How to Trade Algorand: A Step-by-Step Guide
Comprehensive Guide to Trading Algorand
Are you interested in learning how to trade Algorand Token but unsure what to do or even where to start? Well, this guide might be precisely what you need!
Algorand trading is pretty straightforward once you get the hang of it.
Algorand (ALGO) is one of the latest projects aimed at expanding the possible use cases of cryptocurrencies. In fact, Algorand is widely deemed to be a blockchain network that is yet to reach its peak in the crypto market.
As such, there is a growing interest from traders who are eager to profit from the buzz surrounding this digital asset. If your unfamiliarity with cryptocurrencies is stopping you from trading Algorand, let us help you with that.
Our How to Trade Algorand Guide is designed for beginners to help you understand the basics of buying and selling crypto assets.
We will walk you through the different strategies you can use, methods to reduce risk, and how you can set up your first brokerage account to get started with an Algorand trade today.
If you want to buy Algorand quickly and easily, with 0% Commission, check out eToro Exchange!
- How to trade Algorand in 5 Easy Steps:
- What is Algorand Trading?
- How Does Algorand Trading Work?
- How to Trade Algorand Online - Setting up a Trade
- How to Make Money Trading Algorand
- How to Trade Algorand 2021 - Step-by-Step Walkthrough
- How to Trade Algorand Guide - The Verdict
How to trade Algorand in 5 Easy Steps:
To trade Algorand, the first step is to Open an accout with a regulated exchange, depost funds, select Algorand from the platform list, and lastly Buy ALGO (go Long) or sell ALGO (go short).
This guide on how to Trade Algorand asset will break everything down in Layman’s terms so that you do not trade blindly. But, if you don’t quite have the time to read it all of the ways through, this is what you need to do to trade ALGO now.
Step 1: Open an account with a regulated Crypto broker
Step 2: Funds your account
Step 3: Choose how much Algorand you want to trade
Step 4: Buy ALGO (go long) or sell ALGO (go short)
Step 5: Confirm the trade
What is Algorand Trading?
The Algorand blockchain has been designed with the objective of creating an open and borderless economy that is accessible to everyone.
Essentially, Algorand is trying to build a better blockchain ecosystem by incorporating the three fundamental attributes that every crypto project aspires to have - decentralization, security, and scalability.
When thinking of how to trade Algorand, you will be speculating on the price movements of this digital token. In other words, you will be buying and selling ALGO coins in the short term, whenever a profitable opportunity arises.
So, does the value of Algorand change that often?
Yes, in general, the performance of cryptocurrencies can be extremely volatile - with rollercoaster peaks and troughs. As such, you can make substantial profits if you are able to anticipate the market correctly when trading Algorand.
So the question comes down to how you can predict the future price direction of Algorand correctly. Typically, traders rely on a number of tools such as technical indicators and market analysis to make speculations.
Ultimately, you can look at the supply and demand in the market to arrive at your Algorand trading decisions. When there are more traders placing buy orders for ALGO tokens, then the price will increase accordingly.
If the opposite happens, that is - if those who own ALGO are trying to dispose of their coins, then the value of this digital asset will drop. In the most straightforward sense, trading Algorand is simpler than you would imagine.
Let us give you a better idea with a practical example of an Algorand trade:
- Let's suppose that the current price of Algorand is $0.80.
- Your market analysis shows that ALGO tokens are currently undervalued, so you decide to go long.
- Meaning, you expect the price of Algorand to increase in the next few days.
- Thus, you place a $100 buy order on ALGO.
- By the next day, the value of Algorand has increased to $1.10 - a rise of 37.5%.
- Wanting to secure this profit, you sell your ALGO coins and close the trade.
This Algorand trade would have made you a profit of $37.5 on your $100 stake. The trick lies in knowing when to place your trades and at what point to close them. In order to excel at this, you need to back up your decisions with thorough market research.
Even then, you should always account for the fact that your speculation could go wrong - leading to losses. As such, when thinking about how to invest in Algorand, one of the first things to consider is how much risk you can afford to take.
With this in mind, let us move forward to some of the key aspects you need to know before starting your Algorand trading journey.
Read Also: Top Tools for Crypto Trading
How Does Algorand Trading Work?
As you might know already, the concept of trading has been around for decades. Whether you are dealing with stocks or cryptocurrencies, the basics of placing trades are more or less the same.
That said, not everyone is familiar with how trading works. If you are a complete novice to this space, you will need to know the fundamentals before you can learn how to trade Algorand successfully.
So, let us start with that.
Algorand Price Movements
As we mentioned earlier, the price of Algorand moves according to supply and demand. However, when learning how to trade Algorand, you should also be aware of what factors can affect the value of Algorand in the open market.
This might include market capitalization, the circulating supply, key updates to the Algorand protocol, and more. Similarly, how Algorand is portrayed in the media or on social networks can also have an effect on its price.
Above all these, the one unique aspect that applies to cryptocurrencies like Algorand is the notorious volatility. The value of Algorand will keep fluctuating almost every second, throughout the day.
On one side, this can increase the risk related to this asset class. And on the other end of the scale, for traders - this might mean more opportunities to profit from this digital token.
Algorand Trading Pairs
Whenever you are trading cryptocurrencies like Algorand, you will have to trade them in pairs. Let us simplify this - think of it in terms of you exchanging two currencies.
That is to say, in order to buy Algorand, you will need to sell another asset. In the crypto markets, you can exchange either a fiat currency for Algorand or another digital token.
Based on this, you will see Algorand trading pairs classified into two:
- Algorand-fiat pairs such as ALGO/USD (US dollars), ALGO/EUR (euros), or ALGO/GBP (British pounds)
- Algorand-crypto pairs such as ALGO/BTC (Bitcoin), ALGO/ETH (Ethereum), or ALGO/LTC (Litecoin).
When you are dealing with a trading pair, this means that you are speculating on the value of Algorand in terms of the other asset.
- For instance, if you see the price of ALGO/USD quoted at $15 - this means that a single ALGO token is worth 15 US dollars.
- Similarly, if ALGO/BTC is 0.00002055, then this means the price of ALGO is 0.00002055 Bitcoin.
As you can see, it is certainly easier to predict the value of Algorand in terms of a fiat currency, especially for beginners. If you are to trade an Algorand-crypto pair, then it will be more complicated to speculate on the exchange rate.
Therefore, more often than not, newbies prefer to trade Algorand against a fiat currency, at least until they are familiar with the cryptocurrency markets and their intricacies.
Moreover, trading a crypto-fiat pair is also likely to get you access to more liquidity and tighter spreads.
Long or Short-Term Trading
Naturally, before you start trading Algorand, you will want to create a plan - starting with whether you want to trade this token in the long-term or short-term. This is an important factor that will affect your chosen strategy, as well as how much money you stake on this asset.
Let us explain further.
- If you want to trade Algorand in the long term, then you can look at it as an investment.
- Meaning, you will be buying Algorand hoping that it will increase in value in the future.
- This 'buy and hold' strategy is suited for beginners, as you do not always have to closely watch the market or react to any short-term price movements.
On the other hand, if you plan to trade regularly, it will be best to adopt short-term methods. There are numerous strategies such as swing trading, day trading, and scalping that you can choose from - based on your style and preferences.
- In such strategies, you will be trading off the short-term price movements of Algorand.
- However, this requires knowledge of both fundamental and technical analysis, reading market-moving events, tech news, and more - all of which can be overwhelming for beginners.
Consequently, you might want to begin with a long-term 'buy and hold' strategy until you are ready to engage in short-term trading of Algorand.
Trade and Own Algorand
If you are thinking of how to trade Algorand in the long term, then this means you will be taking ownership of this digital currency outright. In other words, you will be buying ALGO coins with the intention of holding them in your crypto wallet and making a profit if they increase in value.
Before you can do this, you will need both a trustworthy online broker and a secure digital wallet to store your Algorand. To make things easier, you might consider choosing a cryptocurrency provider that also offers in-house storage services - like eToro.
eToro is one of the well-established and beginner-friendly crypto brokers in the online space that can give you access to commission-free Algorand trading markets. Not only that, this brokerage is regulated by multiple financial authorities, which makes it more secure - but we will save discussing this for the later sections of our guide.
When engaging in short-term trading, you will be opening and closing numerous positions within a single day. Practically, taking ownership of coins for a few seconds or minutes is not viable.
As such, many traders prefer to use CFDs when trading Algorand in the short term. These are derivative products that allow you to speculate on a digital asset without owning them.
Since you are not buying ALGO coins and merely speculating on their value - you can trade in both bullish and bearish markets.
- You can open a long position speculating that Algorand will increase in value, or,
- You can open a short position speculating that Algorand will fall in price.
An additional benefit is that CFDs are leveraged products - allowing you to magnify your trades. Algorand CFDs have become quite common across cryptocurrency platforms, and you will have no trouble finding one for your chosen pair.
However, CFDs are not accessible everywhere legally. If you live in a country where CFDs are prohibited, your only option would be to find them via an online exchange.
But beware that such platforms are largely unregulated, and as such, you might not be able to fund your account in fiat currencies. A majority of exchanges will only permit you to trade Alogorand against a stablecoin, like USDC or USDT. These are digital tokens that - in theory, hold the same value as one USD.
As such, the process of trading Algorand derivatives via cryptocurrency exchanges can be a hassle, and moreover, unregulated - which is why it will be best to stay away from such third-party providers.
How to Trade Algorand Online - Setting up a Trade
When learning how to trade Algorand, one of the most crucial things to understand is which trading orders to use. This will communicate to your broker how you want to open your Algorand position, what price you want to buy/sell, and when you want to exit the position.
There are numerous types of trading orders you can use. However, as a beginner, you can place an Algorand trade using the following:
Buy or Sell Order
To begin with, you will need to specify whether you are looking to buy or sell Algorand:
- If you open a long position on Algorand, you will start with a buy order and close your trade with a sell order.
- On the contrary, if you are speculating on a short position, you will be creating a sell order first and exiting your position with a buy order.
In simple terms, if you use one of these orders to open an Algorand position, you will need the other to close it.
Once you have chosen whether you want to buy or sell Algorand, you can tell your broker at what price you want to carry out your trade. There are two distinct ways for you to do this - based on your trading style and goals.
When using a market order, you do not choose the price you pay for Algorand. Instead, you will only state the amount you want to stake, and the broker will execute your trade at the next best price available.
As you can imagine, since Algorand is highly volatile, a market order will give you no control over the price you receive. In fact, there might even be a slight difference between the value of Algorand quoted by your broker and the one you receive.
However, market orders are widely used by short-term traders who want to take advantage of a sudden opportunity.
Limit orders allow you to not only choose the amount you want to trade but at what price you want to execute your Algorand position. This is primarily used when you have a clear strategy in mind to follow.
However, the only downside is that the broker will not be able to guarantee that your trade will be executed. If your specific limit order price is not met by a seller, it will remain pending. Otherwise, you will have to cancel it manually.
At this point, you have already dealt with orders that will open your Algorand trade. Now you need to think of how you will exit your position.
Here are two simple orders that can help you:
- Take-Profit Order - These orders are used to specify your target profit so that your broker will close your position automatically when this price level is met by the market.
- Stop-Loss Order - This order is the inverse of a take-profit. That is, you can specify the maximum loss you are willing to take, and the broker will close your trade when Algorand reaches this price level.
To show you how to input different orders in a single Algorand trade, we have put together an example here:
- Let's say that you are trading the pair ALGO/USD.
- The current value of this pair is $0.85.
- You want to go long on Algorand, so you start with a buy order.
- You decide to go with a limit order and set the entry price at $0.90.
- You want to make a 40% profit - so you create a take-profit order at $1.26.
- You also set a stop-loss order at 20% below your entry price - at $0.72.
Now, if the price of Algorand moves in your favour, your broker will carry out your take-profit order at $1.26 before closing your trade.
On the other hand, if the value of Algorand decreases, your stop-loss order will be executed at $0.72, limiting your losses.
The point is, these orders allow you to automate the process of Algorand trading to a large extent, so you do not have to watch over the market every second.
How to Make Money Trading Algorand
When thinking about how to trade Algorand, the idea is simple. If your prediction is right and you time the market correctly, you will make a profit. That said, the amount of gains you can make is based entirely on a different set of factors.
In this section of our guide, we will discuss how you can maximize your potential profits from your Algorand trades.
When you are trading Algorand, you will be putting your money behind this digital token. This amount you are willing to risk on the crypto asset is your stake.
So, how does the stake affect your profits? As you can gather, the more you are willing to risk, the better your returns will be. That is, of course, if the trade goes in your favour.
If not, a higher stake would also mean larger losses.
That said, choosing your stake amount should not be based on your instinct. In fact, it is the worst approach to take when trading Algorand. You always need to have a clear strategy that will help you decide how much you should risk on each position, to not let your emotions cloud your judgment.
One of the simplest and practical approaches for beginners is to decide on a maximum stake amount that you are willing to put up on an Algorand trade.
- For example, you might place a self-imposed limit of 2% on each Algorand trade.
- Meaning, if you have $5,000 in your account, your maximum stake would be $100 per trade.
- If there is $10,000 at your disposal, you will risk no more than $200 and so on.
When you adopt such a strategy, it would be best to choose a brokerage that has a low minimum investment requirement. For example, on eToro - you can start trading Algorand with as little as $25 - allowing you to take smaller risks to gain exposure to this market.
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Algorand Trading Leverage
Earlier in our How to Trade Algorand Guide, we mentioned that CFDs can be leveraged. This is the means of obtaining exposure to Algorand without having to pay the full value of the position up front.
- Let's suppose you want to place a buy order of $1,000 on Algorand.
- But you have only $100 available in your trading account.
- In this case, you can apply leverage of 1:10.
- Meaning, you will only be putting up $100 of your own capital while essentially borrowing the rest from your broker.
- Suppose you make a profit of 10% on this leveraged trade.
- This means that your profits come to 10% of your full position ($1,000)- which is $100.
- Without leverage, your profits would have been 10% of $100 - which is only $10.
As leveraging is an easy way to boost your profits, it is often used on a day-to-day basis by short-term traders. However, while leverage can amplify your profits, it will also increase the risk of magnified losses.
Therefore, before you leverage your Algorand trades, it is extremely important for you to learn how to manage the risk.
Fees to Trade Algorand Online
Another contributing factor that affects the profitability of your Algorand trades is the charges you end up paying to your chosen broker. If your chosen brokerage has a high fee structure, then your take-home profit will be much lower.
That said, this doesn't mean that you should always choose a broker with the lowest fees. Instead, make sure that you get your money's worth in return for the charges you pay.
When learning how to trade Algorand, here are some of the most common fees that you will be liable to pay to your broker.
Algorand Trading Commission
The commission is a service charge imposed by your broker for facilitating Algorand trades on your behalf. This fee varies widely between different brokerage platforms, depending on the asset class and the type of trade.
- For instance, some brokers might charge you a flat percentage fee that applies to all your trades.
- So, if the commission is 2%, then a stake of $1,000 on Algorand will cost you $20.
- The same rates will also apply when you close the trade - respective to the amount.
- Meaning, if your position is worth $1,200 when closing, then you will have to pay $24 (2% of $1,200) to your brokerage platform.
Other times, brokers will have separate commission charges for buy and sell transactions.
Additionally, today, you can also find brokers that let you completely avoid paying any such fees at all. One such example is eToro - where all cryptocurrency trades are 100% commission-free.
In this case, you will need to be cautious with another common fee, called the 'spread.'
The spread is the difference between the bid and ask price quoted for a cryptocurrency, in this case, Algorand. As a trader, you want the lowest spread possible.
This is because, whenever you open a position, the cost of the 'spread' will put you at a loss right away. Meaning, your profits have to cover the difference between the buy and sell price, just so that you can break even.
In other words, if there is a 10% difference between the buy and sell price of Algorand, then your profits have to be above 10% for you to be able to keep any of it for yourself.
Other Algorand Trading Fees
While commissions and spreads are the fees that will directly affect your potential profits, there might be some other charges that you will end up paying to your broker.
Here is an overview of those:
- Deposits and Withdrawals - Many brokerage sites charge you a service fee for processing your deposits and withdrawals on the platform. The specific rates will depend on your chosen broker, the payment method you choose, and even the transactional amount.
- Overnight Fees - If you are keeping your positions open overnight, you might also be liable to pay a 'swap fee' to your broker. This is particularly crucial to remember if you are trading Algorand CFDs.
- Inactivity Fee - Your broker might also have a policy in place that charges you a fee if you do not meet the minimum trading activity set by the platform.
Although these charges might appear minor, they can add up easily if you are not careful. Make sure that you are fully familiar with the fee structure of your chosen broker before signing up on the platform.
Check Out: Will Algorand Make Me Rich in 10 Years?
How to Trade Algorand 2021 - Step-by-Step Walkthrough
In this final section of our How to Trade Algorand Guide, we will walk you through the steps you need to follow to start trading this digital token.
Step 1: Choose an Algorand Trading Broker
We have already established why it is crucial that you have the right online broker by your side when trading Algorand online.
However, finding one can be more challenging than you think. To make things easier, you can check the following aspects in order to arrive at the right decision.
- Regulation: Does the broker comply with the rules and regulations set by a reputable financial authority?
- Fees: What is the fee structure of the brokerage platform?
- Payments: Which payment methods are supported for you to make deposits and withdrawals?
- Minimum Deposits: Do you have to make a minimum deposit to start trading Algorand?
- Algorand Pairs: Which trading pairs can you trade on the brokerage site?
- Trading Platform: Can you easily find your way around the trading interface?
- Mobile Application: Does the broker have a mobile app version for you to place Algorand trades?
If you are a beginner, you will need to spend some time browsing through the many brokerage platforms offering a market on Algorand. From our research, we found that eToro is one of the few brokers that ticks all of the right boxes from our strict criteria.
The platform is well-established and regulated by multiple bodies - including the FCA, ASIC, and CySEC. You will also be able to trade Algorand cost-effectively since eToro does not charge any commissions.
Moreover, if you are following a long-term strategy, you can store your ALGO coins within the platform’s online wallet. And most importantly, beginners will be able to gain access to Algorand at a minimum stake of just $25.
So, moving forward - we will use eToro as a guide to show you how easy it is for you to start trading Algorand on this brokerage platform.
Step 2: Open an Algorand Trading Account
You can visit eToro to set up your trading account. You can complete this step in minutes by simply registering with an email address and setting a password.
You will also be required to provide some basic personal information, such as your full name, home address, date of birth, and contact details.
From there, you will need to get verified by the broker before proceeding. You can do this by providing a copy of your government-issued ID - such as your passport or driving license.
In addition, you will also need to offer proof of residence by providing a document with your address, like your bank statement or a utility bill.
Step 3: Add Funds
In the next step, you will need to fund your brokerage account. On eToro, the minimum deposit you need to make is $200. You will be able to process your payment using a debit/credit card, bank transfer, or e-wallet like PayPal.
Step 4: Choose an Algorand Trading Market
When your account is funded, you can find your chosen Algorand trading pair by simply searching for ALGO.
Step 5: Place Algorand Trade
On the Algorand trading page, you can specify which orders you want to use and the different price levels for each.
You will also need to specify how much you want to stake. When ready, you can find the 'Open Trade' button.
Click on it to complete your first commission-free Algorand trade on eToro!
How to Trade Algorand Guide - The Verdict
Learning to trade Algorand can seem to be a long and strenuous process. However, it does not have to be. With the right regulated broker on your side, you will be able to start placing Algorand trades in no time.
However, before you commence, it is crucial that you are fully informed of the risks involved.
Make sure that you research this digital asset, and always choose a regulated broker to facilitate your trades. eToro is an excellent brokerage platform to use - primarily due to its heavy regulation and commission-free access to the Algorand markets.
eToro – Best Platform to Trade Algorand
eToro have proven themselves trustworthy within the crypto industry over many years – we recommend you try them out.
Virtual currencies are highly volatile. Your capital is at risk.
How to trade Algorand?
You can trade Algorand via a regulated broker like eToro.
How much should I risk on Algorand?
Your stake on Algorand will depend on your financial standing, risk appetite, and goals. However, it is always best to risk small amounts with a broker like eToro that allows you to start trading Algorand from just $25.
How to make money from Algorand trading?
As a trader, you are speculating on the future value of Algorand. If your prediction turns out to be right, you will make a profit on your trade.
Can I trade leveraged Algorand CFDs?
Yes, it is possible to trade leveraged Algorand CFDs. However, whether you can access them or not will depend on your location and your chosen broker.
Which is the best broker for trading Algorand?
There are several crypto brokers that allow you to access Algorand. But it is best to use a regulated broker like eToro that enables you to trade Algorand cost-effectively and without charging you any commission.