Bitcoin trading has changed a lot in the last decade. The market has become highly popular and competitive, and only the top traders are making money these days. That’s why it’s more important than ever to use the best trading tools available.
So, what are the best modern crypto trading tools? This list gives a good overview of the major categories for essential trading tools for modern traders.
1. Market data trading tools
Perhaps the most important tools in any trader’s arsenal are their market data sources. These are the places where they get their core information on what’s happening in markets right now. Some of the main sources of data include:
- Current cryptocurrency prices
- Historical crypto price graphs
- Trading volume
- Market capitalization (the total market value of cryptocurrencies)
These data points form the foundation of any trading strategy. One of the most popular places to get market data is CoinMarketCap. This site has all available information on almost any crypto you can think of. All in an easily understandable format.
Another resource popular among crypto traders is TradingView. This platform goes well beyond cryptocurrency and has information about things like fiat currencies, stock indexes, and even oil prices. There’s a possibility to get the premium subscription for those traders who want a little more from the platform.
If you want to become a successful trader, make sure you put some time and effort into picking the right market data tools. Without the full picture of the needed data, you’ll surely lose money in poor trades.
2. Charting tools
Beyond the raw data, modern traders use sophisticated charting tools to help them understand the oceans of data created by modern markets. Things like price charts, daily charts, weekly charts, yearly charts, and comparison charts help you make sense of what are the short and long term trends happening in the market. With the knowledge of these trends, you can make good trades.
TradingView has plenty of charting tools available and is probably the most popular option for general traders. If you’re only interested in cryptocurrency, then Coinigy might be a better option for your charting needs.
3. Margin and leverage trading
Buying and selling cryptocurrencies can be very profitable. But, you’re limited to how much you can afford to buy at a certain time. Your maximum upside is capped with whatever funds you have available for trade.
If you want to trade more, there is an option available called leverage. This is essentially when you borrow money from other traders and investors to fund your trades. You could borrow 2X, 5X, or even 10X the funds you have available in a certain cryptocurrency in order to 2X, 5X, or 10X your profits from a successful trade.
Many exchange platforms allow margin and leverage trading from within their trading platforms. This makes it extremely easy to get started. Check out what’s available at your exchange or any exchanges you’re currently considering. Also, make sure you understand all of the terms and conditions of using such a trading tool.
However, always remember that leveraged trading is a double-edged sword. While your upside profits can be 10X’d by a successful leveraged trade, so can your downside. If you borrow funds to make a trade that doesn’t pay off, you’ll lose all of the money you borrowed. This is similar to borrowing money from a bank to bet in a casino. Sure, you can make a ton of money and easily pay the original loan back if you win. But, if you lose, you’re in big trouble. Think carefully about your strategy and risks when using these trading tools.
4. A well-equipped crypto exchange
Many trading tools are built into the cryptocurrency exchanges these days. Large, full-featured exchanges include many features that go well beyond just buying and selling basic cryptocurrencies.
There are buy and sell features, advanced crypto wallets, stable coins such as USD Coin, margin and leverage trading, and cryptocurrency storage features.
One of the most interesting features evolving on many cryptocurrency exchanges is opportunities for learning. Many of the exchanges have realized that the more their customers know, the more likely they are to expand their trading, so they are investing in advanced educational resources for users. As a trader, you can take advantage of these features. Sometimes you can even make money from learning about cryptocurrency from exchange platforms.
5. Market sentiment analysis
Cryptocurrency markets don’t act rationally. The price swings of Bitcoin and other cryptocurrencies are still largely driven by market sentiment forces such as FOMO (Fear of Missing Out). When a critical mass in the market starts buying or selling, many others join too, even if the trades don’t make financial sense.
To understand when this is happening in the cryptocurrency market, modern traders use market sentiment analysis tools. These tools scan data and posts from social media sites like Facebook, Twitter, blogs, and news outlets. They look at the words and tone of the articles to generate data points on how the general crypto market is feeling right now.
For example, if there are tons of posts and news reports with words like ‘panic’, ‘sell-off’, and ‘crisis’, this is a clear sign that the general market sentiment is negative. This means that there are likely to be more sellers in the market than buyers, and some cryptos may be underpriced.
Some useful market sentiment analysis tools include CryptoMood and Santiment. Both scan a variety of sources to provide you with possible crypto trading opportunities.
6. A cool head
The most underrated trading tool in the crypto market (or any market for that matter) these days is keeping a cool head. With news and market data being so quickly and readily available, it’s tempting to want to act immediately. Resist this temptation and make measured trading decisions, and you’ll be successful in your trades.