block rewards and transaction fees. The only practical option is purchasing Stellar or trading it.

Both investing and trading, if done carefully, can give you profits, and in the end, isn’t that what it’s all about? However, both concepts are more different than one might believe. Investing in Stellar Lumens is all about buying XLM. You register on a cryptocurrency exchange to buy Stellar and other digital currencies. But to do that, you must first understand that you are holding XLM and planning to sell when profits are required. This means you need to have an idea of how blockchain works, what wallets are, and associated private and public keys. For many people, this can be too much of a hassle and be a barrier to them being able to generate wealth from Stellar. 

The alternative is to trade Stellar Lumens. Unlike investing, you never buy XLM tokens themselves. Trading Lumens is all about entering contracts that derive their value from XLM’s market price. That’s why they are called derivatives. Using derivative platforms gives traders a more traditional atmosphere as they are based on fiat and legacy trading exchanges. There is no need to buy Stellar tokens, place them in wallets, or worry about XLM liquidity on exchanges. At the same time, a trader can use different types of contracts that can give them much more flexibility in generating profits.

CFDs, or Contracts For Difference, are complex trading instruments that rely on the underlying XLM price. A simple explanation of CFDs is what the name refers to: a trader buys the contract which is powered by the then market rate of Lumens. When the XLM price goes up, the trader can close it, with the contract’s value now higher due to a rise in Stellar’s value, pocketing the difference as profit.

Another type of derivative contract used commonly is Futures, where a trader agrees to buy XLM (or at least pay the price) in the future at an already agreed rate. The trader is obligated to do so when the contract expires, regardless of the actual Stellar market value. A carefully studied and timed contract can mean significant profits if a trader’s contract price is lower than the market rate on settlement day.

The obligatory clause in the Futures contract can be a cause of concern for many as they will be able to see that the market is turning red and there is nothing they can do about the contract. For these traders, there are Options, a contract that gives the trader the right to terminate the contract before the agreed expiration time. This can help to avoid losses as the trader doesn’t have to pay anything apart from the premium. For traders who want to go for the long haul and are not sure if the contract expiration time is something they can handle, there is always the choice of a Perpetual contract. Perpetuals are just like Futures in all aspects but one: there is no expiration and the contract can run indefinitely.

Stellar Lumens Analysis: The Key to Success!

Unprepared and without data to back your trading decisions, you are bound to lose your fiat currency. The only way you can protect your money is to trade with proper homework and data-backed decisions. To maximise your chances of success and profitability, do technical and fundamental analysis before placing trades.

Technical analysis is taking hard, numerical data of past performances of XLM and running them under different charts and algorithms to make a mathematical future projection. A few of the main inputs are past prices, trading volumes, highs and lows etc. These numbers can be crunched to produce future expected price predictions through different methods such as Moving Averages, Relative Strength Index, wedge formations, and more. Each technical indicator will have its own prediction and the more accurate your data is, the more accurate your prediction will be.

There are non-numerical factors that can have an impact on Stellar Lumens’ price as well and you will need to account for these. This can be a range of inputs that can be news on Stellar, something the founders do or say, community acceptance, new markets, jurisdictions that Lumens can help to remit money, and market perception. Since these factors cannot be quantified, they can only give an idea of the direction and intensity of how XLM’s price will move in the coming days.

Though these two different analyses are what can directly affect Stellar Lumens and its price, there are other aspects that you will need to be aware of too for trading. These are not directly connected to XLM but can have a significant impact on the price. General crypto or regulatory news, market nervousness, frauds or scams, and other factors will drive the XLM price up or down, even if the origin is from the other side of the globe.

The analysis you have learnt in the previous sections will not amount to anything if you do not use the analysis in conjunction with a trading strategy that suits your needs. There are a few different strategies that you should know and understand:

• Day Trading

Day trading is all about opening up several trades over the course of a single day and closing up shop before the day ends. The point of day trading is to start afresh each morning and not worry about the price movements of XLM when you are not trading overnight.

• Swing Trading

A short to mid-term trading strategy, this is all about calculating and watching larger swings in the market and capturing these. Unlike day trading, swing trading can last more than one day, at times as long as several weeks.

• Position Trading

The extreme trading strategy in terms of time, position trading is sitting down for the longest time possible before closing a trade. The idea is to tap into the largest movements of XLM overall. With price moves that would send day and swing traders scrambling to mitigate their losses, position traders will be calm, knowing that in the grand scheme of crypto movements, XLM will recover.

• Scalping

Where position traders take the slowest approach with the largest swings, scalping is the opposite. Scalping is all about opening several trades, many simultaneously, and grabbing the tiny Lumens price movements over a few seconds to a minute. At the end of the trading session, the tiny profits per trade can combine to give a significant gain.

Sign Up on an Online Broker or Derivatives Exchange

The combined knowledge of analysis and trading strategy means that you are now ready to do some practical Stellar trading. However, you need to sign up on a trading platform if you are going to trade.

Depending on your locality, regulations, and personal choices, you will have an option to register either on an online crypto brokerage or a derivatives exchange. In all fairness, both types of trading platforms will allow you to do just about the same type of trading you want, and in the end, the game is to generate profits, which both types of platforms can offer. On a derivatives exchange, you trade directly with the XLM tokens, whereas brokers operate solely through instruments.

A broker might seem an unnecessary step since you can trade directly, but the brokerage will come with its own set of advantages that you might not find on an exchange. These may include higher leverage options, trading bots, and advanced order options such as both short and long positions.

After making a decision, you should register on your preferred platform for the next step.

Deposit Funds

Since trading is about buying and selling contracts, you will need to fund your trading account to start. Funding options are normally placed under your trading profile section or a dedicated cryptocurrency wallet. Since Stellar Lumens trading is all about using XLM’s price to drive the contracts and not the coins themselves, your derivative trading platform will ask to be funded in fiat. Normal funding options include bank transfers and debit/credit cards. Some platforms will even accept PayPal or another form of fiat transfer. It is wise to check on these options before registering to avoid going through a completely new sign up process on another platform later on. 

You will find a detailed guide on how to fund using the given options by the exchange. For example, bank transfer information will include their bank name, sort code, and account number. If the platform caters to international traders, there might even be an International Bank Account Number (IBAN) mentioned for your ease. Whichever method you choose to deposit fiat in your platform account, we advise you to send over a small amount as a tester at first to ensure you are sending it to the right place. You may also have to upload some government ID and a proof of address to enable larger deposits, as part of the Know Your Customer (KYC) and Anti-Money Laundering (AML) processes.

Open Your First Stellar Lumens Trade

Now that your trading account is all set up and funded, you can start your long-awaited XLM trade. Log in to your account and head over to the market or trading page of your platform and select XLM/USD (or any other fiat pair the trading platform offers). The whole trading interface will adjust to show pertinent data that you could need. The interface will be sectioned neatly to display different kinds of information you will need to glean and use in your analysis to decide on how much and when to trade.

The main action centre is the order container, where you will find different kinds of buy or sell orders you can place. Typically there are three order types found on any good trading platform. A market order only allows you to decide how much you want to buy or sell. There is no control over the pricing as the XLM market rate is used, hence the name market order. A limit order offers the price control a market order lacks. Using a limit order, a trader can define not only the total amount of the order but the price at which he or she is willing to buy or sell. Taking this a step further is the stop-limit order, adding in the ability to define the exact market XLM price condition in which the limit order is placed. A stop-limit buy or sell order can come in pretty handy, especially during up or downswings to capture the rise of Stellar Lumens’ price, or to mitigate losses in a bearish market.

Before placing the orders, you might want to look at the other sections of the interface. The order book will help you determine the traders’ sentiment as you can quickly view the different order amounts and the price requested, along with the trading gap to find if there is selling or buying pressure.

If you want greater exposure to the XLM price and don’t have enough funds (or don’t want to spend all of them), you can always look for a leveraged trading option. Trading platforms offer different leverage tiers to their users who can “borrow” money in multiples of their vested amount. At the end of a successful trade, the loaned money goes back to the platform (plus a little interest for the loan) and the trader gets to keep all of the profit, thus getting more profits than were it an unleveraged trade. Extreme care should be taken while leveraged trading. The elasticity goes both ways and if the XLM price drops, it can mean that you will lose more than just your money. Only do it if you can afford to take the high risk of losing money rapidly due to leverage.

Many trading platforms also allow you to “short” a trade. This is a very important tool to use to multiply your chances of profits. In normal trades, you bet on the Stellar Lumens’ price to rise to make profits and you take losses if it falls. Shorting is a method in which you actually bet against the price of the asset, in this case XLM. Should the market see a downturn, you make a profit off of it.

In the end, trading is all about risk management: what to do and when to do it, factoring in the immense quantities of information at your disposal to mitigate the risks involved.