How To Trade Zcash - Step-by-Step Guide
One of the most in-demand privacy coins in the crypto market today, Zcash’s price has seen all kinds of highs and lows ever since it came into the market. Trading in Zcash (ZEC) can be about either buying/selling the ownership of this cryptocurrency on a regular crypto exchange or speculating on its price movements through derivative products on a broker trading platform.
We’ve created this detailed all-inclusive guide for anyone interested in learning how to trade Zcash in 2021. Trading is not only about numbers and money, but also how well you process information and make quick decisions.
Zcash Trading Summary
Trading in Zcash can be a successful venture if you thoroughly master some proven trading strategy and learn how to effectively use certain tools to execute trades. Some of the commonly used strategies in this regard include scalping, day trading, automated trading, trend trading and swing trading.
Furthermore, a lot of trading activity on broker sites happens through a crypto derivative product referred to as Contract for Differences (CFDs). This product facilitates leverage trading in cryptocurrencies and allows you to take big market positions without tying up large amounts of capital. Futures and options are the other two well-known derivatives employed for the same purpose. Please remember, leverage trading can lead to big gains as well as equally big losses.
Start Trading in 3 easy steps
1. Choose a Trading Strategy
Opting for the right trading strategy constitutes the first step in trading Zcash. Every strategy will have its own corresponding entry and exit levels, and no matter which one you employ you’d need to master certain tools and indicators to make the most of the activity. Having absolute clarity about your trading objective is another essential to succeed in this endeavour.
2. Register on an Appropriate Platform
Registering on an appropriate broker platform is a rather easy process that doesn’t normally cost any money. You may have to comply with a verification process and then deposit some capital to begin trading. Users must ensure that the platform selected is regulated and follows KYC regulations.
3. Long - Short
Once the deposited funds show up in your trading account, you can open trades and take long or short positions on Zcash based on your research. Your broker might also allow you to play around with a demo version before investing any real money. Whenever you begin trading, ensure that you manage risk well and define the right price-points to exit your trades. Doing so will be critical for preventing losses and booking profits, and can be achieved via tools like stop-loss orders and limit orders.
Find the Right Place to Trade Zcash
Finding the right place to trade Zcash can be a very time-consuming task as there are many well-known broker platforms in the market today. We’ve done all the research and have shortlisted the best ones below.
Zcash Trading Explained
As informed earlier, we’ll be focusing on trading Zcash through CFDs in this article. It will involve taking long or short positions on the cryptocurrency depending upon which way you expect its price to move. This is referred to as taking trading positions and this type of trading activity is called leverage trading.
Taking a long position is about buying a CFD in the hope of Zcash’s price to increase, whereas when taking a short position you sell a CFD in the hope of Zcash’s price to fall. You register profit if the market moves in your favour, else absorb losses.
Leverage is a facility offered by broker platforms to help you gain large exposure in the trading market by investing only a small percentage of capital, called margin. The extent of leverage you get will depend on your account type. But the losses can be equally big too. As you indulge in Zcash trading, ensure that you avoid making mistakes like not using a sound strategy, overexposing yourself, and not doing your share of due diligence.
Trade Zcash: Establish a Proper Plan
Trading Zcash in the absence of a proper plan can be very harmful to your profit prospects. In this section, we will cover what moves the price of Zcash in the market, the importance of technical analysis in Zcash trades and some common trading strategies you can use.
Understand What Moves the Price of Zcash
It’s not uncommon to see crypto traders getting so engrossed in stats and figures that they end up overlooking the importance of the bigger picture. We’re referring to the fundamental analysis here. It’s the process of ascertaining if the cryptocurrency under consideration is overvalued or undervalued, by looking at it through the prism of external & internal influences, macroeconomic factors and various other broad aspects such as regulation, demand & supply, emerging trends, technical outlook, news stories, hash rate etc.
Being thorough with this type of analysis is critical for taking trade positions. Below are some of the broad fundamental factors which influence Zcash’s price:
Use Cases – The long-term success of a cryptocurrency depends greatly on its use cases, which are essentially about the project’s value proposition and the core issues it addresses. The primary purpose of creating Zcash was to address the privacy and anonymity issue of Bitcoin. ZEC employs zero-knowledge proof technology which enables its network’s nodes to verify transactions without making any confidential information public. This aspect has a huge bearing on the Zcash price overall.
Demand and supply – Zcash’s overall demand and supply is also relevant to its price movements. As is dictated by the well-known principle of economics, the price of Zcash can increase with a corresponding increase in its demand, and drop with more numbers of ZECs introduced into the market. At the time of writing this piece, ZEC’s circulating supply stood at a little over 11 million coins out of a total maximum supply of 21 million. With around 10 more million coins to get released by the year 2032, the demand for ZEC might increase with the scarcity factor kicking-in.
News – ZEC price is vulnerable to fluctuations resulting from the breaking news stories on the entire cryptocurrency industry. These stories can be anything regarding regulation, adoption or even general news events surrounding ZEC and crypto as a whole, and impact the investor sentiment accordingly.
Adoption – This aspect is also associated with the news stories, as any announcement related to integration or adoption of ZEC can buoy the market sentiment and drive up the prices. You can find exact details about the organisations that accept ZEC on the cryptocurrency’s official website.
Technical Analysis: Read the Charts!
Technical analysis of a cryptocurrency is done mainly with the help of charting patterns and statistical indicators. The most frequently used charts by crypto traders are line charts, candlestick patterns and bar charts. While all these are fed the same data, they differ based on how they present the information for analytical purposes. The basic idea behind these charts is to help traders predict future trends and take profitable trade positions accordingly.
Crypto traders are found using statistical tools like Time Weighted Average Price (TWAP), Volume Weighted Average Price (VWAP), Fibonacci Ratios as well as RSI/Moving Averages/MACD quite often. As regards the statistical indicators, the most regularly used ones include Average Directional Index, Relative Strength Index (RSI), Standard Deviation and Bollinger Bands. All these tools and indicators enable traders to study demand and supply and base their trading decisions on emerging trends. Putting it another way, it’s just basic economics presented in the form of fancy terminology!
While you carry out TA on ZEC, please keep in mind that no amount of analysis can guarantee 100% success. If you’re new to crypto trading, it would be better that you follow some expert’s opinion, or perhaps try your hand at strategies like social trading. ‘Copy Trading’ feature offered by eToro is an excellent example of such practice wherein you can replicate the market actions of a seasoned trading expert, to learn the ropes.
Common Strategies to Trade ZEC
News Trading for ZEC
Like some other hard-forks of Bitcoin, ZEC is also closely related to the most popular currency of the crypto world. Any news that impacts Bitcoin, influences the Zcash price too. News trading for ZEC will involve staying constantly on top of the news stories related to both cryptocurrencies overall and the ones specific to BTC and ZEC. You may even set up alerts to closely follow specific developments.
In this trading strategy, you pick a specific time frame in a normal trading day, followed by opening and closing multiple trading positions during that window, with the idea of booking as much profit as you possibly can. Crypto traders are regularly seen taking multiple long and short positions within 24 hours, closing each one of them in time. As it is common for ZEC to witness significant intraday price movements, it can be a good cryptocurrency to implement such a strategy.
Scalping is a crypto trading strategy wherein you try banking upon the market inefficiencies and the price differences existing between two broker websites. Arbitrage trading and spread scalping are a couple of very good examples of such strategy, and both are applied regularly to ZEC. In arbitrage trading, you seek out and profit from the buy/sell prices of ZEC on different broker platforms, and in spread scalping, you carry out a similar activity, but look for discrepancies on the same broker website.
Choose a Platform that Fits your Trading Strategy
How well you can implement a trading strategy will depend greatly on the platform you choose. The trading website should meet all your criteria and should be responsive to your requirements. As far as leverage trading cryptocurrencies is concerned, it’s done mainly on broker websites and derivative exchanges. Experts recommend the former over the latter, because of brokers being regulated and having strict security measures in place.
Exchanges on the other hand are often found lacking in regulation, making them vulnerable to hackers. They are also sometimes not very responsive in the customer service aspect. Not just that, trading activity on a crypto exchange may even attract charges on deposits and withdrawals of funds.
Set Up Your Trading Account
To leverage trade in ZEC, you will first need to set up a trading account on a reliable broker platform. This process can be completed in three steps as follows:
Registration – You’ll be asked for basic details like your name, address, email ID, phone number etc. in this step.
KYC and ID verification – In this step, the broker platform may ask you to upload some government-issued documents as a part of their identity verification process, and in compliance with their KYC measures.
Funds deposit – Once your account is opened and verified, you can deposit some funds into it using a payment method approved by the portal, and in a currency supported by it.
Open your First Zcash Trade
Talking about the process per se, opening your first Zcash trade should be a pretty simple task. The majority of broker platforms provide ‘Buy’ and ‘Sell’ buttons which you can use to open long and short positions on Zcash respectively. But what’s more important is the position you take and the strategy you use, based on your analysis.
CFDs allow you to choose from multiple leverage options depending upon your account. You can even specify ‘Stop-Loss’ and ‘Take Profit’ points to tackle risk and book profit at the right level. The UI (user interface) may be different from one broker to the other, but you’re most likely to receive easy-to-navigate options and handy tools to execute timely trades.
You can use different order types on a broker website to give instructions. Such orders are instructions to buy/sell a cryptocurrency or CFD. For instance, a market order instructs the website to instantly buy/sell the concerned CFD/crypto at the existing market rate; on the contrary, a limit order is an instruction to buy/sell only when a specific price point is reached.
It’s common to see traders using such orders to take timely trading decisions. Limit orders are preferred over market orders as they fetch the best possible price. Few other order types that you should know about include Immediate or Cancel (IOC), stop-loss order, trailing stop order and All or None order.
Buy or Sell?
‘Buy’ or ‘Sell’ are also instructions given to a trading portal to purchase or sell the underlying asset. In the context of CFD trading, you open a trade with a ‘Buy’ order when you wish to long the underlying cryptocurrency, and ‘Sell’ when you want to short it. On crypto exchanges, the terms commonly used for these two instructions are ‘Bid’ and ‘Ask’ respectively.
A regularly used means to generate revenue for the broker platform, a spread implies the difference between the ‘buy’ and ‘sell’ prices of a cryptocurrency listed on the platform. All the buy-sell orders are consolidated in an order book on the website, which is updated every second, in real-time, as the orders get cancelled or fulfilled.
It’s entirely up to you what amount you may wish to start CFD trading ZEC with. Ideally, new traders must refrain from investing big sums and gradually increase their trade sizes. Please also note, though you might get tempted to take big positions because of the offered leverage, you must resist the temptation. Both the profits and losses get magnified significantly when you use leverage. In the end, take a well-informed investment decision based on your knowledge, analysis and risk appetite.
Leverage on Zcash
Taking advantage of the leverage on Zcash through CFDs is about entering into the same amount of a ZEC trade as you’d normally do on any other platform, but by tying up only a fraction of the capital. Putting it another way, there is no need for depositing the entire value of the trade, but only a small percentage called margin. Let’s make it clear with the help of an example:
Let’s assume that ZEC is presently trading at $150 per coin and you’re positive that it will soon rise to $160. Based on your analysis, you decide to long ZEC and open 4 CFD ‘Buy’ trades of 1 ZEC each.
The broker requires 10% margin on the trade, and therefore you deposit $60 for the 4 CFDs you purchased. Resultantly, you get an exposure of worth $600 of ZEC by tying up only $60, instead of the entire amount.
If ZEC does appreciate to $160, you’d close with a reverse ‘Sell’ order and make a $40 profit. If ZEC depreciates in market value, you’d incur a loss.
Please note, the exact profit amount may vary as the brokers normally charge a spread too, on every ‘buy’ and ‘sell’ trade. CFDs should always be traded with a bit of caution as they come with the possibility of both huge profits as well as losses.
Stop-Loss and Trailing Stop-Loss
You can set up a stop-loss point for your trades based on the support & resistance levels ascertained through technical analysis. The stop-loss point enables you to cap your losses and close your trades just at the right time.
A trailing stop-loss order on the other hand offers a twin-benefit to the traders by functioning both as a limit order and a stop-loss order, to book profit at the right level and prevent major losses respectively.
A ‘Take Profit’ set up is normally used by crypto traders to specify a price point at which they’d like to close and book profit on their open trades, just before the market witnesses any adverse movement. Once again, you can take the assistance of the support & resistance levels to set this price point.
You can trade in ZEC using any derivative product you’re comfortable with, on a broker platform or a derivative exchange of your choice. It’s worth noting, you may need to pay trading fees and/or a commission depending upon the service you choose. No matter which trading route you take, always study and analyse before implementing any trading strategy or using any derivative product.
The size of the contract, normally known as a ‘lot’ is another figure you should be aware of. It represents the units of cryptocurrency included in every CFD. In the leverage example that we shared above, all the 4 CFDs consisted of 1 ZEC each.
Another commonly used term ‘pip’ refers to the unit with which you measure a cryptocurrency’s price movements. For instance, if in the case of ZEC, if 1 pip is considered equal to $1, its price moving from $150 to $160 would imply that ZEC has moved 10 pips. It’s important to know about the pip equation to be able to set the appropriate ‘take profit’ and ‘stop-loss’ points for the trades.
Last but not the least, the margin requirements of every broker platform may differ depending upon the equity available and the trade sizes.
Open Your Zcash Trade
It would be time to open your first Zcash trade once you’re confident about your setup, including the order size and type. You can open the trade by clicking either the ‘Buy’ or ‘Sell’ button on the dashboard, depending upon whether you wish to long or short the currency. It’s always better to cross-check if everything is in order before you click either of the buttons.
You can close your positions by either the manual or automatic method. Whenever you specify the ‘stop-loss’ and/or ‘take profit’ points, your positions will be closed automatically when those points are reached. To manually close your positions, you would need to log into the platform and execute the corresponding reverse trade/s on your own.
Final Thoughts: Ready to Trade Zcash?
We covered multiple aspects of ZEC trading, starting with choosing the ideal platform for your trading requirements, then working on a solid trading plan, followed by setting up your trading account and finally opening your first-ever ZEC trade!
ZEC has pretty solid fundamentals and its price volatility offers opportunities to interested traders. Having said that, the risks and loss potential are equally big too. To succeed at Zcash trading, you must master the art of using indicators and analytical tools to your advantage. You can begin right away by clicking the button provided below.
Frequently Asked Questions
Yes, as long as you do it on a regulated broker platform.
As we also covered in the above guide, you can start leverage trading Zcash by signing up at a broker platform. The leverage offered will differ depending on the platform and your account type.
Many countries permit crypto CFD trading but you should refer to your local laws to get the exact information.
Yes, many regulated broker websites allow debit/credit card deposits.