How To Trade IOTA - Step-by-Step Guide
The cryptocurrency sector is gaining popularity and has managed to attract a lot of new traders and investors. Projects like IOTA, which have specific use cases, are particularly popular, as they have a greater chance of being adopted.
IOTA’s usefulness hints at the growing popularity of its token, which is why anyone who wishes to trade it needs to learn how to do it properly. Trading is more than buying high and selling low, and in this guide, we will tell you everything you need to know about how to trade IOTA.
IOTA Trading Summary
Trading IOTA, like trading any other cryptocurrency, is a series of buying and selling activities. However, the way you do this matters, as you cannot just buy and sell randomly. Instead, you need to have a plan, a strategy, and work towards something bigger.
This might seem complicated at first, but it is not that difficult once you understand what you need to do. Trading cryptocurrency revolves around predicting its price movement, and then exploiting this price volatility.
With a bit of practice, you can even turn crypto trading into a regular source of income, and move on to more complicated variants of trading, such as using derivatives contracts to earn even when the prices are dropping, or use leverage to boost your earnings.
However, trading still remains very risky, and you would do well to remember that, and not risk your money when chances of failing are greater than the chances of succeeding.
Start Trading in 3 easy steps
1. Choose a Trading Strategy
As we have established, selecting a trading strategy and making a plan is the biggest and most important step. If you don’t, you will be trading randomly, without knowing what it is you are doing, or what it is you are striving towards. A plan does not only help you make sense of what you are doing in the market, but it also improves your odds of making successful trades and earning more money in the long term.
2. Set Up a Trading Account
The next step is to create your trading account. You can choose exchanges or brokerages to do this. Trading needs to be done via a trading platform, which can include a regular crypto exchange, a crypto derivatives exchange or a broker. Be mindful of the platforms’ operating conditions, fees, ease of use, and other details that might have an impact on your experience.
Finally, the last step is to start trading, and enter positions. There are long and short positions, depending on whether you are buying or selling, or alternatively, if you are betting that the price will rise or drop, if you choose to trade derivatives. To enter positions, you will first have to create orders, and deposit some money that will serve as your initial investment.
Find the Right Place to Trade IOTA
If coming up with a strategy for trading IOTA is the most important step, then finding the right place to do it is absolutely your second priority. There are trading platforms all over the crypto industry, and some are complex, while the others are simple. Some are expensive, while others are far more affordable. We can help you by presenting you with some of our top picks below.
IOTA Trading Explained
IOTA trading consists of a lot of concepts and terms that might not be immediately clear to newcomers to the crypto industry. To understand trading itself, you need to understand these terms first.
First of all, let’s talk about trading itself. Trading is the process of buying and selling coins, and profiting off of the price difference. You buy when the price is low, and sell when it grows, and the price difference is your profit.
You buy and sell by entering a trading position, which is essentially a name for making your buying or selling offer. Long positions are those where you buy, while short positions are the ones where you sell.
Then, there are also derivatives contracts, which are contracts that use cryptocurrencies as their underlying asset. These contracts do not have their own value, which is why they depend on cryptos to provide it to them.
When you trade derivatives like futures contracts, Contracts For Difference (CFDs), or options, you do not actually buy and sell coins. Instead, you bet on the coins’ price movement. This allows you to make profits even when the prices are falling. Buying cryptocurrencies on crypto exchanges only makes sense when the price hits bottom, and you expect that it will start moving up. If the price starts dropping, you can either sit on your coins and wait for it to go up again, or sell them and suffer losses.
There is also trading with leverage, which allows you to maximise your profits through borrowing funds from your trading platform to invest in crypto, thus buying more coins than the worth of your actual account balance.
One thing that we have to stress is that you should not invest, trade, or use any of the additional features and functionalities without properly understanding them. These are advanced tools and instruments that can cost you a lot of money if you get things wrong, and not understanding how it all works almost guarantees that you will make a mistake. Do not waste your money and learn how it functions first.
Trade IOTA: Establish a proper plan
Let’s talk about how you can establish a proper plan and make the first step towards trading IOTA. There are essentially two things that you need to focus on; predicting the price movement, and selecting a strategy. When it comes to predicting and understanding price movement, there are two types of analysis that you should perform, which are fundamental and technical analysis. As for picking a strategy, you should simply read up about several different ones, and pick the one that sounds the most interesting to you.
Understanding What Moves the Price of IOTA
Let’s start with understanding why the price moves the way it does, as it is crucial for predicting its further actions. This is what we call a fundamental analysis, and it revolves around understanding the market sentiment.
Essentially, crypto value is not decided by anything other than supply and demand. They are not tied to an underlying asset, so the only thing that gives them value is that people trade them and use them. Therefore, if people think that the coin’s value will go up, they will buy it. As a result, the price will indeed go up due to an increase in demand.
Your job is to search the internet for indications that the market will be optimistic or pessimistic about the coin and its value. The price of IOTA can be impacted by anything, including adoption rate, positive developments and news, development breakthroughs, regulations, increased network stability or a new use case.
Technical Analysis: Read the Charts!
When it comes to technical analysis, it revolves around studying the price performance. That means reading the charts, which can be crucial for some trading strategies.
Charts are goldmines of valuable information, provided that you know how to extract it from them. They offer insights into the coin’s past performance, they display patterns in the price behaviour, and they can even tell you when people are buying more and when they are avoiding entering positions. All of this and more can be seen in a seemingly simple chart, and it can tell you what to expect, and how the price is behaving in real-time.
Of course, there is no guarantee that the information provided by the charts will give absolute conclusions about future performance. Basically, the chart might be following a pattern that indicates the arrival of the growth, but if something happened to impact the coin negatively, things could turn around very quickly. This is why it is recommended to do both technical and fundamental analysis and combine the knowledge that both provide you with to know what to expect.
Common Strategies to Trade IOTA
HODLing is one of the oldest strategies in the industry, and it revolves around investing in IOTA coins and then simply forgetting about them, often for years to come. This strategy is based on the belief that the coin’s price will eventually grow to be far above its current price. You simply need to invest and be patient enough to wait for it to happen. Of course, note that there is no guarantee that it will happen.
News trading for IOTA
Another strategy to consider is news trading. This is just what it sounds like. Essentially, you need to keep a close eye on as many online media sources as possible, and react as soon as some impactful news emerges. If positive news comes out, you buy. If a negative report surfaces, you sell, and that’s really all there is to it. It is a popular strategy as it doesn’t require a lot of technical knowledge, just following the current developments and reacting to them. But, it is also possible for impactful news to be published without the reaction of the price, so keep an eye out for that, as well.
Lastly, we have scalping, which is a popular strategy that involves buying and selling in mere minutes. It is an extremely short-term trading move, which is meant to make use of even the slightest price changes. Even if the coin only starts rising by a few cents, you can buy and sell as soon as the growth stops. Since this strategy is focusing on price behaviour and reaction to it, charts are crucial for getting the price movement right. Fundamental analysis is not used all that much here, although it can be beneficial, so don’t rule it out completely. However, you can engage in scalping without the fundamental analysis, but there is no way that you can be successful at it without technical analysis.
Choose a Platform that Fits your Trading Strategy
Once you have selected a trading strategy, it will be time to select a trading platform. Now, this is a very important move too, as it will impact your trading experience from a more technical point of view.
The first thing you need to decide is whether you wish to use a derivatives exchange or a broker. The difference is that each exchange offers its own price, while brokers are tied to many exchanges, which allows you to determine the best price of its associated platforms. However, you will also need to pay extra fees for brokers’ services, which can end up taking a chunk of your profits.
Brokers are also regulated, and generally safer than unregulated exchanges. Other than that, they offer relatively similar services, where you will buy and sell very quickly and exploit new opportunities.
Another choice that you should make is whether or not you wish to trade coins or derivatives. The advantage of trading derivatives is that you don’t have to create a wallet for managing your coins, and you don’t have to worry about their security. On top of that, you can make a profit even when the prices are dropping. On the other hand, some strategies, like HODLing, are not possible with derivatives. Plus, you can convert your coins to different currencies at any time, switch them between exchanges, use them for payments, governance, staking, yield farming, lending, and many other activities that cannot be done with derivatives.
So, your plans on involvement with the crypto industry can play a large role here. But, one thing that all of these platform types have in common is the risk that comes with trading cryptos. Prices go up and down by a lot, and it can happen at any time, sometimes even seemingly without any real reason, so make sure to know the risks before putting your money on the line.
Set up your Trading Account
Once you chose a platform, you will have to set up an account. This is fairly simple to do, and it is a short process that involves registering and verifying your identity. Registration is necessary to use the platform, while identity verification is required by the current regulations in most countries. Don’t worry, however, as the process is quick and painless. The exchange will simply require you to upload certain documents that prove your identity and potentially address. Many exchanges have different levels of verification, and the higher level you accomplish, the greater the amount you are allowed to trade. After the process is done, all that is left is to deposit some funds and start trading.
Open your first IOTA Trade
Finally, we come to the third step, which is trading. But, even here, there are a few things to understand first, before you can actually jump into it. Your trading experience is going to differ from one exchange to the next, but in the end, it is the same process with only minor differences.
Now, when it comes to the things that you should pay attention to when entering trade, these are as follows:
First things first, you should decide on your order type. There are many different order types, such as stop-loss and take profit that allow you to exit the market when the price reaches certain levels. Stop-loss is especially useful here, as it lets you protect your investment from major losses.
Another popular order type is market order, followed by the limit order, immediate or cancel order, all or none order and more.
Buy or Sell?
Next, you need to know whether you are buying or selling, which will depend on your price analysis and strategy, as well. Buying and selling is also known as going long (buying) or going short (selling), or bidding and asking, on derivatives trading platforms.
You may want to decide what to do based on the market sentiment, which can become clearer if you look up the order book. Order books are lists of all available orders on the platform, and each platform has them. Lastly, you should also take a look at spreads, which are the difference between the highest bid and the lowest ask. If the difference is large, then volatility is likely to be great, but liquidity will not be that good. If the difference is small, then liquidity significantly improves, and volatility tends to be low.
This is something that each individual trader needs to decide for themselves. However, if you are new, we recommend keeping close to a minimum for a while, until you gain a deeper understanding of the market.
Most platforms have minimum deposits, minimum withdrawals, and minimum trading amounts. Some platforms have all three, and these figures represent the amounts that you have to use. If you wish, you can deposit more than that, but when it comes to trades, you should stick to the minimum to not risk more money on a potentially unsuccessful trade than necessary.
Leverage on IOTA
We briefly talked about leverage already, mentioning that it is a sort of a loan that you can get from your trading platform of choice to invest, thus maximising your profits if you get it right. However, leverage also reduces your room for mistakes, and the higher the leverage, the more precise you need to be in your prediction. In other words, higher leverage carries a higher risk, and a greater chance of making a mistake and losing your investment.
This is why trading with leverage, also called margin trading, is best left to experts who have plenty of experience and understand the risks.
Stop-loss and trailing stop-loss
We mentioned stop-loss as one of the orders that you can choose, and we mention it here again because it is more than just a market order. Stop-loss is also a risk management mechanism that can help you minimise your losses.
Essentially, when you enter the market at a certain price, you can select a price level below the current market price. This level will act as a tripwire, which, if triggered, immediately closes your position. So, if the price starts suddenly dropping, the stop-loss level will be triggered, and it will close your position, thus preventing further losses. The trick is to put it low enough so that common price fluctuations don’t trigger it, but also high enough so that you don’t lose too much money if the price starts spiralling down.
Trailing stop-loss, on the other hand, comes as a superior version of stop-loss. It functions in the same way, but if the market price starts rising by a certain percentage, the trailing stop loss will follow. Basically, it will always be located at the same distance as the market price, so you won’t miss out on an opportunity to earn, either.
Then, there is take profit, which is another mechanism that functions similarly to stop-loss, only you select a level above the market price of IOTA. If the IOTA price suddenly surges and hits the selected level, your order gets closed automatically, and you get to secure the profit. It is a popular choice for coins that have random, sharp surges before the price settles back down, and it can be rather useful for day trading or scalping, among other strategies.
There are several other details that you may want to keep in mind, such as the fees. Each platform has different fees, as mentioned, including deposit fees, withdrawal fees, and trading fees. Since we are currently talking about preparing the order, trading fees are the main focus right now. These can be fixed up to a certain amount, after which the platform might simply take a percentage of your earnings. Alternatively, it might only work with percentages, so that low earnings come at low fees.
Another thing to remember are triggers. These are signals that will tell you when to react to the price behaviour, and when to stay put. Price often moves in treacherous ways, seemingly preparing to surge, only to drop at the last second. This can trick a lot of traders into action when it was really a time to sit tight and not react. By figuring out how to use triggers, you can reduce the chance of being tricked by the market by only reacting when certain parameters are met. These parameters are mostly triggered when the price is indeed seeing a rally, so you won’t make a wrong move at the wrong time.
Opening your IOTA Trade
Finally, it is time to open your IOTA trade. One last thing before you click the button is to check the details of your order one more time. Just to make sure that everything is in order, as it would be a shame to mistype something and suffer losses due to such technicality. Once you have checked everything and are satisfied with it, you can enter a position and engage in your first trade.
Now that you know how to prepare and open an order, you should also know how to close it. Basically, there are two methods—manual closure and automatic one. Your order will close automatically if stop-loss or take profit limits are triggered. Alternatively, if you wish to do it manually, you can do that too simply by clicking a button that offers this option.
Final Thoughts: Ready to Trade IOTA?
In this guide, we have covered everything that you need to know about trading IOTA. Basically, you need a good plan, which involves understanding how and why the price moves, to be able to predict how it will move in the near future. Next, you need a good trading platform or a broker to handle your orders, and lastly, you need to open your trade. To do so, you should first figure out all of the mentioned parameters.
It sounds a lot more complicated than it really is, but make no mistake, you will have some work to do before you get accustomed to the market. You can use the button below to trade when you’re ready.
Frequently Asked Questions
All regulated platforms insist on identity verification because it helps to keep the bad actors out and provides a secure platform for the users.
Yes, crypto trading is legal almost everywhere in the world, which includes IOTA but check your local laws before trading.
IOTA, like all other cryptocurrencies apart from stablecoins, has a volatile price. In other words, its value moves up and down all the time. It might not be as volatile as Bitcoin, which sees thousands of dollars-large changes every other day, but you can still trade it.
There are many strategies for trading IOTA, and which one you will pick depends on what you believe to be the best for you.