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How To Trade Ripple - Step-by-Step Guide

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The volatility and growing popularity of Ripple (XRP) makes it an ideal choice for traders. If you’re wondering how to trade Ripple, it’s essentially about either buying/selling the crypto’s ownership on an exchange or speculating on its market movements through leverage trading on a broker platform. 

Whether you strictly follow the ‘buy low and sell high’ strategy, or have a more bearish approach, often taking short positions, you’d need to be constantly on top of the market and use various analytical, monitoring and risk management tools, to make it a worthwhile activity for yourself. 

Ripple Trading Summary

Crypto trading can prove to be a very profitable endeavour as long as you know what you’re doing. You can opt from various trading strategies like arbitrage trading, spread scalping, trend trading, swing trading, day trading etc. depending upon your knowledge of and experience with a specific approach. 

All these strategies involve taking long/short positions through derivative products like futures, options and CFDs (Contract for Difference). Anyone starting out in crypto trading can get easily confused about which strategy to follow. The best is to start with one, learn it in-and-out and use it actively to make profits, before considering using another. All of them have profit potential and it all comes down to which one you find the most exciting and are comfortable with. However, new traders must practise risk management as trading can be a risky activity. 

Start Trading in 3 easy steps

1. Choose a Trading Strategy

Selecting a trading strategy is about finding which one excites you the most, and also makes financial sense. Regardless of whether you day trade, swing trade or hold onto your long/short positions a bit longer by trend trading Ripple, it’s the timing of your entry and exit which will matter the most. Gain a good understanding of Ripple, market indicators & tools and your preferred position sizes before you decide on a specific trading strategy.

2. Set Up a Trading Account

You’ll need to open a trading account with a reputed & regulated broker platform to get started. Please note, you may need to provide personal details like your name, address, phone number, or government-issued ID proof to comply with the platform’s KYC measures.

3. Start Trading

Once your details have been verified and the account is opened, you can deposit funds into it and start trading. Many platforms even provide demo accounts to help new traders learn the ropes before they start playing with real money/cryptocurrency. Make sure you have a risk-management strategy in place, and actively use tools like stop-loss orders and limit orders to exit at the right time.

Ripple Trading Explained

Previously, the best option that crypto traders had was to buy/sell cryptocurrency on a crypto exchange and hold their coins in a wallet provided by the exchange itself. Today, you can trade cryptocurrencies in many different ways. For instance, you can trade Ripple at a crypto broker platform without the need to actually purchase any XRP. This is called leveraged trading and can be done via derivative products like futures, options, and contracts for differences (CFDs). 

In leverage trading, you can speculate on whether Ripple’s price will increase or decrease and take long or short positions accordingly, to profit from those possible movements. To take such positions, the broker asks you to deposit a small percentage of total monetary exposure you get from the trade, called margin. Hence, it is possible to trade $1000 worth of Ripple by putting only $100 down as margin. Please know, this way you won’t own any XRP, but simply get to speculate on its movement, and make gains/losses accordingly. 

We’d like to add that as you go about using such derivative products to trade a cryptocurrency, it’s very important that you steer clear of mistakes like not researching the underlying crypto, overexposing yourself, approaching trades without any definitive strategy/plan and falling prey to emotional trading.

Trade Ripple: Establish a Proper Plan

It’s very critical that you approach Ripple trading with a plan, and use fundamental & technical analysis to uncover profitable opportunities. Let’s understand how you can go about creating a proper Ripple trading plan. 

Understand What Moves the Price of Ripple

Crypto traders often commit the mistake of becoming so myopic on the stats & figures that they lose sight of the bigger picture. This is where ‘Fundamental Analysis’ comes into the picture. It is the process of understanding the true value of a cryptocurrency by analysing various macroeconomic factors, external events and influences surrounding it, for eg: hashrate, trends/cycles, use cases, demand & supply, regulation, news, technical outlook and more. 

Carrying out thorough fundamental analysis is very important to stay abreast of the latest developments in the crypto industry, and can be instrumental in taking the right trade positions. Let’s look at some of the broader factors which can possibly impact the sentiment around Ripple.

The enterprise-level implementation of blockchain technology is ensuring its mass adoption. Big entities like Visa, JP Morgan, Paypal etc. are all seeking ways to grab their pieces of the pie, acknowledging crypto as a legit asset class. Ripple has already partnered with big banking partners like Bank of America, Union Credit, Axis Bank, Santander, Westpac and more, for its remittance system. It also owns a $50 million stake in MoneyGram, the well-known payments firm. 

Hashrate is the speed with which a miner processes the blockchain transactions and discovers a code (hash) to connect a new block to the chain. It is also used to gauge the health of a Proof of Work (PoW) cryptocurrency such as Bitcoin, Litecoin etc. Unlike other cryptocurrencies, Ripple transactions are processed in under 5 seconds through a ‘centralised’ blockchain maintained by Ripple itself. This centralisation not just rules out the third-party transaction processing, but also makes Ripple more stable & efficient whose network cannot be subjected to vulnerabilities like a 51% attack.

It’s the cryptocurrency’s use cases which are greatly responsible for its long-term success. This aspect is essentially about the value proposition of the project and what problems it solves. Ripple was created with the idea of using blockchain technology to work as a global payments network and a cryptocurrency which could facilitate the cheaper and quicker exchange of funds between banks, financial institutions and common people, globally.

As per the principle of demand and supply, a cryptocurrency’s price would rise with the increase in its demand and fall whenever its supply is increased. In the case of Ripple, the currency is not mined and released at will by Ripple, in the market. Of the total supply of 100 billion XRPs, around 45 billion are in circulation at the time of writing this piece. Therefore, future releases of Ripple can possibly put downward pressure on its market price. However, if the Ripple team manages to make further inroads into the global financial ecosystem, its demand could also increase simultaneously and offset the impact of any such future releases.

Technical Analysis: Read the Charts!

Traders also actively use ‘Technical Analysis (TA)’ tools alongside fundamental analysis, to make correct predictions about a cryptocurrency’s price movements. The TA tools enable the trader to factor-in candlestick patterns and past trends to make reasonable estimates about the future trends, and better gauge what could possibly be the right entry or exit points.

The technical analysis involves multiple indicators such as moving averages, support & resistance levels, Fibonacci levels, volume profiles, pivots etc. RSI or Relative Strength Index is another commonly used indicator which tells you if a cryptocurrency is being overbought or oversold. On the other hand, you can also use the Moving Average Convergence Divergence (MACD) indicator to learn about momentum shifts and hence the emerging trends.

Traders also regularly use MACD, RSI, Fibonacci retracement & extension levels, and volume levels to ascertain the support and resistance levels when shorting and longing a specific cryptocurrency. 

While it’s possible to do all this by personally using the above-mentioned tools on some reliable online platform, you can even benefit from the analysis and opinions of experts. Having said that, please keep in mind that TA can never be 100% accurate and therefore doesn’t guarantee sure-shot success. It is important to use technical analysis alongside fundamental analysis, to factor in aspects like trends and market sentiments, while taking market-related decisions. However, if you’re just starting out, you can even opt for the easier route of social trading.

Social trading can be referred to as a type of trading strategy wherein you simply follow the investment patterns and decisions of some seasoned expert/s. One of the ways of doing it is via copy trading, a method popularised by the eToro platform.

Common Strategies to Trade XRP

Day Trading

If you use this trading strategy, you’d be buying/selling XRP the same day (within 24 hours). The idea is to make some quick profit, sometimes even within a few minutes, by effectively using technical analysis and price action strategy to uncover opportunities. As Ripple still has some way to go in terms of finding its feet in the conventional financial world, certain developments every now and then make its price quite volatile and ideal for day trading.

Ripple Swing Trading

This trading strategy involves holding on to your positions for a few weeks or even a month. Swing traders normally bank upon volatility waves that usually take weeks or some days to play out. To uncover profitable swing trading opportunities, you’d need to be adept at using both fundamental and technical analysis. To add, when it comes to both swing trading and day trading, you should have good knowledge of charts, and know-how to carry out thorough technical analysis. Ripple, owing to its vulnerability to certain fundamental factors, can witness price movements which may sometimes take more than a day to play out, hence making it good for Swing trading.

Trend Trading

Often referred to as position trading, this trading strategy involves holding onto your positions for even longer durations, normally a few months. Trend traders try to bank upon the directional trends, mostly taking long and short positions in an uptrend and downtrend respectively. While they normally use fundamental analysis to study events that may take a considerable time to play out, trend traders also actively use trendlines, moving averages and other well-known technical indicators to offset risks and improve their success rate. It can be a very profitable strategy for Ripple trading if you can correctly gauge the macro/external factors and stay on track by constantly monitoring the technical indicators.

Choose a Platform that Fits your Trading Strategy

It’s very important to pick the right platform for your Ripple trading strategy. You can choose from any of the derivative exchanges or broker platforms to leverage trade Ripple. However, broker platforms are often recommended over derivative exchanges as they are regulated and implement stricter security measures. 

Exchanges are known to lack proper regulation and hence are vulnerable to nefarious elements. Furthermore, their infrastructure is often found wanting when it comes to responding quickly to customer requests. To make the matters worse, there might be restrictions and fees associated with withdrawals and deposits too.

Set Up Your Trading Account 

There are three major steps involved in opening up a trading account with a broker platform.

Register an account – This step will involve providing multiple details like your name, address, phone number, email ID etc. to the platform

Verification - In this step, the platform will verify your identity through its KYC measures. You might be asked to upload a government-issued id to complete this step.

Deposit funds - Once your account is opened and verified, you can deposit funds in a currency and method supported by the platform. On most platforms, your funds will show up for trading in less than a day.

Open your First Ripple Trade

You can open your first Ripple trade by accessing your funded account on the broker platform you just signed up with. There will be Buy and Sell buttons through which you can take a long or short position on Ripple, depending upon your analysis and trading strategy. 

If you are entering into a CFD trade, the platform would normally allow you to alter the extent of leverage you need and also specify your ‘stop loss’ and ‘take profit’ figures to prevent loss and book profit at the right point respectively. Please note, different broker websites might have different user interfaces, but they will all allow you to use a handful of tools and navigate the platform easily. You can look at the spreads, order books, open positions etc. without any hassles. 

Order type

You buy/sell on a broker platform using an instruction called ‘order’. A market order enables you to instantly buy/sell your CFDs at the best available market rate. On the other hand, a limit order allows you to specify limits at which you’re ready to make the trade. As evident, many traders prefer limit orders over market orders as the former help them make the most of their positions. Please note, the limit order doesn’t get executed and you won’t be charged anything for it if the specified price isn’t met.

Some more well-known order types include Immediate or Cancel (IOC) order, All or None order, stop-loss order and trailing stop order. 

Buy or Sell?

A ‘buy’ or ‘sell’ is an instruction to the concerned trading platform, to ‘buy’ or ‘sell’ the asset under consideration. On a conventional crypto exchange, this asset is normally the actual cryptocurrency being traded, while on a CFD broker platform it means a contract. ‘Buy’ and ‘sell’ may also be referred to as ‘bid’ and ‘ask’.

A spread is the difference between the ‘buy’ and ‘sell’ price of the cryptocurrency on the broker platform, and is normally set by the broker. 

All ‘buy and sell’ orders of a broker platform are listed in something called an order book which updates every second, with each one of those orders getting filled up or cancelled.

Amount

Please remember that though trading cryptocurrencies through CFDs allow you to score huge profits by getting full exposure through leverage, the losses can also be equally big in amount. Therefore, if you are new to this type of trading, you must start small and go with minimum trading size. Furthermore, make trades based on your risk appetite and take all possible risk management measures to limit your losses.

Leverage on Ripple

In simple terms, leverage means getting exposure to large amounts of the traded cryptocurrency, without the need of paying the entire value of the trade upfront. All you need to do is deposit a small percentage called ‘margin’ to execute a trade. 

The biggest advantage of leverage is that you can freely take long or short positions and make the same profits as by investing large amounts of capital equal to the full size of the trades. However, as emphasised earlier, the losses can also be equally big.

Stop-Loss and Trailing Stop-Loss

A stop-loss order helps you minimise your losses when you’re longing or shorting a cryptocurrency and the price starts going south or north respectively. You instruct the platform to sell your contract at a certain negative price point, to prevent bigger losses. You can set the stop-loss order at the right point, by taking the help of the support and resistance levels. On the other hand, a trailing stop-loss order enables the trader to book profit if the market moves in his/her favour, and stop losses in the event of unfavourable movements. 

Take Profit

Take Profit is a setting that enables traders to exit their trade positions, just at the right time (at a pre-set price), and maximise their profits. The price can be set with the help of support and resistance levels, ascertained through technical analysis. Take Profit is executed automatically and hence prevents the trader from getting exposed to sudden negative price shifts.

Finishing Touches

While you go about picking a broker platform, make sure that you know their lot size (contract size). In the case of Ripple, it would mean the number of XRPs included in each contract. 

You must also know about ‘pip’ which are the units in which crypto price movements are measured on the trading sites. 

Please also keep in mind that while some platforms will allow for zero commission trading, others might charge you commissions on every trade or something called trading fees. It’s also important to note that whenever you use margins to trade on the broker platforms, the margin requirements may vary from crypto to crypto and trade sizes.

Open Your Ripple Trade

You can go ahead and open your Ripple trade once you’re confident that your trade set up is ready, right from your order size to the type of order you wish to place. The trade can be executed by clicking on the corresponding button on the dashboard. Nevertheless, before clicking it, cross-check once again that everything is in place, as per your requirements.

Closing Orders

You can either close orders by stepping in and manually executing the trades or have them closed automatically by placing limit orders or stop-loss orders. The manual closure can occur in a couple of different ways–by clicking ‘sell’ to close a long position and clicking ‘buy’ to close a short position. In an automated set-up, the orders will get closed automatically when the appropriate price points are reached for stop-loss or limit orders. 

Final Thoughts: Ready to Trade Ripple?

To summarize, we learnt in this guide how you can trade Ripple in 2021 by finding the right platform to trade, creating a good trading plan through fundamental & technical analysis and implementing any of the well-known trading strategies. As well as how to go about opening your first Ripple trade.

As emphasized earlier, you must continue improving your trading skills by learning about more complex trading strategies/methods. It’s very critical to stay on top of the market conditions and news too. Having said that, like any trading endeavour, Ripple trading too has its inherent risks. So, go ahead and use the button below to get started with Ripple trading.

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Frequently Asked Questions

  1. No cryptocurrency or investment asset can be called completely safe for trading, as all have inherent risks, one of which is volatility in case of cryptocurrencies. Check your local laws before trading.

  2. Yes, many broker platforms allow you to make deposits using your credit/debit card.

  3. Trading on a regulated broker platform would normally attract a fee.

  4. Yes, Ripple can be traded 24/7. However, many online brokerage platforms might have fixed trading hours.

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