Altcoin trading is an excellent way to diversify your income, whether you are a beginner, an amateur or a professional. Literally meaning “alternative coins”, altcoins were originally created to fix Bitcoin’s flaws. Today, there is a wide variety of altcoins you can trade.
Why Trade Altcoins?
There are several good reasons to trade altcoins. On one hand, when you invest, the key rule is always to diversify your portfolio. By looking at cryptocurrencies other than Bitcoin, you limit your risk of loss, since losses on one cryptocurrency can be offset by gains on another. On the other hand, trading altcoins can bring significant potential gains: trading a young cryptocurrency can pay off handsomely if it suddenly surges. Altcoins are therefore excellent for speculation.
On related topics, our articles “Pi Network Review” and “Altcoin Review” complement this guide well.
Trading Altcoins with CFDs
Trading CFDs is a good way to trade altcoins. The costs to expect depend on the platform and the altcoin you choose.
- Fees and commissions
Unlike Bitcoin, most altcoins carry lower percentage commissions on trading platforms.
- Spreads when trading altcoins
Crypto spreads depend on market conditions. Nevertheless, you should do your research to find the trading platforms offering the lowest spreads on the crypto market. Note that the spread is not the only criterion for choosing a platform: it must also be reliable and well suited to trading altcoin CFDs.
- Trading altcoins with leverage
Leverage lets you multiply the size of your starting capital. Trading leveraged CFDs carries a fairly high risk of loss, so you should be comfortable with this technique before using it. Favor good platforms such as AvaTrade or Vantage for trading altcoin CFDs with leverage.
How to Buy Altcoins
You can buy altcoins in a few steps. Although there are various ways to get altcoins, the easiest and most common is to do so online, through a reliable online broker. We recommend Vantage for its regulation and for operating in a way that suits all types of investors. First, sign up on the platform and verify your account for security. You can then deposit money before searching for and buying your altcoin. You can choose the payment method you use.
How to Sell Altcoins
To sell an altcoin, you need to use an exchange platform. On eToro, for example, simply click on the altcoin position you want to sell from your portfolio. Clicking on the position takes you to the page that lets you close it. Open the close-position window, check the details, then confirm by clicking “Close position”. You can then sell your altcoins and realize your profit or loss.
Altcoin Trading: What Factors Affect Altcoin Prices?
There are several types of altcoins, such as security tokens, stablecoins, mining-based altcoins and utility tokens. Many factors therefore influence their market price.
- Project use and distinctiveness
How the project is used plays a big role in an altcoin’s value. When the goals announced at launch are achieved, this inspires investor confidence. The more users and investors there are, the more the coin will rise in value. A token’s distinctiveness also works in its favor: a project that stands out strongly from others tends to increase in value because demand rises.
- Interest
Some altcoins pay interest. These obviously attract investors and push up their market price through the law of supply and demand: the more demand for an altcoin increases, the more its value rises.
- The price of Bitcoin and other cryptocurrencies
Altcoin prices generally depend on Bitcoin’s. Various altcoins are also linked to one another in some way (competing cryptocurrencies, for example), making their prices interdependent.
- Real-time use
How much an altcoin is actually used affects its value. When several companies use an altcoin, its price rises — as with Ethereum, which is used by many companies.
- Availability
To gain popularity and therefore value, altcoins must be accessible. If an altcoin is hard to acquire, investors may be discouraged and its value may fall.
Altcoin Trading Strategies
There are several ways to trade altcoins. Here are the two main strategies traders use.
- Day trading
Also called short-term trading, it involves opening and closing a position within a single day. If you do it over even shorter periods, it is called scalping. Day trading generally suits experienced traders, as it requires advanced knowledge of crypto trading. For example, leverage is used to increase profits but can be particularly dangerous for those who don’t master it. Choose carefully which altcoin you trade with leverage. You need to be comfortable with the techniques involved — the second strategy may suit you better if you feel you still lack experience.
- Buy and hold
This is a much calmer long-term strategy. As the name suggests, it involves buying and holding your tokens for a certain period. The principle is to buy low and sell high. This technique is particularly attractive for young altcoins with a promising future, letting you buy cryptocurrencies at a lower price and make a profit in a few years by selling them.
Tips for Trading Altcoins
If you put the valuable tips below to good use, your altcoin trading journey will go well.
- Learn about the project
Each altcoin is based on a specific project. So before investing, you should obviously understand what the company does. Understanding the purpose of the altcoin you are interested in is essential, whether you invest long term or trade short term. Investing in an altcoin whose purpose you don’t understand makes it very risky to define your strategy. Each altcoin generally has a website where you can dig deeper.
- Choose a reliable platform
Trading altcoins requires an intermediary, namely a trading platform, and your choice will shape the rest of your journey. Beyond reliability and regulation, compare the prices, tools and service quality of different brokers. Don’t forget that the broker should offer a fairly wide choice of altcoins so you can diversify your portfolio. Vantage is undoubtedly the trading platform that meets these criteria and offers the best altcoins to broaden your investments.
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Note that even analysts and experts can be wrong in their predictions, as many factors drive changes in altcoin prices. It is therefore impossible to know exactly how much you could make, and it also depends on the altcoin you choose to trade. Some altcoins have simply disappeared while others are booming. To maximize your chances of winning, favor popular altcoins such as Ethereum, EOS, Ripple or Tron. There is a whole range of altcoins with a promising future.
Altcoin Trading: What Are the Advantages?
As alternative currencies, altcoins offer many advantages in response to the shortcomings of the Bitcoin system.
- Improved system: altcoins were generally designed to fix Bitcoin’s shortcomings in terms of speed or mining costs.
- Real competition: Bitcoin’s operating rules have been modified, encouraging the emergence of new competitors to the Bitcoin system.
- Low transaction fees: each transaction is charged at low cost. In addition, the blockchain is based on secure technology.
Altcoin Trading: What Are the Disadvantages?
Trading altcoins has a few drawbacks, which it shares with most cryptocurrencies such as Bitcoin.
- High volatility: altcoin prices can swing wildly because of their young age, making the risk of loss very high. However, this can be good for trading in the event of a sudden upswing.
- Vulnerability to fraud: unfortunately, altcoins are often the target of fraud and scams. It is best to stick to fairly well-known altcoins.
Trading Altcoins: CFDs or Spot?
As you have seen, trading altcoin CFDs is very common. It also lets you use leverage to increase your trading capital and make more profit. If you decide to invest a smaller amount, CFDs are an excellent idea. However, we advise you to limit potential losses by using a stop loss, which automatically closes your position.
Trading altcoins on the spot market also has its merits. This method seems more reassuring if you are new to trading, as you won’t have to deal with the technicalities of CFDs and leverage. In this case, you need a wallet to store your tokens and keep them safe. There are several types of wallets you can use to trade altcoins.
Altcoins vs Bitcoin
While some altcoins work the same way as Bitcoin, others have brought innovations and improvements. For example, Litecoin produces blocks in under 3 minutes, whereas Bitcoin can only mine one every 10 minutes. Many networks are far more scalable than Bitcoin, with low transaction fees, such as Bitcoin Cash or Decred. Several altcoins can process thousands of transactions in a few seconds. Others offer very interesting and innovative projects capable of dominating the market in the years ahead. So by choosing altcoins, you bet on diversity and limit the risk of a major loss on a single cryptocurrency.
Ethereum: The Most Popular Altcoin
Ether is considered the most popular altcoin and appears to be Bitcoin’s biggest competitor. It is the leader in smart contracts and dApps (decentralized applications). Ethereum is also the number-one currency for ICO funding. It is therefore known in many fields such as finance, entertainment, cloud computing, insurance and real estate. That is why Ethereum is one of the most traded altcoins on the market. This cryptocurrency solves several of Bitcoin’s problems and is on its way to overshadowing the legendary Bitcoin, which long dominated the market. It is also one of the cryptocurrencies to watch.
Conclusion: Alternatives to Altcoin Trading
By now, you can easily see why altcoins have gained ground in the crypto market thanks to their diversity and volatility. It cannot be ruled out that they will one day overshadow Bitcoin, given their rapid growth. Whether you want to invest long term or trade short term, altcoins are an excellent way to diversify your profits, and there is something for everyone, amateurs and professionals alike. You can trade the most popular ones, such as Ethereum, Cardano and Ripple, or less popular ones with high potential.
As an alternative to trading altcoins, there are other ways to get them. For example, you can use faucets — websites that give away small amounts of cryptocurrency in exchange for completing tasks and actions. You can also mine altcoins, which means taking part in running an altcoin’s network and receiving cryptocurrency in return. Finally, altcoin casinos let you deposit in altcoins and collect winnings in altcoins. All of which goes to show that everyone can find what they are looking for with altcoins.
If you have experience trading altcoins, feel free to share it with us in the comments!
We cover this topic in detail in Trader Salary: Independent Trader and Bank Trader Salaries.
Read also: Altcoin Definition