Where & How to Trade Zcash (ZEC) in 2023

Zcash is a digital token that can both serve as a form of investment and trading instrument. However, the differences between these two approaches to the challenge of making money from Zcash are not always immediately apparent.

Investing in Zcash involves buying ZEC tokens and then holding them over a period of time. This can be considered somewhat similar to the buy and hold strategy that is commonly utilised by investors. Anyone engaging in this approach to Zcash fundamentally believes that the token will increase in value over a period of time.

By contrast, trading Zcash involves monitoring the markets closely, and making a number of trades, often on a short-term basis. One form of trading is day trading, a popular practice among investors, and one that we will discuss in more detail later in this article. Trading is based on market fluctuations, whereas investing can be seen as a more value-based proposition.

Trading takes place over a much shorter period of time than investing, and it allows much greater agility for investors. However, it can also be viewed as a riskier activity than investing, with the latter being based on much more solid market indicators. 

When trading Zcash, it is unusual for investors to receive any physical coins. It is instead far more typical to utilise crypto derivatives, such as CFDs, futures, and options. 

CFDs, or contracts for difference, are popular with the financial system in general, as well as cryptocurrency. They see differences between opening and closing trade prices settled with an investor in cash. Futures are derivative contracts, which require parties to transact an asset at a future date and price. Options are based on underlying securities, such as stock, with investors offered the opportunity to buy or sell a particular asset. Each of these approaches has its own particular merit, and is worthy of consideration.

When deciding on a trading strategy for Zcash, several factors will be due consideration. The type of derivative involved is important, as is the behaviour of the market at the time of investment. Risk profiles should definitely be taken into consideration as well, while other factors and macroeconomic issues can also have an influence. In short, there is no easy way to settle on a Zcash trading strategy, and certainly no stereotypical approach that will apply to all market climates and investors.

Zcash Analysis: The Key to Success!

Once you have made the decision to invest in Zcash, there are several ways that this can be achieved. And the multiple ways of analysing Zcash are certainly central to this process. The two most popular ways to analyse this cryptocurrency are via technical analysis and fundamental analysis. These differ significantly, and can be seen as counterpoints to one another.

Technical analysis is based on pattern recognition. Technical analysts pour over stock charts and other forms of data in order to make predictions about the way that the market will react. This is completely different from the fundamental analysis, which instead is based on the true value of an asset in the real world, with fundamental analysts believing that this will be realised via the market in due course. Fundamental analysis is focused on breaking news, regulation, technical development, and other relevant issues and information.

Both of these approaches are valid, and which one you favour will really be based on your own personal preferences. However, regardless of whether you are primarily a technical analyst or fundamental analyst, other factors should also be taken into consideration. These include the current economic climate, whether or not cryptocurrencies are experiencing a bull market or bear market, and macroeconomic factors. 

While assessing these factors and making a balanced decision is challenging, it should be understood that it is a primary skill in successful trading.

There are a variety of trading methodologies and approaches available when dealing with cryptocurrencies, and in this section, we will examine several of these.

• Swing trading

Swing trading is one of the most popular forms of trading, and involves traders attempting to catch a short-term gain in any stock, equity, commodity, or indeed cryptocurrency. Swing training is associated with relatively short timescales, although these can expand beyond a few days to several weeks, or even months, depending on the market behaviour and preferences of the trader.

Swing traders use technical analysis in order to tease out buying opportunities, analysing price trends and patterns in crypto behaviour in order to draw informed conclusions. Swing traders would be expected to hold the position for a matter of a few days to weeks, and the technique is essentially intended to capture a portion of what will be a more generalised price movement in an asset or commodity. Swing trading runs right across the financial system and is certainly a valid approach to making money from Zcash.

• Day trading

Day trading is the most dynamic and exciting form of trading, in which trades are completed within a 24-hour period. Day trading requires a trader to make a large number of purchases and sales in a solitary day, before the market closes. 

Day trading is intended to circumnavigate unmanageable risks and negative price gaps, but it does require a large amount of technical knowledge. It is also speculative, and can expose investors to significant losses, while a hands-on approach is essential with day trading, as market monitoring is non-negotiable.

• Technical Analysis

Technical analysis involves examining and predicting price movements by using price charts and market statistics. It is a data-focused approach, in which investors tend to predict price direction based on historical data and quantitative modelling.

• Scalping

Finally, scalping is another technique used by many experienced traders. Scalping involves placing a vast number of trades in a short period of time, in order to benefit from tiny market fluctuations. Scalping is a low-risk trading strategy, due to the fact that capital is being spread over a large number of small trades, however it requires lots of time and attention to get every trade right.

Sign Up on an Online Broker or Derivatives Exchange

Zcash traders can make use of either online brokers and exchanges. Cryptocurrency exchanges allow users to purchase and trade with actual Zcash tokens, whereas brokers enable users to gain exposure to ZEC’s price movements through derivatives contracts that reflect the price of the underlying asset. Many exchanges also offer derivatives these days, however.

Novices or those more familiar with traditional investing will often feel more at home with brokerage platforms, whereas exchanges are often more crypto-focused. Both types of platforms will also offer different features sets: for example, many brokers offer “copy trading”, whereas some exchanges offer eye-watering levels of leverage not found elsewhere.

Deposit Funds

Depositing funds via an exchange or brokerage platform can be considered pretty straightforward, as most of these platforms have been developed with beginners to the cryptocurrency field in mind. There are just a few simple steps to follow.

Firstly, registration with the site requires users to confirm their identities. This is usually done via government documentation and proof of address. You will be asked to provide a payment method, with the likes of debit cards, credit cards, PayPal, Skrill and Neteller all usually supported.

Next you can deposit funds on the site, and then you are ready to begin trading.

Open Your First Zcash Trade

Trading ZEC for the first time is naturally very exciting, but it is important to understand the process fully before engaging.

This begins with deciding whether or not you will hold coins, with those investors who decide to do so requiring a form of adequately secure storage. The crypto space is becoming ever more credible and regulated, but theft is still possible, and so a hardware wallet solution comes highly recommended.

You should also finalise your strategy for trading Zcash before you begin. This involves researching the market diligently in order to craft a trading plan. Ensure that this includes entry and exit strategies, along with a clear idea of what you ultimately wish to achieve. It's also valuable to monitor the market on a regular basis, and essential if you intend to conduct your own trades with any sort of frequency.

Short / Long Position

One common approach to Zcash trading is to adopt a short or long position. Shorting any stock, commodity, or cryptocurrency means you are betting that it will decline in value, whereas those taking a long position in Zcash believe that it will increase in value in the foreseeable future. Brokers are great for shorting, as they translate what can be a complicated and involved procedure into a simple, one-click affair.

It is quite usual for both of these positions to be held for a significant period of time, and so they can be seen as long-term strategies, but can also be used fleetingly to complete day trades.

CFD Contracts

CFD contracts are another excellent way to trade cryptocurrencies such as Zcash. CFD contracts offer the benefit of leverage, and are a derivative product. They are widely available and are also popular due to their ability to enable investors to offset losses. 

However, there are disadvantages to CFD contracts as well. While the levels of leverage possible with CFDs can make them very attractive, it should also be noted that this makes investors more vulnerable to losses as well. CFD contracts also necessitate rigid margin requirements.

Order Book

Order books are also important in cryptocurrency trading. This list of all buy and sell orders associated with a token also provides a record of all market participants. This document is therefore an essential record, which traders should certainly refer to frequently.

Order Types

Is also important to understand that there are several order types available, which enable investors to provide specific information to brokers. One of the most commonly used is the limit and stop order, which involves telling a broker that the current market price is unfavourable. When receiving these, brokers will then pause trading until the price discovery of an asset moves in a certain direction. This is a form of automation, and can vastly increase efficiency by streamlining your trading process.

Leverage

Leverage has been mentioned several times in this article, and it essentially refers to investing in the market via credit. Both professional and institutional investors use leverage regularly, as it can lead to larger profits. Conversely, it should also be noted that any form of leverage results in a greater risk of liability, as losses will be amplified by the same amount as profits.

Risk Management

Risk management is an important principle for any Zcash investor, as it helps protect accounts from losses and undesirable outcomes. Risks are common in any form of training, but risk management can be considered particularly important in cryptocurrency, due to its relatively volatile market.

Risk management enables investors to achieve excellent results, by reducing the exposure of a trader to risk. This is why risk management is extremely popular with professional and institutional investors, even though it is often overlooked by amateurs.

Such due diligence is a critical part of the trading process, especially with relatively young tokens such as Zcash.