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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.