How To Trade Binance Coin - Step-by-Step Guide
Binance Coin’s (BNB) popularity continues to surge with each passing year. Its price volatility on the other hand serves as an excellent opportunity for traders to either take the ‘buy low sell high’ approach by investing in the coin or practice regular/leverage trading to take advantage of its constant price fluctuations.
For anyone who wants to learn how to trade Binance Coin in 2021, we have created this all-inclusive and detailed guide. However, please keep in mind that trading involves making correct price predictions through analysis and is a time-consuming activity.
Binance Coin Trading Summary
Binance Coin trading normally involves using some proven trading strategy to bank upon BNB’s price movements. Traders use the price volatility of BNB to trade successfully. You can use any of the well-known trading strategies like trend trading, day trading, swing trading, arbitrage trading etc. for this purpose.
When you trade cryptocurrencies, you can either take the regular approach wherein you buy/sell the ownership of the crypto under consideration, or do leverage trading through crypto derivatives such as CFDs (Contracts for Differences), options and futures. Irrespective of the approach you take, there will be a possibility of incurring either profit or loss in each one of them.
Start Trading in 3 easy steps
Selecting an appropriate strategy for trading BNB should be your first step in this endeavour. Each will have its own entry & exit points, and would require you to use certain tools and market indicators regularly, to benefit from it fully. We cannot emphasise enough on the importance of having complete clarity about what you wish to accomplish from the entire activity.
It’s fairly easy to register on a broker platform by providing some basic details and completing their verification process. It usually doesn’t cost any money and you can start trading almost immediately sometimes, after depositing funds into your trading account.
Once your trading account is credited with the deposited funds, you can start trading BNB, and open long or short positions, based on your opted-for strategy. Please note, many brokers allow you to demo their service too. It’s also worth mentioning here that no matter which strategy you use, you must always have some risk management measure in place, and make timely exits from your positions. This can be accomplished with the help of setups like stop-loss and take-profit respectively.
Find the Right Place to Trade Binance Coin
To what extent you profit from trading BNB will also depend upon the place where you trade the coin at. To make things easier for you, we have provided below a list of the best broker platforms for BNB trading.
Binance Coin Trading Explained
As we mentioned earlier, we’ll be talking about Binance Coin trading via Contracts for Difference (CFDs) in this guide. Using a derivative product like this one normally calls for taking a long or short position (aka trading position) on BNB, based on the direction in which you foresee its price moving. A long position is one wherein you buy the cryptocurrency under consideration, with the hope that its price will increase in the near future. On the opposite end is a short position which is about selling the cryptocurrency and hoping for its price to drop. You make a profit if the price moves as you had predicted.
In CFDs, you use the leverage provided by the platform to get a large exposure in the market and take appropriate trading positions. When you use leverage, you’re not asked to deposit the complete value of the trade, but only a small percentage of it (called margin), to get the same level of exposure. The amount of leverage offered will be based on your account’s standing with the platform, apart from some other factors. With large exposure, there will be the scope of both huge profits as well as losses, so ensure that you don’t commit mistakes such as overexposing yourself, neglecting due diligence, placing trades based on emotions and not using a sound strategy.
Trade Binance Coin: Establish a Proper Plan
As mentioned above, it’s very critical to have a proper strategy and plan in place to benefit from BNB trading activity. Below, we’ll go over the fundamental factors which impact BNB’s price movements, the significance of technical analysis, and some regularly-used strategies for Binance Coin trading.
Understand What Moves the Price of Binance Coin
It’s a common sight to see crypto traders getting so obsessed with the statistics and figures that they forget to pay heed to the broader factors which are also often in play. This brings into the picture a process called fundamental analysis, which is about ascertaining the actual value of a cryptocurrency by conducting a thorough analysis of multiple external and internal factors like demand & supply, hashrate, trends, regulation, news, use cases and more.
Carrying out fundamental analysis is very important when it comes to taking well-informed and profitable trade positions. Let’s acquaint you with some such broad factors which can impact the BNB’s price movements.
Demand & Supply – The market price of Binance Coin, like any other cryptocurrency or tradable asset, is impacted by the economics’ principle of demand & supply. It means that the BNB’s market price will likely increase with more and more traders/investors creating demand for it, and drop if there’s more supply of the coin than its demand. Out of the maximum possible supply of approx. 170.5 million BNB, there were around 154.5 million in circulation at the time of writing this guide. Binance halves its coins almost once every year and the shrinking supply of BNBs in the future could possibly drive up its prices.
Success of ICOs – The overall success of the ICOs which take part in Binance’s Launchpad scheme is another broad factor that may influence BNB’s price movements going forward. Binance supporting the launch of new high-potential cryptocurrencies will give BNB buyers/sellers more trading options. Also, investors and traders will have all the more reason to trade on Binance and also own BNBs.
News – Like any cryptocurrency out there, BNB too is vulnerable to price fluctuations whenever there's breaking news related to the crypto industry as a whole. Such stories may be anything about the general events surrounding the Binance Coin, regulatory aspects, adoption of crypto etc., having the ability to influence the investors/traders’ sentiments, for or against your open positions.
Fundamentals and use cases – Being the native coin of Binance Exchange, which is counted amongst the most prominent cryptocurrency exchanges in the market today, gives BNB some very stable fundamentals. That combined with its constantly growing use cases has made it the third biggest cryptocurrency after BTC and ETH today. Other than being an exchange, Binance is involved in multiple other initiatives such as Binance Labs (incubator), Binance Research, Binance Info, Binance Charity Foundation, Binance’s Trust Wallet, Binance Launchpad and Binance Academy. Furthermore, being backed by Binance automatically enables BNB’s easy adoption by millions of people trading on the platform.
Technical Analysis: Read the Charts!
Technical analysis is essentially carried out with the assistance of statistical indicators and charting patterns. Some of the commonly used charts in this regard include candlestick patterns, line charts and bar charts. Although it’s the same data supplied to each one of these charts, where they differ is in the manner they present that data, making it actionable for the traders. Crypto traders are seen frequently using these charts to speculate on emerging trends and taking appropriate trade positions in the market.
Coming to the statistical tools, traders regularly use various kinds of tools such as Fibonacci ratios, VWAP (Volume Weighted Average Price), TWAP (Time Weighted Average Price) and RSI/MACD/Moving Averages. In addition, Bollinger bands, average directional Index, Standard Deviation and RSI (Relative Strength Index) constitute the most frequently used ones. All these stats-related tools facilitate sound trading decisions by correctly studying a cryptocurrency’s demand and supply.
As you go about conducting technical analysis on BNB, please don’t forget that no amount of analysis comes with a 100% success assurance. If you’re new in the crypto trading world, it would be better that you rely on some expert’s opinions instead, or practice strategies such as social trading before starting placing independent trades. eToro offers ‘Copy Trading’ which is an excellent way to replicate the market actions of experienced traders.
Common Strategies to Trade BNB
News Trading for BNB
News trading is essentially about closely following the news stories related to a specific coin or crypto industry as a whole, and making use of price action strategy to benefit from the changing market conditions. It works as an excellent strategy for BNB trading as Binance being a well-known crypto exchange is heavily impacted by any news story that influences the cryptocurrency industry overall. It may be a good idea to set up news alerts for specific developments, to stay constantly on top of things.
BNB being closely associated with the performance of Binance Exchange and the general mood in the crypto market is also used by many traders for day trading purposes. This type of strategy involves selecting a time window during a regular trading day and then opening & closing multiple positions.
Also commonly known as position trading, in trend trading, you hold onto your trade positions for durations normally exceeding a month. Trend traders take long/short market positions during the uptrends and downtrends respectively. Their focus is on using fundamental analysis to play on trends which may take a few months to show their complete effect. These traders actively use moving averages, trend lines and other technical indicators for risk management and better success rate. This type of trading strategy can be excellent for Binance Coin trading if you are good at reading and analysing macro factors and can stay focused on your path by constantly studying the technical indicators.
Choose a Platform that Fits your Trading Strategy
The effectiveness with which you implement and benefit from a BNB trading strategy will have a lot to do with the platform you use for the coin’s trading. In general, when it comes to CFD trading on cryptocurrencies, you can use any of the reputed derivative exchanges and regulated brokerage platforms. The latter are considered better owing to their strict security measures and regulatory aspect. Please note, trading BNB on unregulated platforms can be a risky affair, with the possibility of even losing all your holdings.
Set Up Your Trading Account
To begin leverage trading in BNB, you must first register a trading account with a reputed brokerage platform or derivative exchange. The trading account setup can be completed through the below-provided steps:
Registration with the provider – This step will involve supplying some basic information to the platform such as your name, phone number, email ID and residential address.
Verification – During this step, the trading platform will complete a verification process, complying with its KYC measures, and will authenticate your identity. You may be asked to upload some government-issued identity documents to complete this step.
Deposit of funds – After the platform opens your trading account and verifies your identity, you’d be permitted to deposit funds into it, to start opening trades. This deposit can be done via a payment method and in a currency accepted by the website.
Open your First Binance Coin Trade
You can open your first Binance Coin trade in a fairly easy manner. Most of the well-known brokerage platforms will provide easy-to-use trade opening mediums such as ‘Buy’ & ‘Sell’ buttons to help you take long and short trade positions on BNB. More than the process, it’s the strategy you plan to use and the corresponding position you take, which will be of great importance.
The extent of leverage offered may vary from account to account. Additionally, the user interface may also not be the same across different brokerage sites. Nevertheless, most portals are easy-to-use, and also provide handy tools and indicators to facilitate well-informed trading decisions.
A ‘Buy’ or ‘Sell’ order given to a trading platform can be of multiple types, to fulfil different purposes. While such an order is basically an instruction given to the platform, to ‘Buy’ or ‘Sell’ the CFD/crypto under consideration, the way these ‘buys’ and ‘sells’ are executed will vary depending upon the order type. Some of the commonly known order types are market order, stop-loss order, trailing stop-loss order, All or None order and Immediate or Cancel (IOC) order.
A market order is an instruction given to the platform to trade the concerned CFD/crypto right away at the current market rate. On the other hand, a limit order instructs the platform to execute the buy/sell order the moment a specified ‘limit’ price is met. Quite evidently, limit orders are preferred over market order as they’re focused on fetching the best price, instead of the current market price.
Buy or Sell?
As also explained above, ‘Buy’ or ‘Sell’ are nothing but orders given to a crypto trading website to execute the purchase or sale of the concerned asset. In CFD trading, whenever you ‘Buy’ a contract, you’re essentially taking a long position on the underlying crypto, whereas when you ‘Sell’ a contract, you’re shorting that crypto. ‘Bid’ and ‘Ask’ are the other two names commonly used for these instructions on a crypto exchange. The difference between the ‘Bid’ and ‘Ask’ or ‘Buy’ and ‘Sell’ price of the cryptocurrency, is referred to as the spread.
All such buy-sell orders on the trading platforms are combined together in an order book which gets updated moment-by-moment, as orders get fulfilled and cancelled in real-time.
With regard to the right amount you should start trading Binance Coin with, it will depend entirely on how much risk you’re willing to take. New traders must start slow and small, and go with minimum possible trading sizes. It’s only once you have traded for a considerable time period and have learnt the ropes that you should move on to bigger trades.
Please remember, though leverage can be tempting and make you want to indulge in those trades with huge profit-potential, restraint is the name of the game. Keep in mind that your losses can be equally big when you use leverage. It’s important to gather knowledge, build some risk appetite and learn everything you can about fundamental & technical analysis, before venturing into bigger CFD trades.
Leverage on Binance Coin
Using leverage to trade BNB is about getting the same exposure as you’d normally get on a regular trade placed on an exchange platform, but by tying up only a small percentage of that trade’s total capital. This percentage is referred to as margin, and enables you to book the same level of ‘profits’ or ‘losses’ as you’d do by investing the complete value of the trade. Here’s an example to help you understand it better:
Let’s say, BNB is presently trading at $250 per coin in the market. You carry out detailed fundamental & technical analysis on the coin and predict that its market value may appreciate to $300. So, you open a ‘Buy’ order for 4 BNB CFDs, with each contract consisting of 1 coin each (called a lot). In other words, you long BNB.
The trading platform asks for a 10% margin and hence you deposit $100, which is 10% of the total trade value of $1,000. As a result, you get exposure of $1,000 worth of BNB, by investing only $100.
Things pan out as you had predicted and BNB indeed appreciates to $300. You close your position by executing a reverse ‘Sell’ trade of 4 BNB CFDs of 1 coin each and make a $200 profit in the process.
Please note, the broker may charge you a spread on the ‘Buy’ and ‘Sell’ trades, so the net profit may be less than the $200 calculated above. The other figures may also vary from platform to platform. Also, remember that you may incur a big loss if BNB drops in price rather than appreciating. Therefore, you must always tread with caution while indulging in leverage trading.
Stop-Loss and Trailing Stop-Loss
You can set up a stop-loss order for your BNB trades based on the support & resistance points established during the technical analysis. This type of setup allows you to limit your losses, by closing your open trades just in the nick of time.
Although it’s quite similar to a stop-loss order, a trailing stop-loss order provides the double-benefit of both a stop-loss order as well as a limit order. You can set it up to cap losses and to register profits at the right price points.
Crypto traders commonly use the ‘Take Profit’ set up to specify a price point at which they’d like to exit their open trade, and book timely profit, right before any unfavourable market movement. This too is derived from the TA’s support & resistance levels.
While you can trade in BNB on any derivative exchange or brokerage platform, please note, some of these may attract commission/trading fees. Regardless of the medium you choose, always do your due diligence before using any trading strategy or derivative product.
There are some more terms/concepts we’d like to touch upon briefly here. First is a ‘lot’ which implies the amount of cryptocurrency contained in a Contract for Difference. While in some cases a lot may be equal to one full coin (as in the leverage example we shared), in other less-valued altcoins, a lot can comprise of many units of the cryptocurrency.
‘Pip’ is another frequently used term in crypto trading, which is about the unit through which a coin’s price movements are measured. For example, if for BNB trades, 1 pip equals $10, BNB’s price moving from $250 to $350 would mean that the coin has moved 5 pips. Please ensure that you know about BNB’s pip equation on the chosen trading platform, before opening any trades, as it would be required to set the appropriate ‘stop-loss’ and ‘take profit’ levels. Lastly, be aware that every brokerage website may have different margin requirements depending upon your trade sizes and equity.
Open Your Binance Coin Trade
Once you have decided the trade setup you need, including the size and type of your order, you can open your first Binance Coin trade. This can be done using the ‘Buy’ or ‘Sell’ button provided on the dashboard, depending on the trading position you wish to take. Make sure everything is in place before going ahead and executing your first BNB trade.
You may close your open BNB trade positions either automatically (via limit order or stop-loss order), or manually by logging into the trading website and manually executing the corresponding reverse trade of the same size.
Final Thoughts: Ready to Trade Binance Coin?
We threw light on multiple aspects of BNB trading, beginning with the selection of a reliable brokerage platform and then delved into fundamental analysis, technical analysis and some commonly-used strategies. In the end, we covered how you can set up your crypto trading account on a broker website and trade.
Please remember, even though BNB has very solid fundamentals, its price volatility can lead to both huge profits and losses. To succeed in this endeavour, you must regularly practice some well-known trading strategy, and make good use of analysis and tools. You can start right away by clicking on the button below.
Frequently Asked Questions
Yes, CFD trading is legal in many parts of the world. However, always check your local laws before signing up with any platform.
Yes, BNB trading is considered a safe activity as long as you do it on a regulated brokerage platform.
No, but brokers may charge you a nominal spread for opening/closing trades.
Yes, you can place BNB trades 24/7. Having said that, some broker sites may have fixed trading hours.