Comprehensive Guide To Trading Solana (SOL)
The Solana (SOL) network has been a great tool in promoting the mass adoption of crypto payments in the online space. The blockchain project does this by facilitating fast and transparent solutions without compromising on safety.
If you are wondering how to trade Solana safely and cost-effectively - this guide is for you.
As you read on, you will be able to learn more about Solana, the strategies you can use, and how you can find the best broker to trade this digital asset in the most practical way.
How To Trade Solana (SOL) In 5 Simple Steps
If you are eager to start your Solana trading journey right now, here is a quickfire guide that you can follow:
- Step 1: Open your trading account with a regulated broker that supports the Solana market. This will require you to provide some personal information and contact details.
- Step 2: Upload documents that will verify your identity and address.
- Step 3: Deposit funds using a debit/credit card, e-wallet, or by making a bank account transfer.
- Step 4: Select the Solana market you want to trade by searching for the digital asset on your chosen brokerage platform.
- Step 5: Enter the specifics of your trade - such as your stake and the appropriate trading orders. When ready, confirm your trade.
And that’s it - you’ve just learned how to trade Solana in five simple steps!
What Is Solana (SOL) Trading?
In simple terms, when thinking of how to trade Solana, you will be buying or selling this cryptocurrency - with the intention of making a profit.
As a tradable asset, the value of Solana increases and decreases every single day. This fluctuation is caused by variation in the supply and demand of this asset.
When trading Solana, you will be speculating on the price movements of this digital token - be it in the short or long term. If there is a huge demand for this cryptocurrency in the market, then its value will rise.
On the other hand, if more people decide to offload their SOL coins, then you will see its value go down. Being able to correctly predict these price fluctuations is how you will be able to make a profit from your Solana trades.
To give you a clear-cut idea of how to trade Solana, we have prepared a practical example here:
- Let's suppose that Solana is valued at $150 per coin.
- You want to trade Solana against US dollars, which will be shown as SOL/USD across cryptocurrency platforms.
- Your research shows that Solana is undervalued, so you create a $2,000 buy order.
- Three months pass, and the value of Solana increases to $300.
- This translates to a 100% increase in the value of Solana.
- Happy with your profit, you place a sell order on SOL/USD.
As per this example, you doubled your investment - translating to a gain of $2,000.
The takeaway is that if you speculate correctly, trading Solana can be profitable. Had your prediction been wrong - you would have ended up facing a loss.
For this reason, when you consider how to trade Solana, you should have a clear idea of how this cryptocurrency market works.
How Does Solana (SOL) Trading Work?
For those of you already familiar with trading other markets such as stocks, forex, or commodities - speculating on the price of Solana might not altogether be a new concept.
However, cryptocurrencies are relatively new assets that are much more volatile. If you are a complete beginner to trading, then we will discuss some fundamentals that will provide you with foundational knowledge on how to trade Solana.
Solana Price Movements
As a trader, you will need to educate yourself about what drives the price of Solana - as this is necessary for you to correctly speculate the market.
The value of Solana can be affected by any number of factors, such as the utility of this blockchain, cryptocurrency regulations, or the global economy. Ultimately, it will boil down to the general market feeling.
Since the launch of SOL tokens in April 2020, the price of this digital asset has increased by more than 19,000%. Put simply, there has been growing demand for Solana in a very short period of time.
However, you should bear in mind that the price of this cryptocurrency also fluctuates almost every second of the day.
For this reason, the price of Solana will always be slightly different across multiple crypto providers. Not to worry, this small variation will not be an issue that will affect the profitability of your trades.
Solana Trading Pairs
One of the first things you will need to decide when thinking about how to trade Solana is choosing a trading pair.
For those unaware, a trading pair constitutes two different assets that can be traded for each other. To give you an example, if you come across SOL/USD - this means that you will be exchanging Solana against US dollars.
- The main advantage of choosing such 'crypto-fiat' pairs is that it will be easier for you to predict the exchange rate.
- Apart from US dollars, you will also be able to trade Solana against other fiat currencies like euros, British pounds, Japanese yen, and others - depending on the markets supported by your chosen brokerage.
Alternatively, you will also be able to trade 'crypto-crypto' pairs. In this case, you will be speculating on the value of Solana against other digital tokens like Bitcoin or Litecoin.
This requires you to be an expert in analyzing the price movements of both the digital assets involved. Needless to say, this demands some serious expertise.
As such, many beginners tend to avoid trading Solana against cryptocurrencies. Regardless of which market you choose, it would be best to make sure that you are dealing with liquid pairs such as SOL/USD or SOL/BTC.
Long or Short-Term Solana Trading
Another crucial decision is to figure out which trading strategy you want to adopt for Solana.
If you think that the Solana network has promising future prospects and that the project will rise in value over time - then you might want to consider buying SOL tokens directly.
This way, you will be taking ownership of the coins you purchase and storing them in a crypto wallet.
You can then hold the Solana tokens for years at a time, until you find the right moment to cash out.
This long-term 'buy and hold' strategy is also widely known as 'HODLing' in cryptocurrency circles.
If you are a beginner, then this approach might be better suited for you, as there is no need for you to worry about the short-term volatility of this digital asset.
That being said, if you are rather keen on trading Solana on a short-term basis, then you will be targeting modest profits instead, but by placing more regular trades.
However, this will require chart reading and analytical skills that can often take months to learn.
Trade and Own Solana
As we discussed above, if you are thinking of how to trade Solana using the 'buy and hold' strategy, you will want to take ownership of this digital asset. This can be done by purchasing SOL tokens via a crypto provider.
However, you will find that there are different types of platforms that allow you to buy Solana - among which, a regulated broker would be your safest option.
Not only do these sites facilitate the easy purchase and sale of SOL tokens, but you will also have the option to store your digital assets in an in-house custodial wallet for free.
And above all, the level of security offered by licensed brokers cannot be matched by unregulated cryptocurrency exchanges. As such, you will want to stick to a licensed platform for buying Solana.
If you are interested in trading Solana on a short-term basis, you will want to use an online broker that supports CFDs (Contracts for Difference). These allow you to buy and sell this digital asset without taking ownership of the SOL coins.
There are a few other facets that make CFDs an attractive financial instrument to traders:
- Solana CFDs track the real-world price of this cryptocurrency.
- Solana CFDs allow you to access leveraged markets and lower trading fees.
- You can also capitalize on both bullish and bearish markets of Solana.
All these perks aside, if you are residing in the US, then you should note that CFD instruments will not be legally accessible to you. Similarly, the UK has also prohibited the trading of cryptocurrency CFDs.
However, if you can access CFDs where you live, make sure that you trade them only via regulated brokers. You will also find third-party exchanges offering leveraged products, but it will be best to be mindful of the fact that these are unlicensed, and hence, potentially riskier.
Moreover, such unregulated exchanges might not offer you the convenience of trading Solana against other fiat currencies. Instead, you will have to settle for pairs such as SOL/USDT or SOL/USDC - which are stablecoins with their value pegged to the US dollar.
Check Out: Should You Buy Solana (SOL)? 4 Pros, 4 Cons
How To Trade Solana (SOL) Online - Setting up a Trade
When learning how to trade Solana, you must familiarize yourself with orders. You can look at these as instructions you leave to your broker about how and when you want your positions to be executed.
If you have some prior experience in the stock or commodity markets, then you will notice that trading orders are more or less similar across all assets.
For complete beginners, we have put together a list of easily employable orders that can be used by all Solana traders, regardless of their expertise.
Buy or Sell Order
The buy and sell orders will be used to enter and exit your Solana trades.
- If you believe that the value of Solana is going to rise - you will set up a buy order.
- If you expect the price of Solana to fall - create a sell order.
No matter what strategy you follow, all of your Solana trades will require both a buy and sell order.
For instance, if you open your Solana trade with a buy order, you will need to use a sell order to exit the market - and vice versa.
Now that you know how to open your Solana trade - let us discuss some other orders that can help improve your trading expertise.
To begin with - your broker will ask you if you want to create a market or a limit order.
Let us explain the difference between the two and when you should consider using them:
- Market Order - Let's suppose that the price of Solana is at $150.00. You want to open a trade immediately, at this rate - so you place a market order. This will be carried out right away by your broker. However, due to the volatility of the market, you might see a minute contrast in the value of SOL tokens you receive.
As is clear, market orders are preferred when you want to open a Solana trade instantly.
- Limit Orders: On the other hand, you will use a limit order if you want to open your Solana trade at a specific price point.
For example, let's say that Solana is valued at $150, and you want to enter the market only when the price of SOL increases to $155. This is when you will place a limit order at $155.
What you need to know is that limit orders are executed by your broker only if the value of Solana reaches your predefined price level. If not, it will remain pending - until canceled manually.
Whether you choose a limit or market order will ultimately depend on your Solana trading strategy.
Apart from learning how to open your Solana trade, you will also need to consider how you want to exit your position when the time comes.
In fact, with the help of the following orders, you do not need to watch over the market to execute your exit strategy.
- A take-profit order allows you to close your trade when a specific profit point has been achieved.
- For instance, if you are going long on Solana, you can set the take-profit order at 3%. Your trade will be automatically closed when the value of this digital asset increases by 3%.
- Onto stop-loss orders, these allow you to prevent losing more than what you can afford on a Solana trade.
- For example, if you want to stop your losses at 1% on a long position, you can use this order, and your broker will close your trade automatically iof Solana falls in value by 1%.
If you are trading Solana for the first time, you might want to see an example that demonstrates how you can use all the above-mentioned orders:
- Let's say that you want to trade Solana against USD - so you choose the pair SOL/USD.
- The current value of SOL/USD is $150.
- You think the value of Solana will rise in the next few days, so you set up a buy order.
- You set a limit order to enter the market at $160.
- If your Solana position attains a profit of 5%, you want to cash out.
- So you set up a take-profit order at $168.
- You want to prevent a loss of more than 2% - so you set a stop-loss order at $156.80.
In this example, your Solana trade could go two ways:
- If the value of SOL/USD rises to $168 - your take-profit order will be fulfilled by your broker.
- Should SOL/USD fall to $156.80 - your broker will proceed with the stop-loss order.
Traders commonly use both take-profit and stop-loss orders for the same position. This way, no matter how the market moves, your broker will automatically close the trade - at a price decided by you.
How To Make Money Trading Solana (SOL)
The above-mentioned trading orders give you more control over your Solana positions. However, there are many other factors at play that will ultimately decide the profitability of your trades.
Below, you will find some considerations that are crucial in determining the potential profits from your Solana trades.
When thinking of how to trade Solana, you will not only need a good grasp on trading orders but also on how much money you are going to risk on this asset. The more you stake, the better your returns could be.
For example, if you stake $100 on Solana and make a profit of 5% - this translates to an amount of $5. On the other hand, had you increased your risk to $1,000 - your gains would be $50.
As easy as this might seem, many beginner traders overlook the fact that a higher stake also means greater losses. This is why you will want to consider a bankroll management strategy to trade Solana.
In simple terms, this means that you will be deciding how much you can risk on each Solana trade by considering your trading account balance. Typically, many people choose not to use more than 2% of their available funds at a time.
For example, if you have $2,000 in your account - you will never stake over $40 on a single Solana trade. This is a simple strategy that will help to keep your emotions in check when making trading decisions.
Solana Trading Leverage
If you are new to the concept of trading, then you might not be familiar with what leveraging is or how it works.
In the most basic form, when you are trading Solana with leverage, this means that you will be magnifying the value of your position by a specific ratio.
In other words, you will have the option to trade with more money than what you have available in your brokerage account.
- Let's suppose that you have $500 available in your trading account and want to open a Solana position.
- You apply leverage of 1:10
- Meaning, your stake will be amplified 10 times.
- So your $500 stake will now be boosted to $5,000.
- You end up making a profit of 10% on this particular trade.
- On your leveraged position - you make a profit of $500.
- With no leverage, you would have made gains of only $50.
The main advantage of trading Solana with leverage is that you will be able to open positions at much higher stakes. This enables you to boost your positions that aren't permitted by your current account balance.
However, this also means that you will be facing increased exposure to risk. For this reason, many countries have strict regulations when it comes to providing access to leveraged Solana trades.
You might still be able to leverage your Solana positions via an unregulated platform. But needless to say, this means that you will be putting your money at even more risk.
Fees to Trade Solana Online
No matter how you choose to trade Solana, you will be liable to pay fees of some description to your broker. After all, like any other business, these platforms are looking to turn a profit.
Before you get started with an online broker, check our list of potential fees to watch for.
Solana Trading Commission
Most Solana brokers make the bulk of their money via the trading commissions they charge. This might be worked out as a variable percentage or a flat rate.
- For example, popular cryptocurrency exchange Coinbase charges 1.49% for every Solana trade action.
- That is, if you open a position worth $1,000, this will cost you $14.90 at both ends - when entering the market and when exiting it.
Although this might seem like a negligible amount, such commissions can add up over time, especially if you are placing regular Solana trades.
On the other hand, you will also find that there are a few online brokers that charge you 0% for placing cryptocurrency trades.
When trading Solana, you will also need to think about the spread - which is the variation between the buy and sell price of this digital asset.
The wider the gap is, the more the spread will be. As such, you will want the difference between the bid and ask prices to be as minimal as possible.
Moreover, remember that your potential profits from Solana trades should cover the cost of the spread for you to break even.
For instance, if your broker charges you a spread of 2.5% - then your position will need to make a return of at least 2.5%. Your take-home profit will amount to any gains you make beyond this 2.5% mark.
Other Solana Trading Fees
Apart from the spread and commission, your Solana broker will also charge you a few other fees related to payment methods and operational costs, such as:
- Deposits and Withdrawals - Payment methods such as debit/credit cards are likely to cost you additional transactional fees. You can use bank transfers to avoid this; however - this means an extra waiting period every time you make payments.
- Overnight Fees - If crypto CFDs are accessible to you, you might also be charged an overnight fee for each day you keep your Solana position open.
- Inactivity Fee - Your broker might also charge a fee if you are not actively trading on the platform. This usually kicks in after 12 months of inactivity have passed and will be deducted directly from your account balance.
All things considered, you will want to make sure that your chosen Solana broker charges you reasonable fees so that you can secure as much take-home profit as possible.
How To Trade Solana (SOL) 2022 - Step-by-Step Walkthrough
Our guide has provided you with all the necessary information about how to trade Solana. When you are ready, you can follow the detailed step-by-step walkthrough below.
Step 1: Choose a Solana Trading Site
Perhaps the most important decision that you will make when deciding how to trade Solana is finding a suitable broker.
Your chosen crypto provider must not only offer sufficient features and reasonable fees but it should also be regulated by respectable financial authorities.
If you find it too challenging to find the right Solana broker, follow the checklist below to make sure that you have considered all important factors.
- Regulation: Find out if your broker is regulated by any governing body - such as the FCA, SEC, CySEC, FSA, ASIC, or others.
- Fees: Check the fee structure of the broker to find out how much you will be paying in commissions and other charges.
- Payments: Consider which payment methods you can use to make deposits and withdrawals on the platform.
- Minimum Deposits: Find out whether there is a minimum deposit required to start placing Solana trades.
- Solana Pairs: Go through the different Solana markets and trading pairs supported by the broker.
- Trading Platform: See whether the broker offers access to a demo account to try out the trading platform.
- Mobile Application: Check if the broker supports Solana trading via a mobile app.
When you have found a broker that provides the features you seek, you can set up your trading account with the platform.
Step 2: Open a Solana Trading Account
You can get started by visiting the website of your chosen Solana broker and opening an account on the platform.
- This requires you to submit some basic personal details, contact information and to choose a username and password for your account.
- Next, you will be asked to answer some questions that concern your previous trading experience.
Before proceeding, your Solana broker will also need to verify your account as per its regulatory requirements.
This simply requires you to provide some identification - such as your passport or driver's license. As proof of address, you can submit your utility bill or tax letter.
Step 3: Deposit Funds
When your account has been verified, your broker will notify you with an email - which will rarely take more than 2/3 minutes. With this step completed, you can log in again to make a deposit to start trading Solana.
Some Solana brokers support wire transfers and debit/credit card payments - as well as e-wallets like PayPal.
Step 4: Choose a Solana Trading Market
When your account is fully funded, you can now choose a Solana market that you want to trade. As we discussed earlier, this means that you will have to choose a trading pair and search for it on the platform.
For example, let's imagine that you are looking to trade Solana against US dollars. You can search for SOL/USD on your chosen brokerage.
Step 5: Place Solana Trade
After arriving at the trading page of your chosen Solana pair, you can start setting up your position. Here, you will need to specify whether you are opening a buy or sell order - based on your speculation.
You should also set up your market/limit, take-profit, and stop-loss prices. Next, enter your stake amount and confirm your order.
Your broker will then carry out your trading orders as instructed.
How To Trade Solana (SOL) Guide - The Verdict
When thinking of how to trade Solana, you will need to invest some time in learning about the market and consider the risk involved. Once you are confident, you can follow the steps we have outlined above to open your first position.
Ultimately, you will also need the right online broker that can facilitate your Solana trades in the most secure and low-cost manner.
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Virtual currencies are highly volatile. Your capital is at risk.
How to trade Solana?
The safest and most convenient way to trade Solana is through a regulated broker.
What is the minimum stake required to trade Solana?
The minimum investment amount you will need to place Solana trades will depend on your chosen broker. While some platforms have no such requirement, others might require you to make higher stakes to get access to markets.
How to store Solana?
You can store Solana in a secure crypto wallet protected by a private key.
Can I apply leverage on Solana?
Yes, if you can access Solana CFDs legally, then you can find a regulated broker that offers leveraged products.
How to find the right broker to trade Solana?
It is always important to choose a regulated broker when thinking of how to trade Solana. You will also need to check the fee structure, as well as the trading pairs supported by the platform before you sign up for an account.