Cryptocurrency trading is a good way to invest your money and earn a profit. The relatively newer market of cryptocurrency is still highly volatile, with coin values fluctuating several times within a single day. If you are interested in trading cryptocurrency, you will have to learn the basics, which include trading strategies, Bitcoin and altcoins, market volume, market caps, and more.
A basic question when first starting out in cryptocurrency trading is this: What is trading pairs cryptocurrency and how do you use these pairs to trade?
Once you get into learning how the cryptocurrency market works, you will encounter the term, trading pairs. Simply put, a trading pair is where two currencies are listed together and can be traded for each other. Read on below to find out more.
What Is A Trading Pair?
A trading pair is two currencies that are listed together. The pair will show you the relative value of a currency against another currency. These two currencies will have a base currency and a quote currency.
The base currency is the first currency that is listed in the pairing. This is the currency that you want to buy or sell. The quote currency is listed as second in the pairing. This is the currency that you are buying with or selling for.
Traditional Trading Pairs
Traditional trading pairs refer to fiat currencies and are usually reflected in the foreign exchange market. Major currencies of the FOREX market are those that are always being traded. These include the US dollar, Japanese yen, Great Britain pound, Canadian dollar, and Australian dollar.
These major currencies have high liquidity, meaning that more trades are happening that include them. Thus, once you have a trading pair that involves any of these currencies, prices that are reflected in the pair are usually more accurate in terms of buying and selling.
The minor currencies from all over the world are also being traded, but at a less frequent rate. Therefore, these currencies are less liquid, and prices that are reflected in trading pairs that include minor currencies may not be as accurate.
An example of a trading pair in the FOREX market is EUR/USD. This pair means that you are either buying or selling EUR with USD.
Crypto with Fiat Trading Pairs
Fiat currencies are also being exchanged with cryptocurrencies. However, only the major cryptos are traded directly for Fiat. An example is the BTC/USD trading pair. This means that if you are interested in buying, you will be buying BTC using USD. On the other hand, if you are interested in selling, you will be selling your BTC for USD.
If you do not have major cryptocurrencies, and you need to trade for a fiat currency, you can opt to first trade your altcoin for a major crypto. Once done, you can trade this newly acquired major crypto for the fiat currency that you need.
Crypto with Crypto Trading Pairs
Trading pairs also exist that trade crypto for crypto in the market. Some of the most traded crypto pairs include BTC/ETH, XRP/BTC, USDT/ETH, USDT/EOS, and more. Basically, the major cryptocurrencies that exist in the market today are also popular trading pairs.
Even though there are already a lot of trading pairs in the cryptocurrency market, not all coins can be traded for each other. For example, Cardano (ADA) is an up-and-coming cryptocurrency that was founded by one of the co-founders of Ethereum, Charles Hoskinson. This altcoin is predicted to continue its slow and steady rise in the market.
The problem is, ADA is not yet readily tradable for fiat currencies or other altcoins, despite its positive outlook. Due to this, if you want to trade ADA either for fiat or for other altcoins, you must first trade it for one of the major coins.
Thus, trading pairs for this altcoin would be the following: ADA/BTC, ADA/ETH, ADA/XRP, ADA/LTC, and so on. Once you have a major coin secured, you can trade it for other altcoins or fiat currencies.
How to find your coin?
Once you understand how trading pairs work, the next step is to find an exchange that carries the coins that you want to trade, and the trading pairs that you will use.
Coinmarketcap is a free website that contains a detailed list of the most traded cryptos in the market. It also provides a list of exchanges, what cryptocurrencies they carry, and what trading pairs are available to each. It is a helpful website that can assist you in choosing which exchange to sign up for based on the coins you want to trade.
One of the best exchanges today is Binance. This exchange has a wide array of coins in its platform. You can read all about its features on its website. Learning what the exchange does is important to be able to get Binance trading pairs explained to you.
Cryptocurrency Trading Tips
Understanding what trading pairs are and how important these are to actual trading is important to becoming a successful trader. Here are a few more tips on cryptocurrency trading.
- Always choose trading pairs that have a major currency for ease of transaction. This way, once you have a major coin, you will be able to diversify your portfolio and buy altcoins that are just coming out.
- Start small. Whatever coins you choose to trade, it is better to start small and get the feel of the market first. Do several small transactions in a day. This strategy will help you minimize losses and gain invaluable experience.
- One of the best advices for cryptocurrency traders is to educate yourself first, and gain experience second. Take the time to study on trading pairs, coins, and strategies, before applying your learnings to actual trading.
The goal for all cryptocurrency traders is to be able to trade safely and secure profits while minimizing potential losses. Learning what is trading pairs cryptocurrency is just one part in the whole process of trading. Be sure to trade wisely, and never put in more money than you can afford to lose.