Cryptocurrency trading: risks of trading

The cryptocurrency market and altcoin signals is a very volatile market and, accordingly, carries a high risk when trading. Before trading, it is important to understand the risks involved:



The cryptocurrency market is very volatile, as a result, it can experience sharp price spikes within a short period of time. Since cryptocurrencies are not widely used in the real world, prices can move irrationally based on fear and emotion rather than fundamental data or technical trading patterns.



The volatility of the cryptocurrency market has led to huge crashes. For example, in 2018, the total market capitalization of cryptocurrencies decreased by more than $700 billion due to a number of issues affecting cryptocurrencies:

  • Money laundering
  • Tax avoidance
  • cyber theft
  • Failures in exchange operations
  • Loose/no regulation
  • excessive speculation
  • Illegal Initial Coin Offerings (ICOs)
  • Hacks

There are many successful attempts to hack cryptocurrency exchanges. This is, of course, a good reason why you should consider trading cryptocurrencies CFDs rather than real cryptocurrencies on exchanges.

For example, in the 2018 Coincheck hack in Japan, more than $500 million worth of digital currency was stolen. In 2014, the Japanese exchange MtGox, which processed almost 80% of all international bitcoin transactions, was closed, while 850,000 bitcoins disappeared from its virtual vaults. (worth about half a billion dollars!).

It is also worth remembering that opening large trading positions with high risk and expecting to consistently win is a sure way to lose money. Each trader decides when to enter and exit a position and how much to risk, so it is important to develop a good trading plan that takes into account trading risks.
Choosing a strategy for trading cryptocurrencies
Trading consists of making decisions about whether to buy, sell or not take any action in a particular market. Traders who have been trading successfully over a long period of time are much more likely to have a trading strategy or methodology that helps them in their decision making process.

Trading strategies are used to quickly determine when to trade and when not to trade, what timeframes to focus on, what technical indicators to use, how to enter and exit a trade, and so on. Of course, the tools you use will depend on the trading style you choose. This is the first thing to do when you are learning crypto trading.

After all, if your goal is intraday trading of cryptocurrency CFDs on an hourly chart, which involves trading during the trading day for short-term profits, then using a long-term weekly chart for analysis will not be very useful.


Trading styles usually use one or both types of analysis:

Technical analysis

Includes analysis of cryptocurrency price movements to identify patterns of repetitive behavior. Many traders also use technical indicators to determine at what price levels a market might reverse. You can learn more about technical analysis from our Introduction to Technical Analysis article.


Fundamental analysis

Includes analysis of news related to cryptocurrencies, such as new developments, and the use of the technology behind cryptocurrencies called blockchain. There are also unique fundamental events directly related to cryptocurrencies, such as “halving”. You can learn more about this type of analysis in the article “Fundamental market analysis: what is it and how does it work?”.

Here are a few styles of cryptocurrency trading to look out for:


Day trading (day trading)

This style involves opening buy and sell positions several times a day, often closing them by the end of the day. Traders using this style primarily rely on technical analysis tools such as trading indicators and chart patterns.

swing trading

This style involves buying and selling instruments and holding open positions for several days, and in some cases several weeks. Traders using this style of trading often combine technical and fundamental analysis, for example by analyzing new developments in blockchain technology to make trading decisions.

Automatic trading

In this style, users program a bot to automatically make transactions in cryptocurrencies. The MetaTrader platform provided by Admiral Markets is the ideal platform for algorithmic traders. Of course, in order to conduct automatic crypto trading, certain programming skills are required.

Copy Trading

Not exactly “new”, but certainly a growing style of trading, copy trading should not be overlooked when considering

Leave a Reply

Your email address will not be published.