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How To Trade Stellar Lumens - Step-by-Step Guide

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Crypto trading is more popular than ever due to the soaring prices of various cryptocurrencies. Traders from all over the world are entering the industry, buying as soon as the prices dip, and selling when they surge again.

Of course, to be successful at trading Stellar Lumens (XLM), you must know and do more than that. Traders depend on accurate price prediction, and to predict the prices, they must know how to analyse markets. They must also regularly monitor the market as they wait for opportunities. If you can train yourself, you can become an excellent trader too.

Stellar Lumens Trading Summary

Trading Stellar successfully is something that you have to properly prepare for. While buying and selling on its own is rather simple—trading crypto has become extremely easy when it comes to the procedure itself—trading it successfully requires work. You need to develop a proper trading strategy, and learn how to take advantage of price volatility.

If you do that, you can become a competent trader and even use Stellar trading for making a regular income. There are also crypto derivatives that you can trade like CFDs, futures and options. These can be very useful for trading during bear markets, as they allow you to earn even if the price is dropping.

Start Trading in 3 easy steps

1. Plan your trades

The first thing to remember if you want to trade Stellar (XLM) is that you need to plan your trades. That means coming up with a strategy, and being careful about what you do with your money. Remember that the market can turn at any time, which is what makes the crypto industry very risky. But a good strategy can help you make profits over time.

2. Register on an appropriate platform

The next thing to do is to find a platform that you can trade on. This means finding one that offers Stellar, as well as as many trading pairs as possible. Also remember to check if the platform’s fees are to your liking, as they differ from one platform to another.

3. Start trading

Lastly, you can deposit money and start trading. Just remember the risks, and know that you can go long or short, and that you always need to keep a close eye on the market, its changes and price forecasts to know what’s the best move to make in any given situation.

Stellar Lumens Trading Explained

The trading industry is large, well-developed and complex. You need to understand the terms associated with trading to be able to trade properly and to know what you are doing.

For example, there are trading positions that you enter and exit. You can enter a long position or short position, which depends on whether you wish to purchase Stellar coins or sell them. Then, there are crypto derivatives contracts, such as CFDs, options and futures. We already mentioned that these allow you to make money off of crypto prices, whether they are growing or dropping.

This is because you do not actually buy coins when trading derivatives. You simply trade contracts that use Stellar coins as an underlying asset. As a result, you don’t have to worry about the coin’s price drop, as long as you can predict it in time. You see, trading derivatives involves betting on the future of the coin’s price. All you need to do is know which way it is going to move to make the right move. 

However, if you make a mistake, you can lose your investment. Especially if you trade with leverage, which involves buying more than what you can afford to buy with your own money by taking a loan from your broker or trading platform. Sure, the reward will be massive if you get it right. But, the risks grow, as well, and space for mistakes shrinks, so the greater the leverage, the smaller the room for errors. Leverage should be used by experienced traders as the risk of loss is greater. 

We would not recommend trading with leverage if you are new to the crypto trading industry. This is something that is only meant for those who have a deep understanding of the market, and it is simply too risky for newcomers.

Trade Stellar Lumens: Establish a Proper Plan

Establishing a trading plan is your first step towards becoming a successful trader. There are some things that you need to understand and do to prepare a good plan. New traders must also learn about risk management strategies and use them while trading. 

Understand What Moves the Price of Stellar Lumens

The first thing is understanding why the price moves the way it does. In other words, you need to know what is impacting it. This usually involves things like:

Supply and Demand

First, you need to know how much coins there are in circulation, and whether or not people are looking to obtain them. The more people want the coin, the greater its price. This is because XLM is not bound to any asset that would give it value—it simply goes up and down based on how much people want to own it.

News

Next, there are various news that could impact the price of the coin. That can include new partnerships, new developments, regulators’ announcements and price forecasts.

Adoption

The coin that has no purpose or use cases is not going to be desired by a lot of people. After all, why would you want to own something that you can’t do anything with? This is why adoption is a very important factor. Coins’ prices often go sky-high whenever a large number of merchants adopt them, either by the coin being accepted by payment processors or merchants themselves, although the former is much more likely to happen.

Anything else that might impact the market sentiment

The crypto industry’s prices are impacted by how investors feel about coins. With that in mind, anything that could make the investors want or not want the coin is worth keeping an eye on, as it is bound to make a strong impression on the way its price moves.

Technical Analysis: Read the charts!

The second thing that can help you understand the price is studying charts. Granted, this is not the most interesting part for most people, but it may very well be the most important one. You see, charts can show you current trends, they reveal growth and drop in trading volumes, and can reveal patterns that coins tend to follow when moving uninterrupted. 

All of this is very important for learning what trend maybe coming next, and can be crucial for some strategies. Of course, charts also do not guarantee that the coin will continue to move as expected. Any news or other type of development could change the way people feel about the coin in a flash, thus changing what they do with it, and what its price will be like. But, charts can be useful in calm periods, and particularly for short-term predictions.

Common Strategies to Trade XLM

News Trading for XLM

One of the most common trading strategies is news trading. Coins are typically impacted by the news, either good or bad. If the news is good, people rush to purchase the coin as they expect its price to go up. In doing so, they are the ones who push it up. If the news is bad, the opposite happens. This is why you must always keep an eye on new reports and developments, as they could be crucial for making a profit.

Day Trading 

Day Trading is an example of a strategy that relies on fundamental and technical analysis in a relatively equal measure. It all happens within a single day, that much is true. But, a lot can happen in one day, especially during more volatile periods, so it pays to watch the news and read the charts.

Scalping

Scalping, on the other hand, is also a category of day trading, only those who use this strategy do not depend much on the fundamental analysis. Since scalping includes trading in extremely short time intervals, often only a few minutes—charts are everything to your average scalper. They make money off of the tiniest price shifts, which may even include a few cents per coin. However, this method requires constant monitoring of the market, and it is by far the most time-consuming.

Choose a platform that Fits your Trading Strategy

After selecting a trading strategy, the next step is to choose the right platform to do your trading. Users can choose between derivatives exchanges and brokers, with the exchanges being somewhat riskier because most are still not regulated. 

You can also go for derivatives exchanges, provided that you don’t want to actually own the coins, but rather benefit from their price changes. Some derivatives exchanges also allow you to purchase coins, but their focus is primarily on derivatives contracts.

If you trade on a crypto exchange, you get access only to the coins that the exchange lists, so it is imperative to check whether or not the exchange has Stellar among supported coins. Next, you also want to choose one that has as many Stellar trading pairs as possible but also remember to look at the fees and other details that might impact your experience.

If, on the other hand, you choose a broker, it is worth noting that brokers can offer better prices, as they are linked to numerous exchanges. That way, they allow you to choose which exchange’s price to use when trading. Brokers also must be regulated to provide service, so you get some extra security on that count.

Lastly, using brokers will also increase your expenses, as you will also have to pay the fee for using them, in addition to any transaction fees, deposit/withdrawal fees, so while they are safer and provide better options, it all comes at a price.

Set up your trading account

Once you choose a platform to trade on, you will have to set up your trading account. This is not that complicated, and it typically involves registering, and verifying your identity by uploading photos of certain documents, and sometimes a selfie or proof of residence.

This is usually a quick process, with the verification being done in minutes, or sometimes a few hours, but that depends on the platform, its technology and popularity. 

After that, simply add a payment method and deposit the funds you will use for trading, and after that, you will be free to buy your first batch of Stellar.

Open your First Stellar Lumens Trade

Now, speaking of your first trade, it will likely vary depending on which platform you chose. But it is all more or less the same in concept. You may notice some changes in terminology or navigating the platform, as well as available features, as some platforms simply offer more, while others have less.

That doesn’t mean that those offering less are necessarily bad. They might just be purposefully simpler to help the new traders find their way around. In fact, many would suggest that you do go for a simpler platform if you are new, to avoid confusion and costly mistakes.

With that said, let’s talk about some of the details that you will need to have figured out in order to enter your first trade, such as:

Order type

The first thing to consider is your order type. There are many different order types, such as stop-loss, trailing stop-loss, take profit, immediate or cancel order, limit order, market order, all or none order and more. Some of these will secure better prices, while others can help you protect your investment from losses. Others can ensure that your order is automatically closed when the price hits a certain level, which can be good for ensuring profits, even if you are not available to sit in front of the screen and keep an eye on the market during your trades, so choose carefully.

Buy or sell?

Provided that you have done your research, you should be able to make an educated assumption about what the price is likely to do next. This will be the basis of your activities, and it will help you conclude whether you should buy or sell (or bid/ask, if you happen to trade derivatives). Another thing that might help you understand the market sentiment are order books, which are lists of all currently active orders, and it shows whether people are more interested in buying or selling. 

There are also spreads to keep an eye on. A spread is essentially the difference between the highest bid and the lowest ask. If the difference is small, then the price is relatively stable, and you can expect strong liquidity. If it is large, then the opposite is true.

Amount

Deciding on the amount you will have to deposit and later trade should not be difficult. Experienced traders likely do not need advice in this regard, while newcomers should try to keep their investments minimum, at least initially, to avoid suffering great losses. Always assume that your trade will end badly, and if you are only getting started, it likely will.

So, don’t risk too much money while experimenting and learning the ropes. You can avoid losses if you have done thorough research, but there is never any guarantee. Even established traders suffer losses from time to time and it is all part of the trading world. Just make sure that you don’t commit more capital than what you can afford to lose. 

Leverage on Stellar Lumens

We briefly mentioned leverage earlier. Trading with leverage, also called margin trading, is a trading process where you buy a larger amount of derivatives than what you can afford to buy. You provide a portion of the funds used for payment, while you borrow the rest from the platform.

This stands to increase your reward multiple times, depending on how big a leverage you use. For example, if you have $100, and trade with x2 leverage, you can purchase $200 worth of derivatives. But, you need to be very precise with your price predictions, as your window for making a mistake rapidly shrinks. So, while leveraged trading does come with great benefits, it also carries significantly greater risks. A broker can liquidate your position to recover funds in case the trade goes in the opposite direction and the risk of loss is always greater while using leverage. 

Stop-Loss and Trailing Stop-Loss

Earlier, we mentioned stop-loss and trailing stop-loss as order types. These order types are particularly used by traders as they also act as mechanisms for securing your investment. When you use stop-loss, you enter a market at a current price, while choosing a price limit below the current market price. If the price starts falling, it will trigger this selected level, and your order will be closed automatically.

The trick is to select a level that will not be triggered by constant price fluctuations, but also to not go too deep and experience unnecessary losses. 

As for trailing stop-loss, it works in the same way, with one difference. If the price happens to go up, the level you selected will move up by the same percentage, along with the price. That way, it won’t just remain where you put it, and have you miss out on potential profits. 

So, if the trailing stop-loss level goes beyond the market price that the coin had when you entered the market, and then the price starts dropping and triggers it at this new level, you might even make gains by using this order. It is clearly superior to a regular stop-loss, which is what made it quite popular among investors.

Take profit

Take profit is another order type that you might consider, especially in situations when you know that the price is approaching a strong resistance level. These levels tend to reject the market price of the asset, causing it to drop after approaching. To make sure that you won’t miss out on the opportunity to close the order or exit your position in time, you can select a price level that you are sure the asset will reach. Once it does, the take profit order will immediately close your position, thus ensuring that you do collect profits before the correction takes place.

Finishing touches

At this point, you are almost ready to open your first trade. But, there are also a few finishing touches—a few minor concepts that you should keep an eye on. One example includes commissions, or fees, as mentioned before. A lot of platforms will calculate the fees when you are making a trade so that you will know exactly how much will you get for a specific amount. In other words, you will know how much you must pay to buy a certain number of coins.

You should also be aware of triggers, which are specific signals that traders use to know when to spring into action, and when to hold and wait. Price often seems like it is about to surge, causing people to invest, only for it to then suddenly drop and cause traders to lose money. But, if they were to set up triggers, they would know that the momentum was not strong enough, and that they should be patient and wait.

Open Your Stellar Lumens trade

You should now be ready to start trading XLM. Before you do, though, one final check-up is in order. This is nothing overly complicated—just make sure that you have entered all figures and other details correctly, and that nothing is out of order. Even a small mistake can disrupt your plan, so make sure that there are none, otherwise, you could lose money due to a technicality.

Closing Orders

While opening an order is your primary goal, you should also think about closing one. Doing so is simple, and can be done in two ways, either manually, or automatically. Automatic order closure is done by certain order types, such as stop-loss and take profit, as mentioned before. It happens if the price triggers the levels you have set up. Alternatively, if you decide that you have had enough trading for the day, you can close the price manually by clicking the button.

Final Thoughts: Ready to Trade Stellar Lumens?

As you can see, trading is not that difficult from a technical standpoint. But you need to do a lot of preparing and organising to know what to expect, what to do and how to behave in specific situations. It requires patience and discipline, knowledge and education about the market, but ultimately, it is nothing that cannot be learned by anyone. Your personality type is likely going to be the greatest challenge, as you need to know when to move and when to refrain from taking action. New traders must also use risk management strategies and try to gain experience to become successful in trading. 

There are many opportunities in the trading world, and all it takes is a competent trader who can identify the right time to enter and exit a trade. Just be cautious, as there are just as many risks as well as opportunities out there, and you may lose money just as easily as you gained it. Use the button below to open your first trade.

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Frequently Asked Questions

  1. Stellar is available on most platforms, as it is a rather popular utility coin meant for transferring money internationally. As a result, you can buy it and trade it on most platforms.

  2. Yes. Most platforms will insist on identity verification as regulated platforms are required to adhere to KYC and AML procedures to reduce the risk of fraud.

  3. Most platforms allow multiple methods for deposits such as direct bank transfer, debit or credit card and via third-party payment processors. You can use any of the above methods to deposit funds into your trading account.

  4. The height of transaction fees grows mostly on slow networks, like Bitcoin and Ethereum. Since they are unable to process all transactions as they arrive, processors focus on those that will bring the most money first. With Stellar being able to process transactions immediately, there is no competitiveness to have your transaction processed, so you get to pay small amounts even when transferring large ones.