How to Trade Chainlink: A Step-by-Step Guide

Comprehensive Guide to Trading Chainlink in 2021

Last Updated July 23rd 2021
23 Min Read

Looking for an entry point into the exciting world of Chainlink trading? We'll help you through it.

Chainlink trading is pretty straightforward once you get the hang of it. 

Chainlink is a blockchain bridge that can link smart contracts with real-time data from third parties. 

Its application as an oracle network makes this project one of the most indispensable tools in the emergence of the decentralized ecosystem. The native token of Chainlink - LINK, has generated a return of over 150% since the start of 2021. 

Are you interested in trading this digital token yourself? 

Then our How to Trade Chainlink Guide offers you valuable insight into the world of this cryptocurrency. We cover everything from the fundamentals of how to trade Chainlink, risk-reward management, strategies and how to choose the right broker. 

Contents:

Trading Chainlink digital currency is no easy feat - which is why we have put together an in-depth guide on How to Trade LINK. Within it, we explain the ins and outs of how this investment scene works, what risks and rewards you need to consider, and how you can start trading Chainlink today. 

How to Trade Chainlink in 5 Steps

To trade Chainlink, the first step is to open an accout with a regulated exchange, depost funds, select Chainlink from the platform list, and lastly Buy LINK (go Long) or sell LINK (go short).

Step 1: Open an account with a regulated exchange 

Step 2: Funds your account

Step 3: Choose how much Chainlink you want to trade 

Step 4Buy Chainlink (go long) or sell Chainlink (go short)

Step 5: Confirm the trade

What is Chainlink Trading? 

Chainlink is an open-source oracle network that can translate data from external resources into smart contracts. In other words, it can be used in communicating information to and from the blockchain protocol. 

LINK tokens form the backbone of the Chainlink project. Every time a company connects its off-chain API to smart contracts using Chainlink, it will receive LINK tokens in return. 

As such, the value of LINK tokens is directly correlated to the popularity of the Chainlink network. If there is widespread interest from companies towards this technology, it will drive up the price of this digital asset. 

On the other hand, if the network fails to grab interest from stakeholders - then the value of the coin will drop. 

That said, ultimately - Chainlink is a tradable asset with a frequently fluctuating value. These price variations depend entirely on the supply and demand of the coin in the cryptocurrency market. 

As a trader, you will be trying to predict the price of LINK tokens in the future. 

Let us offer an example that will clear the mist:

  • Let's suppose that Chainlink is priced at $30.20.
  • On cryptocurrency trading platforms, you will see this shown as LINK/USD.
  • Speculating that the value of the token will go up - you place a $100 buy order. 
  • At the end of the day, the price of Chainlink increases to $31.70. 
  • This demonstrates an increase of nearly 5% in the value of the token. 
  • You immediately place a sell order - closing the trade and securing your profit. 

In this example, the price of Chainlink moved from $30.20 to $31.70 within a single trading day. This converts to a profit of $5 (5%) on your stake of $100. 

On the contrary, if the price of LINK tokens had gone down - you would have made a loss. 

To sum up - when thinking of how to trade Chainlink successfully, your aim is to correctly speculate the market. If you are right, your trade will result in a profit. 

For this reason, before you start to place trades on Chainlink, it is crucial that you learn how the cryptocurrency space works and what factors move the market price of LINK tokens. 

Read Also: Could Chainlink Be A Millionaire-Maker Coin?

How Does Chainlink Trading Work?

The concept of cryptocurrency trading began in 2009. When compared to the likes of stock and commodity trading, which has been around for decades, the market of digital assets might appear still comparatively young. 

However, the underlying concept of trading is more or less the same for all assets - including cryptocurrencies like Chainlink. 

Therefore, for those who are already familiar with the ins and outs of the financial market - trading Chainlink will be of second nature. 

If you are a beginner trader, you can benefit from learning some of the trading fundamentals that we have listed here. 

Chainlink Trading Price Movements

As a Chainlink trader, your goal is to correctly speculate the future direction of this digital coin in terms of its price. However, to be successful - you will first need to understand what drives the value of cryptocurrencies. 

The price of Chainlink has increased by more than 18,000% since it was launched in 2018. This indicates that the general feeling towards this digital asset has been growing strong. 

Conversely, if the majority of traders decide to sell off their LINK tokens, the value of the coin will also drop accordingly. 

That said, the price of Chainlink will always vary slightly between different cryptocurrency platforms. For instance, you might notice that on one site, Chainlink is quoted at $29.20, whereas in another, the coin is priced at $29.25. 

This small variance is unavoidable considering the volatility of cryptocurrency markets - and will have no implications on your ability to make a profit when trading Chainlink. 

Don't Miss: Chainlink Price Predictions

Chainlink Trading Pairs

Among cryptocurrencies, a trading pair is made up of two assets that can be exchanged for each other - such as LINK/USD or LINK/BTC. 

When trading Chainlink - you have the option to exchange this token for another cryptocurrency or a fiat currency. 

When you are trading Chainlink against a cryptocurrency - this is called a 'crypto-crypto' pair. For instance, you might see LINK traded against BTC or ETH on your chosen exchange. 

On the other hand, when you trade Chainlink against another fiat currency - this will be termed as a 'crypto-fiat' pair. 

For example, some of the most commonly traded Chainlink-fiat pairs include LINK/USD, LINK/EUR, and LINK/GBP. Depending on your crypto provider, you might also be able to access pairs such as LINK/CAD or even LINK/JPY. 

It is worthwhile to note that choosing a 'crypto-fiat' pair comes with several advantages. These can offer you not only high liquidity but also tighter spreads. Moreover, it will be easier for you to speculate on the exchange rate when you are trading Chainlink against a fiat currency. 

On the contrary, trading a 'crypto-crypto' pair will mean that you need to have a firm grasp on both the digital assets in question - which can be complex for newbie traders. 

Long or Short-Term Trading

When thinking of how to trade Chainlink, your aim is to generate a profit from the short, medium, and long-term price fluctuations of the coin. That said, it is up to you to decide which trading strategy you want to pursue, based on your financial goals. 

For example, if you want to target long-term profits - you will  'buy and hold' Chainlink coins. In the crypto world, this method is popularly known as 'HODLing.'  

In this 'buy and hold' strategy, you will purchase Chainlink coins and keep them in your wallet for a duration of several months or even years. 

You can hold on to your coins until you are ready to cash them out - preferably for a profit. 

This strategy can be ideal for those who are still learning their way around the cryptocurrency markets. The reason is that long-term trading eliminates the need for you to follow the short-term price swings of the asset. 

On the other hand, this is where short-term strategies get a bit more complicated. 

As you can imagine - in this approach, you will be chasing the short-term price volatility of Chainlink. Most importantly, you will need the help of technical indicators and charts to arrive at trading decisions - which is no easy undertaking for a newbie trader. 

For this reason, many beginners prefer to start their trading journey using long-term strategies until they are well-versed in the ways of the cryptocurrency markets. 

Check Out: Is Chainlink a Good Investment?

Trade and Own Chainlink

As we discussed above, if you prefer a long-term trading strategy - you will be buying Chainlink coins directly from a crypto-provider. When doing this, we suggest that you purchase LINK tokens only from a regulated online broker. 

To make things easier, we can steer you in the direction of eToro - a regulated social trading platform with millions of users across the world. The broker can give you access to thousands of tradable assets - including cryptocurrencies such as Chainlink. 

Most importantly, buying and selling Chainlink on eToro is 100% commission-free, allowing you to save a significant sum in terms of trading costs. Lastly, you also have the option to store your Chainlink coins in the eToro digital wallet without having to pay any additional fees. 

For those who are entering the cryptocurrency arena for the first time, eToro offers a 'Copy Trader' feature. This enables you to replicate the trades of experienced crypto investors in your own eToro portfolio - allowing you to trade passively.

Chainlink Trading 

For those who are considering how to trade Chainlink in the short term - you will be following strategies such as 'day trading' or 'swing trading' using CFDs. 

CFDs or Contracts for Differences are complex financial instruments that reflect the market price of its underlying asset. As such, a Chainlink CFD will mirror the price movements of the LINK token - allowing you to trade this asset without having to take its ownership. 

The most notable benefit of CFDs is that it allows you to profit from both the rising and falling markets. 

In addition, many crypto providers also offer you leverage on CFDs - making it possible for you to amplify your trades. 

However, as you can imagine, trading Chainlink CFDs is deemed considerably risky. As such, you will not be able to trade crypto CFDs legally in many countries - including the US and the UK.

If you are able to access them in a prohibited country, it will be only via a third-party cryptocurrency exchange - which is likely to be unregulated. Moreover, such platforms will prevent you from trading Chainlink against fiat currencies. 

Instead, you will have to exchange LINK tokens for USDT - a stablecoin with its value pegged to that of one US dollar. 

How to Trade Chainlink Online - Setting up a Trade

Trading orders are instructions that you give to your broker to execute trades on your behalf. 

As you can imagine, when thinking of how to trade Chainlink successfully - you need to have a firm grasp of the different trading orders, as well as when to use them. 

In this section of our guide, we will introduce you to some of the most common orders that will be most useful to you when placing Chainlink trades. 

Buy or Sell Order

A buy or sell order indicates the position you are taking on Chainlink. 

For instance:

  • You will place a buy order if you think that Chainlink tokens will increase in value. 
  • You will place a sell order if you think that Chainlink tokens will decrease in value. 

Chainlink traders use both buy order and sell order when placing a single trade. 

In summary:

  • If you choose to open your Chainlink position with a buy order, then you will need to use a sell order to exit your position. 
  • Likewise, should you place a sell order to open your Chainlink position, you will have to use a buy order to close it.

Entry Price

Depending on your trading style, you can choose between a market or limit order to enter the market. 

  • Market Order

A market order is used when you want to buy or sell Chainlink immediately. Your broker will carry out the trade for you at the next best price available in the market. However, due to market volatility, your order might be fulfilled at a slightly different price. 

  • Limit Order

A limit order allows traders to buy or sell Chainlink at a specific price. For instance, suppose the current market price of Chainlink is quoted at $25.50. You might place a limit order at $28.00 - meaning your broker will keep your order pending until the price of Chainlink increases to $28.00, or you manually cancel it. 

Exit Strategy

The orders we discussed above allow you to enter the market on your own terms. It is equally important to have an exit strategy to close your Chainlink positions.

You can do this by placing 'take-profit and 'stop-loss' orders.

  • A 'take profit' order is used to secure your profits at a specific price level. For instance, let's say that you are looking to make a profit of 5% on your Chainlink trade. In this case, you will set up a take-profit order at 5% above or below your entry point. If the price of Chainlink meets this price level, your broker will close your position - locking in your profits. 
  • A 'stop-loss' order can help you reduce the risk involved in a Chainlink trade by limiting your potential losses for when things don’t go to plan.  To give you an idea of how this works, if you want to prevent any losses beyond 2% on your Chainlink trade, you can place a stop-loss order at 2%. If the market moves against your speculation, your broker will close your trade when the price of LINK tokens reaches your prespecified price level. 

Interestingly, Chainlink traders can use all of the orders described above in a single trade. 

Take a look at this example: 

  • Let's say that the pair LINK/USD is currently trading at $30.00. 
  • You want to open a buy order - but only when the price of the coin increases to $32.00. 
  • Hence, you set up a limit buy order on LINK/USD at $32.00. 
  • Your profit target on this trade is 5% - so you set the take-profit level at $33.60
  • You also want to limit your losses to 2% - so you set a stop-loss order at $29.40. 

Now, if this trade goes as you planned - that is, if the price of LINK tokens increases to $33.60 - your broker will execute your take-profit order and close your trade. 

On the contrary, if the price of LINK tokens were to fall - your stop-loss order will be carried out, and your broker will close your position at a 2% loss. 

As you can see, placing take-profit and stop-loss levels will ensure that your trade will be closed automatically at price points set by you. This will help you avoid the need to watch over the market and manually take action to prevent further losses. 

How to Make Money Trading Chainlink

While trading orders can be pivotal in the success of your Chainlink trades, they are not the only aspects that will determine your profit potential. 

When considering how to trade Chainlink, you will also have to give serious consideration to the following factors: 

Stake 

Every Chainlink trade you place will require you to enter your stake amount - which is how much you are willing to risk on this crypto asset. 

As you can imagine, your stake is directly proportional to your profit, as well as losses. 

For instance, if you stake $100 on Chainlink and your profit is 10% - you will make a gain of only $10. Had you staked $500 - your profits will have also increased to $50. 

That said, when deciding on your stake amount on Chainlink - you should also consider the risk involved. Many traders prefer to limit their stakes to no more than 2% of their entire trading account balance on a single trade. 

To give you an idea - if you have $5,000 in your trading account, the maximum you stake on a single Chainlink trade will be $100. 

Over at eToro - you have the option to start trading Chainlink with as little as $25, making such a strategy easily adoptable. 

Chainlink Trading Leverage

As we covered earlier, one of the most popular ways to trade Chainlink in the short term is through CFDs. 

If you are able to access Chainlink CFDs in your resident country, then you might have the option to amplify your profits through leverage. 

Let us offer you an example:

  • Suppose that you want to place a $1,000 buy order on LINK/USD.
  • You choose to apply leverage of 1:5. 
  • This brings your total stake to $5,000. 
  • After four hours, the value of Chainlink increases by 5%. 
  • On your $1,000 stake - this will mean a profit of $50. 
  • Since you applied leverage of 1:5 - your returns are boosted to $250. 

As you can clearly see, leverage can help you significantly increase your returns. However, you need to remember that leverage can also boost your losses. 

Fees to Trade Chainlink Online

Cryptocurrency brokers and exchanges often charge you a variety of trading fees for using their services. Every broker is distinct when it comes to the trading fees they charge. 

Here is an account of the most common types of fees that you will come across when trading Chainlink. 

Chainlink Trading Commission

Trading commission rates on your chosen crypto broker can decide how much profit you make from your Chainlink trades. Many cryptocurrency exchanges will offer you a percentage rate - calculated against the size of your stake. 

For instance, over at Coinbase - all cryptocurrency trades involve a commission of 1.49%. 

That said, not every broker will charge you a commission. Regulated crypto broker eToro has a zero-commission policy on cryptocurrencies, including Chainlink. 

Chainlink Spread

While the commission is more or less straightforward, the spread is considered an indirect fee that is included in the cost of trading. It is measured as the difference between the ask and bid price of Chainlink. 

A wider spread can mean higher trading fees. Hence, it is in your best interest to look for online brokers that offer tighter spreads. If not careful, the spread can easily eat away at your profits, especially for short-term traders. 

For instance, let's say your online broker has a spread of 1% on Chainlink. This means that every trade you open will start at a 1% loss. Meaning, you will have to make a minimum of 1% just to break even on any Chainlink trade. Only the earnings beyond this 1% can be considered as your profit. 

Other Chainlink Trading Fees

In addition, you should also check whether the crypto broker charges you transactional or administrative fees. 

These might include: 

  • Deposits/Withdrawals: These fees are calculated for every deposit or withdrawal request you make on the platform. These transactional charges can also vary depending on your specific payment method. 
  • Inactivity Fee: Many brokers will charge you an inactivity fee if you do not perform any trades through your account for a duration of 12 months or more. 
  • Overnight Fee: Overnight fees are most commonly applied for Chainlink CFD positions that you keep open overnight. On some platforms, you will also see this displayed as the 'Swap Fee.'

As is evident, the trading fees charged by your broker can have a monumental impact on your profits. Consequently, before choosing an online broker, it is crucial that you assess the fee schedule to have a clear idea of what you are liable for. 

Read More: Should You Buy Chainlink?

How to Trade Chainlink 2021 - Step-by-Step Walkthrough

Has our guide convinced you to test the waters of Chainlink trading? 

If so, we will now give you a thorough and detailed account of how you can set up your account with a regulated online crypto broker to start trading Chainlink from the comfort of your home. 

Step 1: Choose a Chainlink Trading Exchange

Choosing a cryptocurrency broker for your Chainlink trading endeavours is one of the most important decisions you will have to make. Your brokerage platform will be executing your trading orders, and in some cases, will also act as a digital wallet for your assets. 

As such, never tie yourself to an online broker without considering the following factors.

  • Regulation: Is the crypto broker regulated by any reputable financial authorities?
  • Fees: What cryptocurrency fees and commissions are charged by the platform?
  • Payments: Which payment methods are accepted by the broker?
  • Minimum Deposits: What is the minimum deposit policy regarding Chainlink trades?
  • Chainlink Pairs: Which Chainlink trading pairs are offered by the broker?
  • Trading Platform: How easy is it to navigate the brokerage platform and access its different features?
  • Mobile App: Does the broker offer a free mobile application?

Our study found that eToro is one of the best online crypto providers you can choose. Here are some of the reasons why we suggest you consider this platform:

  • eToro is a regulated online broker with licenses from not one but three financial bodies - namely the FCA in the UK, CySEC in Cyprus, and ASIC in Australia. For US residents, the platform also holds a FINRA registration. 
  • eToro gives you access to thousands of tradable assets - including cryptocurrencies at 0% commission rates. 
  • The platform supports multiple payment methods - ranging from credit/debit cards, bank transfers, and e-wallets such as PayPal. 
  • The minimum investment in cryptocurrencies is set at $25 - allowing you to engage in Chainlink trading without risking huge sums. 

Considering all these factors, we will be using eToro as guidance to show you how you can start trading Chainlink online today. 

Step 2: Open a Chainlink Trading Account

Visit the eToro website to create your trading account.  While signing up, you will have to fill in some basic information - including your full name, contact details, address, and date of birth. 

As we mentioned, eToro is a regulated broker, and thus, to ensure it complies with AML rules, the platform will also need you to complete a KYC process. 

This means that you will have to upload a valid photo identification - such as a copy of your passport, national ID card, or driver's license. You will also have to submit your utility bill to offer proof of residence. 

Step 3: Deposit Funds

As the verification process is automated, you will be able to fund your account right away after confirming your identity. 

eToro accepts payments through credit/ debit cards and e-wallets such as Paypal and Neteller. You can also choose a wire transfer - but this can take three to five business days to process. 

Step 4: Choose Chainlink Trading Market

Once you have made a deposit, you can search for ‘Chainlink’ or ‘LINK’ via the search bar. On clicking the result that loads from the search bar, eToro will immediately redirect you to the trading page of Chainlink. 

Step 5: Place Chainlink Trade

You now need to place some trading orders, as we discussed earlier in the 'Setting up a Trade' section of this guide. You will also have to enter the amount you are willing to stake on Chainlink. 

When ready, you can confirm the order by clicking on the 'Open Trade' button. eToro broker will execute the respective orders as per your instructions. 

That's it - you have just completed your first commission-free Chainlink trade on eToro!

How to Trade Chainlink Guide - The Verdict

When thinking about how to trade Chainlink - there are numerous considerations to go through. This includes choosing a strategy, analyzing your risk tolerance, and placing the right trading orders. 

But most importantly, you should also make sure that you engage in Chainlink trading only through a regulated online crypto broker. 

If you are in search of a top-rated platform, you can start by checking out eToro. This regulated trading platform gives you access to not only Chainlink but thousands of other tradable assets - all at 0% commission rates. 

eToro – Best Exchange to Trade Chainlink

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.

FAQs

Which is the safest way to trade Chainlink?

The most secure way to trade Chainlink is through a regulated online crypto broker such as eToro.

How much should I stake on Chainlink?

Each broker will have a distinct minimum investment policy on cryptocurrencies such as Chainlink. On eToro, you can start trading Chainlink by staking as little as $25.

Can Chainlink trading make you rich?

If you are able to speculate the future price of the coin correctly, then you might be able to make a profit from your Chainlink trading endeavours. On the contrary, if you happen to be wrong - you will end up losing money.

Can I trade Chainlink with leverage in the US?

Cryptocurrency trading is legal in the US. However, you will not be able to trade Chainlink CFDs - as this is prohibited for US citizens.

What is the total supply of Chainlink?

Chainlink has a supply limit of 1,000,000,000. 

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