Selecting cryptocurrency trading pairs is perhaps the most crucial task when investing in the digital currency market. You must analyze the underlying cryptocurrency and ensure it suits your trading business and risk appetite.
There’s a massive list of over 2000 cryptocurrencies to pick from and several – centralised and decentralised – exchanges to review before investing in the market. In addition, you must develop strategies such as the use of exchanges like swyftx sushiswap that can help you to leverage the market swings and collect profit to expand your portfolio.
Best Ways to Select Crypto Trading Pairs
So, it’s crucial to learn how the digital currency industry works and differentiate assets, currencies and tokens before taking a plunge. You’ll avoid pitfalls like crypto fraud and safeguard your investment capital while earning income.
Cryptocurrency market is speculative and traders take positions based on the prediction of prices. The underlying crypto trading scope can have a crypto paired against a tradeable dollar or crypto to crypto.
Are you wondering where to start? Below is a discussion on how to select crypto trading pairs.
Look at Market Capitalization
The long list of cryptocurrencies in the digital currency markets has values to show ratings and trading performance. A higher market capitalization shows that a cryptocurrency pair is well-established and has gained trust from traders. It’ll have significant implications for the profitability of your trades as you leverage the cryptocurrency market swings.
If you mismatch crypto trading pairs, there are high chances of missing opportunities or losing your capital. So, you must research market capitalization and match it with your trading needs.
Analyse Traded Volume
Trader participation in a market is a crucial factor to consider when investing in the digital currency market. A highly used pair in the crypto exchanges is also a sign that shows authority on the trading floor.
Conversely, a dormant pair means your trades will struggle to ride the market swing tides, and you can lose your portfolio. So, it’s crucial to analyse the traded volume of your preferred pair before trading.
The ability to convert your cryptocurrency to cash is critical and may determine how you trade in the digital currency market. It’s better if you can sell off your crypto portfolio faster so that you can buy other opportunities early. You also safeguard your interest or profit from getting slashed by market price fluctuations, as experienced by Bitcoin in 2021.
In addition, you can develop a strategy to manage your risks when on the trading floor. For instance, active crypto pairs with consistent buy transactions will survive a downward trend in the market. Therefore, be analytical and review the pros and cons of each team before trading in the market.
Establish Base Cryptocurrency
Base currency has a connection with the market capitalization of a cryptocurrency. It’s a pacesetter of a crypto trading pair that gives an agreed value used on the trading floor of an exchange. Also, it determines the exchange rate of the crypto pairs should you decide to liquidate.
So, a well-known cryptocurrency should take the base position of all your trading pairs. The exchange you conduct your trading business in must also accept your choice of base cryptocurrency. Otherwise, it’ll be challenging to penetrate the market or execute profitable trades.
Prioritise Popular Crypto Trading Pairs
The cryptocurrency demand and supply are also critical when selecting your trading pairs. Currently, Bitcoin is the most popular cryptocurrency in the world, and its market dominance is outstanding when you look at market cap and liquidity.
Lesser-known cryptos can clamp down your trading business because of the uncertainty surrounding their development. In addition, these might not be well trusted in the cryptocurrency community and can collapse in the market.
Watch Out for Other Crypto Trading Opportunities
The digital currency market is versatile and allows you to trade multiple cryptocurrencies in several exchanges. Correlation and integration are crucial features determining your choice of crypto trading pairs. A high correlation of cryptos means limited opportunities and can cripple your trading business.
Alternatively, look for low correlated cryptos that are acceptable in exchanges worldwide. It creates more trading opportunities, such as crypto arbitrage, that can be profitable if well executed. Also, you can integrate and develop crypto trading strategies aligned with the trading volume of each pair and exchange. However, you must research ways to maximize opportunities on the trading floor using the chosen pairs.
Study The Trading Options
Cryptocurrency exchanges have centralised and decentralised exchanges that offer varying trading options and assets. It’s crucial to learn what cryptocurrencies are available at respective businesses. You can narrow it down to specific digital currencies that you can buy efficiently and transparently. You’ll avoid misplacing your portfolio and protect your money.
Selecting cryptocurrency trading pairs is challenging and requires a keen review of the underlying digital currencies. You must ensure every market execution is well-calculated and has the potential to bring returns. Market capitalization, liquidity and popularity of individual cryptocurrencies, among others, are critical to your trading business. Therefore, ensure your research relies on the above criteria to protect your portfolio from potential risks in the digital currency market.