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How To Trade Litecoin - Step-by-Step Guide

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These days, cryptocurrency trading is one of the more popular things to do with your money. The crypto industry is in a good place in 2021, and many people have started accepting cryptocurrencies as an alternate avenue for investment and trading.

Of course, to trade successfully, you need to accurately predict the price movement through analysis and constant tracking, so there are things to do here. Good trading requires some knowledge of analysis. But, if you want to know in detail how to trade Litecoin (LTC), we will explain everything below.

Litecoin Trading Summary

Litecoin trading can be easy and very profitable if you know what you are doing. Similarly, it can cause you to lose all of your funds if you are thumbing through it blindly.

To trade properly, you need to have a trading strategy, learn how to take advantage of price volatility, and how to predict the price changes based on signals that the market is sending. You should also keep track of news that can influence the prices. 

Alternatively, if you don't have to deal with storing the coin and keeping it safe, nothing is stopping you from trading crypto derivatives. They are a great option for investors who do not wish to stress about token security. Not only that, but they let you earn even when the coin prices are dropping. But, we will talk more about them later on.

Start Trading in 3 easy steps

1
Plan your trades

You need to know what you are getting yourself into when you go to trade. In other words, you can't just deposit the money and start buying randomly. You need to have a plan—a strategy and you need to stick to it. Even if it doesn't seem like it is working at first, you need to stick to it. Trading with a plan might bring profits, but if you trade without one—the risk of losing everything is greater.

2
Set up a trading account

Of course, to trade you will need an account at some exchange or a broker. Creating an account is quick and easy. You will have to provide your email and name, and other information that the platform might require you to deliver. You will also have to verify your identity by uploading some government-issued documents.

3
Long/short

The last remaining step is to deposit some money, and start trading. If you are on a regular cryptocurrency exchange, you can simply buy and sell LTC, depending on the price. If you are buying derivatives contracts, then you will go long or short. We will explain how that works in a little while. For now, however, all you need to know is that this is all there is to starting trading. And, of course, you need to do a lot of research along the way.

Litecoin Trading Explained

Trading on regular crypto exchanges mostly relies on buying when the price is low, and selling when it grows. The trick is to learn when is the price as high as it is going to be, and sell before it starts to drop. This is something that you can only achieve with experience, but it is important, as well as helpful.

If you decide to trade with brokers—services that help you by providing you access to derivatives markets and can trade on your behalf if you instruct them to, you can trade other crypto-based products. 

There are all kinds of crypto derivatives available these days. Contracts For Difference (CFDs), Options, Futures, options—they can all be used for trading and earning profit. They use the underlying asset such as Litecoin to base their price on. This is why they are called derivatives.

Then, they allow you to bet on the future price of the asset. You can bet that the price will drop or surge, and if it happens, you get money as a reward for a proper forecast. It is more complicated than that, and there are different details depending on the type of contract, but that's the general idea.

You can also trade with leverage and increase your trading capabilities by taking a loan from the exchange or broker. But, just as your reward grows, so does the risk.

Trade Litecoin: Establish a Proper Plan

To trade Litecoin and make a profit off of it, you need to establish a plan. that means that you need to:

Understand What Moves the Price of Litecoin

Litecoin is not tied to any real-world, physical asset. That means that its price is free to move up and down, and it does it very easily. This is what we call volatility which is the prices ability to shift based on various influences, such as supply and demand, news, technical outlook, network stability, and anything else that might encourage people to deal with the coin, or discourage them from it.

With no fixed price, Litecoin can move up and down based on the market sentiment, which is, in turn, influenced by fundamental reasons, such as the ones mentioned above. This is why you need to include fundamental analysis into your own coin analysis before buying or selling.

Technical Analysis: Read the Charts

After the fundamental analysis, it is time to get technical, and that means reading charts. Charts can tell you a lot about any specific cryptocurrency's past, present, and even let you make a decent forecast for the future if you know what to look for. There are many indicators, such as moving averages, pivots, volume profiles, Fibonacci levels, resistance levels, support levels, candlestick patterns, and more.

All of this can help you understand how the price is really doing, and where it might go next. Supports and resistances, for example, can tell you which level is protecting the price from dropping (support) and which is preventing it from advancing (resistance). 

Moving averages can say a lot about the shift in momentum, which indicates the current trend. Short moving averages sometimes cut above the longer ones from below, which usually indicates that the market is about to turn bullish. This is known as the golden cross. If the situation is the opposite, then it is known as the death cross, and it indicates the upcoming bearish period.

Each of these signals and indicators can be used to determine what will happen next and how to react to it, if you know what to look for and how to read them. Some platforms like eToro allow social trading where you can observe and study the trading behaviour of other users. 

Common Strategies to Trade LTC

HODL Litecoin

HODLing is a common enough strategy that has been used by traders from all over the world for years now. HODLing is basically a play on the world HOLDING, which refers to keeping your coins in your wallet, and not selling them regardless of what happens. While HODL is originally a misspelling of "hold," over the years, it got another meaning—hold on for dear life.

The strategy is based on the idea that someday, crypto prices will soar to massive heights, and that then everyone who bought coins when they were cheap will be able to sell them for huge gains. Something like buying BTC in 2012 for mere cents, to sell it in 2021 for $40,000 per piece. In the meantime, investors are expected to keep adding more and more and increase their crypto wealth.

Day Trading

Another popular activity is day trading, which is buying and selling cryptocurrencies within the same day. You can do one right after the other if the price moves favourably, or you can wait for a few hours to check out its movement.

While HODLing requires patience and promises huge gains in return, day trading requires focus, concentration and dedication. In return, it could potentially provide a trader with smaller gains every day, or even several times per day.

Swing Trading

Swing trading is another strategy that involves trying to capture price moves (swings) that happen in a short to medium time frame. The idea is pretty similar to day trading, but it takes a longer period of time than a single day, typically anywhere from a few days to a few weeks.

This type of strategy works best in trending markets. So, swing traders tend to move a lot from coin to coin, wherever they notice a strong trend on a higher time frame. Swing traders would come, buy the coin, keep it for as long as the price swing lasts, then sell it before the price starts to drop.

This does not work that well with cryptos that are stable and trade sideways, as there are no opportunities to exploit large surges.

Choose a Platform that Fits your Trading Strategy

Once you choose your trading strategy for Litecoin, you will next have to find the best place for you to use it and trade LTC. There are two types of platforms to choose from—regular crypto exchanges, and crypto derivatives exchanges.

Regular exchanges allow you to buy coins the way you expect it to work—you register, deposit money, buy coins in exchange for that money, and then own coins. Crypto derivatives platforms, on the other hand, do not offer that. They offer derivatives contracts that use cryptocurrencies as underlying assets.

This is not unique to crypto, as derivatives have been long used in the traditional financial industry. But, the point is that several products use crypto as an underlying asset that you can trade, such as CFDs, options and futures. 

The advantage here is that you don't have to own and manage coins, and also the fact that you can make a profit even if the prices are dropping, as you essentially make a bet on how the price of the underlying asset will behave.

There is also a third option, which is to use a broker to access such platforms. Brokers serve as intermediaries that can trade on your behalf, and the benefit of using one is the fact that they are tied to multiple platforms, so they can trade by using the best available prices. Another advantage concerns the security of your funds, as brokers are regulated, meaning that any brokerage firm needs to be licensed. To do that, it needs to satisfy rather high criteria, so you can be sure that your funds are safe, and often insured.

As for exchanges, many remain unregulated to this day, so there is a chance that they could freeze your money, or you could lose access to all your assets if they crash.

Set Up Your Trading Account

Now, provided that you have chosen a platform where you wish to trade, your next step will be to set up a trading account. This is a simple enough process that is pretty much the same. You just need to register with some basic information such as name, address and email ID, and then go through identity verification.

This is obligatory on all regulated platforms, so you will have to go through it. But, once that is done and you confirm your ID by uploading the documents that the platform requires, you will be free to deposit some money and proceed to the next step.

Open your First Litecoin Trade

Opening your first trade is an exciting move for new traders, but it doesn't really involve doing much, and it is pretty simple to do. Start by logging into your account on the chosen trading platform or a brokerage, and you will see BUY and SELL buttons on your dashboard. 

If you wish to buy, then you need to hit the BUY button. This is also called 'going long,' or entering a long position. Selling is called 'going short,' opening a short position, or simply shorting.

Of course, each platform is different, including the design and user interface, but generally speaking, it should be easy to recognise the buttons we are referring to. After that, simply enter the amount that you wish to buy or sell, and execute the trade.

Order type

First, you should think carefully about your order type. There are many different types of orders, and you need to know each of them—what it does, how it works, and alike. That way, you can select the one that fits your needs best. Will it be a market order, that you can execute immediately at the offered price, or will it be a limit order, that lets you buy or sell at a specific price, or a price better than the one you specify?

It is up to you to decide. We can also suggest looking into other types, such as Immediate or Cancel order, the stop order, the stop-limit order, All-or-None order, or trailing stop order.

Buy or Sell?

The next thing to consider is what should you do next? Is this the time to buy or sell? Buying generally has a good impact on the market, as it shows that there is a demand for the crypto in question. By buying LTC, you may help boost its price, and attract new buyers, which boosts its price even more.

On derivatives platforms, you will likely encounter terms like bids and asks, instead of buy and sell, but those are pretty much the same things. You may also encounter something called a spread, which is the difference between the lowest ask and the highest bid.

If the bid-ask spread is small, the liquidity is greater, as there is a better chance for someone to want to participate in the trade at the prices that you offer. Large spreads usually indicate that the liquidity is low, so you shouldn't hope for a quick sale under those conditions. But, it is a good thing if you are looking to buy at a lower price.

Amount

When it comes to the amount, most brokerages and exchanges have necessary minimums amounts below which you cannot deposit, withdraw, or even trade. There are also maximum amounts, and you cannot go above them. Some platforms allow only accredited investors to trade with no limits, while others do not make such exceptions.

In the end, if you are a beginner, we recommend not trying out too great of an amount, as you will experience great losses if things turn unfavourably for you. 

Leverage on Litecoin

Trading with leverage is something that experienced traders tend to do in order to maximise their profits without having to invest the corresponding amount of money. Basically, it is a type of trade where you use a certain amount of your money, and take a loan from the platform to pay for the rest.

As a result, you can buy a lot more LTC than you can afford to with your own money alone. The downside here is that this also increases your risk of losing. You have less and less room for mistakes as you take greater leverage, and this is why it is only recommended that experts use this method of trading.

Stop-loss and Trailing Stop-Loss

One thing that we did not mention right now is risk management. When you trade, you risk losing your money, just like in gambling. The difference between trading and gambling is that you trade based on facts and conclusions, while gambling relies strictly on luck. Another difference is risk management, as you can set up stop-loss and trailing stop-loss orders to minimize your losses, if things go unfavorably for you.

Stop-loss is a type of order where you decide on a certain price before the asset's market price. That lower price will then serve as a trigger for immediate closure of your position. Basically, if the price starts dropping and you are not there to see it and react, your position will be closed as soon as the price touches the limit.

That way, you will only lose a portion of your funds, instead of everything. Trailing stop-loss functions in a similar way. However, instead of being fixed, the level at which you placed the limit moves alongside the price. This allows you to earn even more while still being safe from losses. In fact, if the price goes up enough before dropping and hitting the limit, you might even earn instead of losing any money.

This is why trailing stop loss is clearly superior. The only issue is figuring out where to put these levels, so that common price fluctuations don't trigger them.

Take profit

While stop-loss prevents you from losing money by allowing you to set a limit to act as a trigger, take profit allows you to earn money by choosing a trigger above the market price.

So, let's say that you have a certain amount of LTC and you wish to sell it, but you expect its price to keep going up. You enter a position with take profit activated, and once the price rises to the selected level, your position will be automatically closed.

Finishing touches

There are only a few other details that you should consider before opening your Litecoin trade, such as fees and commissions. Exchanges and brokers earn money by charging those, and most have their own rates, so you should do well to inspect each of them and determine if the service is worth the money, and whether you are willing to pay that money. 

There are also triggers that you should decide on—signals and indicators that will inform you that the time to buy or sell has come. For the best impact, you need to know when to act and when to pass, so that you wouldn't accidentally make a bad trade. Often, the market price might seem to rise, but if it doesn't hit the signal limit, it is likely only a mild fluctuation that will soon see the price go back down. 

By using triggers, you will prevent yourself from emotional trading, which only leads traders to ruin.

Open Your Litecoin Trade

Once everything is set up, all that remains is to click the execute button and open your trade. Hopefully, you have set everything in the best way possible. Just make a habit of reviewing your trade each time before opening it.

Closing Orders

Another thing to know is how orders can be closed. It can happen automatically if the price hits the selected limit that you have set in stop-loss/take profit orders, or it can be done manually if you are present and overseeing the trade.

Whos behind

Final Thoughts: Ready to Trade Litecoin?

So far, we have covered a lot about trading Litecoin. The coin has been called silver to Bitcoin's gold for as long as anyone can remember, and as such, Litecoin is generally considered a great opportunity. It certainly did not stay among the top cryptocurrencies for no reason.

So, if you are attracted and tempted to trade this particular coin, we understand that desire. Just keep in mind all that we talked about, especially when it comes to choosing the right strategy and platform. In the end, it is all about being secure, as the crypto sector still isn’t regulated, which means that there is a lot of risk involved. 

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Frequently Asked Questions

  1. This is not something that anyone can confirm or deny with certainty. LTC has shown that it is capable of much greater heights than the ones where it sits right now. Whether it will revisit them or not remains to be seen.

  2. Litecoin is Bitcoin’s oldest fork. It is significantly faster than BTC, but in most other aspects, the two are identical.

  3. Litecoin has a maximum supply of 84,000,000 coins. At the time of writing, 66,441,117 coins are in circulation, while 17,558,883 are yet to be mined.

  4. Yes, Litecoin is completely legal to own and trade in almost all countries. Some places, like China and Russia, do not allow its use as a means of payment, however. Countries that have banned its and other cryptos’ use completely are very rare, with Nigeria being one of them. Check your local laws before trading.