How to Trade Litecoin - The Ultimate Guide to LTC Trading
Find out how to trade Litecoin LTC, as well as how Litecoin works
Want to discover how to trade Litecoin? Check out our guide on how Litecoin trading works
Lauded as the silver to Bitcoin’s gold, Litecoin was developed in 2011 when creator Charlie Lee sought to modify the existing Bitcoin code to fix what he perceived as potential shortfalls in the original cryptocurrency.
Fast forward to 2020 and Litecoin has established itself as one of the top digital currencies on the market - consistently amongst the top ten tokens in terms of market capitalisation and with over 50 million coins in circulation at the time of writing. Whilst Litecoin inevitably bears many similarities to its predecessor, there are a few key differences that have made LTC stand out as a trading asset with serious potential for growth. Most notably, Litecoin blocks are created four times faster than those of Bitcoin - an issue which has dogged the latter in recent years.
Anyone serious about trading or investing will want to know about Litecoin. However, learning how to trade Litecoin is something that requires plenty of research, which is why we have put together the following guide to tell you everything you need to know to start trading this hugely popular altcoin.
How to Trade Bitcoin in 5 Easy Steps
To trade Litecoin, the first step is to Open an accout with a regulated exchange, depost funds, select Litecoin from the platform list, and lastly Buy Litecoin (go Long) or sell Litecoin LTC (go short).
This guide on how to Trade Litecoin LTC 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 Litecoin now.
5 Steps to trading Litecoin:
- Step 1: Open an account with a regulated, commission-free broker like eToro
- Step 2: Funds your account
- Step 3: Choose how much Litecoin you want to trade ($25 minimum)
- Step 4: Buy LTC (go long) or sell LTC (go short)
- Step 5: Confirm the Trade order
Let’s get started learning how to trade Litecoin in more details!
What is Litecoin Trading?
In a nutshell, Litecoin trading involves speculating on the price of the token - trying to predict whether its value will increase or decrease over a given period. There are a few ways in which you can go about this, which we will detail later in the article, but for now all you need to know is that you can potentially make a profit whether the price of the cryptocurrency goes up or down.
How much profit you can generate will depend on a few key factors. These include how much the price of Litecoin moves, how much your original stake is, and what leverage you employ, if any. In this sense, trading Litecoin works in exactly the same way as trading forex or stocks. A simplified Litecoin trading process might look something like this:
- You believe that Litecoin will go up in value against the US dollar
- The price is listed as $70 for 1 LTC
- You stake $500 on a buy order
- The price increases by 10% during your trade window
- You close the trade, making $50 profit
There are of course other factors to consider, but armed with the right information, trading Litecoin can be just as lucrative as trading any other asset class.
Before You Start
As we have touched upon, the overall process of trading Litecoin is very similar to any other asset. In fact, you will find that many brokers and exchanges offer cryptocurrency trading along with forex, CFDs, and stocks all via the same trading platform. However, it should be remembered that cryptocurrency is still a relatively new kind of asset class and the market behaves somewhat differently when compared with traditional trading options. With this in mind, it’s important to make sure you furnish yourself with as much information as possible before you commit funds and start making trades.
Ways to Trade Litecoin
Market prices for financial assets are dictated by supply and demand - and cryptocurrencies are no exception. If demand for Litecoin is high, then there will be more traders looking to buy and prices will be pushed up. Conversely, if sentiment turns against Litecoin, then traders will start selling their holdings and the price will start to fall.
Market sentiment can be influenced by myriad factors. Any news relating directly or indirectly to cryptocurrency will affect prices. For example, if there are rumours that suggest a change in regulation for digital currencies, the prices will react accordingly. Similarly, the emergence of new blockchain technologies - including new cryptocurrencies - will also have a knock-on effect for the rest of the market.
Cryptocurrency is known for being more volatile than other financial assets, but fortunately, you can make a profit whether the price of an asset goes up or down. Volatility, therefore, equals opportunity for the savvy investor.
Interested in Litecoin trading ?
Owning Litecoin vs Trading Litecoin
Before we get into the finer details of Litecoin trading, it’s important to understand what exactly is happening beneath the surface. A crucial distinction to be made at this point is the difference between owning Litecoin and trading Litecoin.
Owning Litecoin is not synonymous with trading the asset class. Some investors might choose to buy Litecoin via a broker and store it in a private crypto wallet. In this case, the investor owns the underlying Litecoin and can do with it as they wish. Often, people will buy an amount of cryptocurrency with the hope that it will increase in value over the medium/long term. Buying crypto in this way is referred to as HODLing - effectively an industry term for holding onto cryptocurrency until it appreciates in value, rather than making short term trades.
In order to buy Litecoin, you’ll first need to set yourself up with a cryptocurrency wallet to store the currency. These come in various forms, including both hardware and software variants, but are not so dissimilar from a traditional cash wallet in how they work. Once you have a wallet, you can use a brokerage service like eToro to buy and sell Litecoin, if and when you decide to.
This is where things get a little more interesting.
The disadvantages involved in HODLing are probably fairly apparent. Firstly, you won’t be able to make profits on the frequent value fluctuations that occur around the clock as it simply isn’t practical to keep shifting your Litecoin. Secondly, HODLing will only allow you to make a profit if the value of your chosen crypto increases - there’s always the chance that the price may drop, leaving you at a loss.
Trading Litecoin is done via an exchange or broker and these allow both short and long selling - in other words speculating either a price increase or decrease. This kind of trading is done with a much shorter turnaround than with HODLing - successful cryptocurrency traders will often make numerous transactions in a single day. When trading in this way, you never actually own the underlying asset. Instead, you speculate on price movements via contracts for difference (CFDs).
Trading with CFDs
As we have already touched upon, CFD trading allows a trader to profit from the price movement of an underlying asset without ever owning that asset outright. A CFD is a contract between two parties that tracks variation in the price of a given asset, without that asset ever actually trading hands. The advantage of CFDs is that you have the option to go either long or short - long if you think the price of Litecoin will increase, short if you believe it’s likely to fall.
In most cases, Litecoin trading is done by pairs, much in the same way that foreign currency is traded. Pairs come in different combinations, but most Litecoin traders will be trading the cryptocurrency against the US dollar, regardless of where they are based, as inevitably trading volumes and liquidity levels are much higher with the US currency.
It is also possible to trade Litecoin against other cryptocurrencies. Crypto-to-crypto pairs or crypto-cross pairs - are certainly worth considering as an option, as there is often a great deal of price fluctuation between two coins - especially between Altcoins, including Litecoin, and Bitcoin. However, a novice investor is most likely going to want to focus on LTC/USD.
Where to Trade Litecoin
Finding a trading platform
If you want to learn how to trade Litecoin, you’ll need to find a trading platform to allow you to make transactions. There are quite literally hundreds of platforms on the market, so you may find you are somewhat spoilt for choice. However, choosing the right platform for you requires some forward planning and research.
What kind of trader are you?
Firstly, you’ll want to decide if you are just looking to trade Litecoin and perhaps some other cryptocurrencies, or if you’ll be wanting to explore other financial asset classes. Different trading exchanges and brokers will often vary in the services they provide. For example, some may only offer crypto and forex, whilst others will offer a whole complement of trading markets, including stocks, indices, and commodities. Of course, you can open as many trading accounts as you like, but it is often more convenient to use one platform for all your trading needs.
Another thing to consider when choosing a broker is what level of trader you are. If you’re completely new to the financial markets, then you’ll want to find a provider that can help you get started. This goes beyond simply having effective customer support and a few how-to pages - some of the more advanced trading platforms, such as the industry-standard MetaTrader 4 - can seem bewildering to novice traders, with their vast array of metrics and trading options. Many popular brokers have mitigated this problem by creating their own proprietary trading platforms, with the more inexperienced trader in mind.
Things to look out for when choosing a platform to trade Litecoin
Choosing the right platform for you will largely come down to personal preference, but there are a few factors that should be considered prerequisites.
Make sure any platform you sign up with has adequate regulation. If you are a UK-based trader, for example, then any broker or trading platform you sign-up with should be fully regulated by the Financial Conduct Authority. In adhering to regulatory standards, platforms have to meet certain requirements ensuring they are operating within the law and client funds are adequately protected.
Getting Started with a Trading Platform
Once you’ve decided on a platform, you’ll need to register and open an account. Each provider will have its own onboarding process, but for most you will need to provide a few details and verify your identity. Any reputable firm will carry out verification checks as standard, but more often than not you are only required to do this when making your first withdrawal.
Some platforms will allow you to open a demo account, using virtual funds. These are a great way not only to get acquainted with a new platform, but also to get a feel for how the crypto markets work. However, when it comes to making money from Litecoin trading, you’ll need to deposit some real funds to execute trades.
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Once you're set up with a trading account and have deposited funds, then it's time to start trading Litecoin.
The first thing to consider when trading Litecoin - or any asset for that matter - is deciding how much capital you are prepared to put into the trade. It should be remembered that day trading carries an inherent risk, so you should always bear this in mind when budgeting for transactions.
It’s not uncommon for brokers to set a minimum amount per trade - which varies hugely depending on your provider - but as a general rule, most successful traders will never risk more than 1% of their total account balance. If you’re still learning how to trade Litecoin, then a conservative approach is advised.
Buy or Sell?
The first thing to consider when opening a position is whether you think the price of Litecoin is going to go up or down. If you think the exchange rate will increase, then you open a buy order.
If, on the other hand, you expect the price to drop, then you open with a sell order.
Effectively, the order is reversed when closing a position. For example, if you made a buy order and the exchange price of Litecoin increases, then you issue a sell order to close the trade and take your profit. The situation is reversed when opening with a sell order.
Next, you need to decide how and when you wish to open your trade. You effectively have two choices at this stage, you can either open a trade on the spot (a market order) or choose to enter at a specific point (a limit order).
A market order is the simplest option. Here you will see your trade executed instantly and the price you enter the market at will be close to the price quoted at the time. There is can be slight variations, due to the time taken to execute a trade and the speed at which prices move, but ultimately a market order can be thought of as what you see is what you get.
Limit orders allow you to specify the price at which your trade is executed. This is an incredibly useful feature as it allows you to enter the market at the most favourable point. For example, you may be expecting the price of Litecoin to drop before it starts to increase, in which case you can activate your trade from a better position, with more potential for gain. It should be noted that, if Litecoin does not reach the specified price, your order will expire without being executed.
This of course begs the question: which type of order should I use when trading Litecoin? There is no set answer here - the situation and trading environment will always dictate the best type of transaction at the time.
Closing a position
Setting up your Litecoin trade is, of course, only half of the process. You’ll also need to decide when to close the position. As we have already mentioned, if you opened a sell order, then you close the trade with a buy order and vice-versa.
You can close a transaction at a time of your choosing, however, if you are still learning how to trade Litecoin then we would advise erring on the side of caution and setting what’s called a stop-loss order or take-profit order. Effectively, these are instructions to your broker to close the transaction at specific points and are an extremely useful tool for mitigating risk.
A stop-loss order means that your broker will close the position if the trade does not go your way. You might, for example, limit your losses to 5%. However, setting the stop-limit too low will not allow for any fluctuation in price, so you’ll want to leave a bit of breathing room here.
Take-profit orders are a similar idea, except they instruct your broker to close the trade when a specific price is reached.
- LTC/USD stands at $60.00
- You believe the price will go up, so put in a buy order
- You want to safeguard against losses of 5% or more
- This means you put a stop-loss order in at $57.00
- You also want to close your trade at a 10% profit
- As such, your take-profit order will be $66.00
- With these orders in place, the most you will lose is 5% and your best profit will be 10%.
Ready to start trading Litecoin?
Other Things to Consider When Trading Litecoin
If you’re serious about learning how to trade Litecoin, then there are a few things you will need to be aware of when making trades. The following are important considerations for entering the world of crypto-trading.
You will of course pay fees for brokerage services to trade Litecoin. The fees and commissions will vary between providers and are charged in different ways.
Trading commissions are a straightforward charge that is levied for every trade that you make. Some providers charge a flat rate, but most will charge a percentage of the trade. Once again, these vary quite a bit, but are typically between 0.10% and 0.25% per trade. It’s not uncommon to see platforms advertising commission-free trading, but these will draw their profits from having a wider spread.
The spread is the difference between the buy and sell price listed by a brokerage or exchange. The spread for Litecoin - and most cryptos - is expressed as a percentage. For example, if the buy price on LTC/USD is $60.00 and the sell price is $60.30 - the spread amounts to 0.5%.
The spread acts as an indirect fee, as your position will always open at a slight loss. Typically, brokers that offer commission-free trading will have much wider spreads than those that charge per trade.
Other trading fees
Aside from the costs involved in trading Litecoin, brokers may also charge additional fees. These include payment processing fees - charged for withdrawing and/or depositing funds to your brokerage account. It is also not uncommon for platforms to have an inactivity fee if you don’t make any trades for a given period. Once again, these will vary between platforms so be sure to do your research when opening an account - these additional charges should always be factored in when you trade Litecoin.
How to Trade Litecoin: Conclusion
Hopefully, having read through this article you will have a much better idea of how to trade Litecoin. Of course, trading any financial asset is an ongoing learning process and we’d encourage you to take things slow and take in as much information as possible.
How to trade Litecoin in 5 Easy Steps
A simplified process for trading Litecoin looks like this:
- Open a brokerage account
- Deposit funds
- Research your trade
- Choose whether you want to open a buy or sell order
- Monitor your trade
- Close the position - either manually or with a stop-loss/take-profit order
Interested in Litecoin trading with eToro?
You have probably realised by now that there is much more you can learn about each step in the process - learning which takes time. However, trading Litecoin is definitely worth the effort as cryptocurrency is one of the fastest-growing and most popular asset classes globally, presenting a fantastic opportunity for savvy investors.
Litecoin Trading - FAQ
How do I start trading Litecoin?
To start trading Litecoin you’ll need to find a reputable broker and open an account. It’s also advisable to research the fundamentals of cryptocurrency and the different ways you can trade Litecoin. Our guide should furnish you with enough information to start exploring your options.
Is it safe to trade Litecoin?
The appeal of cryptocurrency as an asset is just how secure it is - it’s the very nature of blockchain technology. However, it’s important to ensure you use a regulated broker or exchange service, like eToro. Look for licensing from trusted authorities such as FCA, ASIC, and CySEC.
Can I trade Litecoin with leverage?
It is possible to trade Litecoin with leverage, but your options will depend on where you are based. European financial regulations allow the trading of cryptocurrency CFDs with a leverage of 1:2. However, stricter American financial rules mean that US traders will not have the option to trade with leverage.
How do I find a broker to trade Litecoin?
There are thousands of brokers offering cryptocurrency trading and choosing the right one will depend on a few factors - including your trading goals and existing experience. Fortunately, many brokers will allow you to open a demo account before committing any funds. When browsing the different platforms, make sure any ones you consider are fully regulated by a reputable financial authority.