How to Trade Tezos: A Step-by-Step Guide
Comprehensive Guide to Trading XTZ in 2021
Tezos (XTZ) entered the cryptocurrency trading scene with phenomenal success in 2017. After a promising start and surviving a bearish market, the digital currency is now reaching new heights.
Today, Tezos is a cryptocurrency with a market capitalization in excess of $1 billion. Considering its potential, this digital asset presents itself as a good value proposition for your investment portfolio.
That said, we should make it clear that trading Tezos is not all smooth sailing. Taking this into account, we would suggest reading our guide on How to Trade Tezos.
We will start with the basics of how this crypto-asset works, trading strategies, risk management, and how you can find a reputable broker to trade Tezos online.
How to Trade Tezos in 5 Easy Steps:
To trade Tezos, the first step is to open an accout with a regulated exchange, depost funds, select Tezos from the platform list, and lastly Buy XTZ (go Long) or sell XTZ (go short).
This guide on how to Trade Tezos 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 XTZ now.
Step 1: Open an account with a regulated broker
Step 2: Funds your account
Step 3: Choose how much Tezos you want to trade
Step 4: Buy XTZ (go long) or sell XTZ (go short)
Step 5: Confirm the trade
What is Tezos Trading?
Tezos is a smart contract platform, with Tez (XTZ) as its native token. It sets itself apart from other blockchain models through its governance - which allows the network to evolve and upgrade over time.
Like any other tradable asset, Tezos has an underlying financial value. Its price, however, fluctuates throughout a single trading day - based on the supply and demand of the market.
In simple terms, when trading Tezos, you are speculating whether the price of the digital asset will increase or decrease in the future. If you happen to make the correct prediction, you will make financial gains on your Tezos trade.
Let us show you a basic example of how Tezos trading works:
- Let's say Tezos is valued at $2.30
- On your cryptocurrency trading platform of choice, you will see this denoted as XTZ/USD.
- You think that Tezos is undervalued - so you place a $100 buy order.
- A month passes, and the cryptocurrency is valued at $3.00
- This shows an increase of 30.43% in value
- Thrilled with your profits - you place a sell order to exit the Tezos trade.
In the example above, the price of Tezos increased from $2.30 to $3.00 in just a month. This translates to a profit of $30.43 on your $100 buy order.
As such, if you correctly speculate the market sentiment on Tezos and place a trade at the right time - you stand to make a profit. On the other hand, if you predict incorrectly - the trade will result in a financial loss.
Therefore, it is imperative that you should educate yourself on the particulars of the cryptocurrency market before you venture into the Tezos trading scene.
How Does Tezos Trading Work?
As we touched upon earlier, the process of trading Tezos has much in common with other traditional assets.
However, remember that cryptocurrency is a relatively new asset class in the trading arena - compared to the likes of stocks, forex, and commodities. Hence, it is best to equip yourself with all the essential information before you start trading Tezos.
In this section, we will cover the most important Tezos trading fundamentals.
Tezos Trading Price Movements
The market price of all financial assets is dictated by their supply and demand. Cryptocurrencies are no exception to this.
If the demand for Tezos is high, there will be more traders buying the digital currency, and hence the price increase. If interest towards Tezos takes a u-turn, then traders will start selling their coins, and so the price of Tesos will take a hit.
In the case of cryptocurrencies, this market sentiment can be influenced by a myriad of factors - such as a change in regulation, blockchain developments, internal administrations, or other global economic affairs.
Moreover, it might catch your attention that the price of Tezos varies slightly at different online brokers. You might notice that while one trading platform quotes you $2.30 on Tezos, the other might quote you $2.29.
As you can imagine, this difference is only natural between competing trading platforms and not relevant to your ability to achieve profits when trading Tezos.
Tezos Trading Pairs
Cryptocurrencies are commonly traded in pairs.
- In a crypto-fiat pair, you will be trading Tezos against a fiat currency like the US dollar or Euro. For instance, when you see XTZ/USD - XTZ is the crypto, and USD is the fiat.
- In a crypto-crypto pair, you will be trading Tezos against another cryptocurrency like Bitcoin or Litecoin.
Most Tezos traders prefer to trade this cryptocurrency against the US dollar. This gives them access to high liquidity and trading volume in the market.
That said, you will also find trading platforms offering other crypto-fiat trading pairs such as XTZ/EUR (Euro), XTZ/AUD (Australian dollar), XTZ/GBP (British pound), and XTZ/JPY (Japanese yen).
Trading Tezos against a fiat currency also gives you the added advantage of better spreads in the market. In addition, beginners might also find it easier to measure profits and losses while trading a crypto-fiat pair.
Regardless of whether you choose to trade Tezos against a cryptocurrency or a fiat currency - make sure that you know your way around the markets involved so that you can speculate correctly.
Long or Short-Term Trading
If you are considering how to trade Tezos online - you have two routes in front of you.
For instance, let's say you believe that the Tezos project will largely grow in the future. In this case, you will purchase Tezos coins and store them in your private crypto wallet - hoping for its value to increase in the long term.
This is referred to as 'HODLing' in the crypto trading industry. You are essentially holding on to your cryptocurrency waiting for it to appreciate in value.
When investing in Tezos for the long run, you are not looking to make profits from the short-term fluctuations in the market. In other words, you do not have to concern yourself with technical analysis or chart reading to make short-term predictions on the price of Tezos.
For this reason, many new traders find the "buy and hold" strategy more suitable - at least until they gain an understanding of the ins and outs of the cryptocurrency trading market.
On the other hand, in a short-term trading strategy, you hope to make smaller profits on a regular basis. If you lean towards 'day trading' or 'swing trading'- you will find yourself placing multiple trading orders throughout a single day.
Short-term traders prefer to stick to ultra-liquid trading pairs like XTZ/USD or the XTZ/BTC.
Trade and Own Tezos
We mentioned above that a "buy and hold" strategy requires you to directly purchase Tezos coins. If you choose this long-term plan, we suggest that you invest in Tezos via a well-respected online broker rather than a cryptocurrency exchange.
This is primarily because a licensed online broker is authorized to provide financial services under the relevant regulatory bodies. If you are in the search for a regulated online broker - we can recommend eToro.
The social trading platform has been around for over a decade - with 13 million registered users and an array of trading tools. Not only can you trade Tezos commission-free on the site, but you can also store the digital currency in your eToro wallet at no additional cost.
Most importantly, eToro is regulated by the FCA, CySEC, and ASIC. Beginner traders will also find the platform extremely user-friendly.
That said, the 'buy and hold' strategy is suitable for not only novice traders. In fact, many seasoned professionals prefer to trade Tezos in the long-term. As we discussed, its biggest advantage is that it eliminates the need for you to watch out for short-term price fluctuations.
For those who prefer to trade Tezos in the short-term - you can look for an online broker offering Tezos CFDs (Contract for Difference).
Before we go any further, note that if you live in the US, then CFDs are strictly prohibited. If you are a resident of the UK, you can access CFDs on traditional assets (like stocks and forex) through regulated online brokers - but crypto-CFDs are no longer legal.
Here is an overview of what Tezos CFDs are all about:
- CFDs are derivatives that mirror the real-world price of the financial asset - this time, Tezos.
- Tezos CFDs allow you to trade with leverage and invite competitive spreads.
- CFDs make it possible for you to go both 'long' and 'short' on the market. This means that you can make profits from both the rising and falling price of Tezos.
If you reside in a country where Tezos CFDs are legal, you can trade the digital asset against both cryptocurrencies and fiat currencies.
That said, even if it is prohibited in your country, you will still be able to find third-party cryptocurrency exchanges offering leverage on Tezoz CFDs. However, be mindful of the fact that these platforms are likely to be unregulated - meaning you will be putting your capital at risk.
Furthermore, in such cases, you will not be able to trade Tezos against fiat currencies. Instead, you will be trading XTZ/USDT, where USDT is a digital currency called Tether - a token pegged to the value of 1 US dollar.
Ready to dive into Tezos market?
How to Trade Tezos Online - Setting up a Trade
Now that we have covered the fundamentals of trading Tezos, we will have a look at how you can set up a trading order. For those new to trading, a trading order is how you indicate your trading position to your online broker.
In simple terms, you place an order based on your prediction - and the online broker will execute this order on your behalf.
The basics of these trading orders remain the same for all asset classes. Regardless, we will give you a quick summary of the different order types and how you can use them to trade Tezoz online.
Buy or Sell Order
Buy and sell orders are the most fundamental of trading orders.
- You place a buy order - if you believe that the value of Tezos will increase.
- You place a sell order - if you believe that the value of Tezos will decrease.
When learning how to trade Tezos online, you should know that every single trade you place will need both a buy order and a sell order.
- If you are going long and entering the market with a buy order - you will exit it with a sell order.
- If you are going short and entering the trade with a sell order - you will exit the trade with a buy order.
Buy and sell orders are only the most basic of trading orders. Along with these, you can use order types that specify how and when you want to enter the market. These are called "entry strategies".
When you trade Tezos, you will have to specify to your broker whether you want to place a 'market order' or a 'limit order.'
Let us give you an explanation of both to clear the mist.
- Market Order
Let's say Tezos is valued at $2.35. You like this price and want to buy Tezos right now - hence you place a market order. Your online broker will execute this order for you instantly at the best price available. However, you might see a minute difference in the price the trade is executed at - due to market volatility.
- Limit Order
Let's say the current value of Tezos is $2.50. But, you want to wait until the price hits $2.54 to enter the market. So you place a limit order at $2.54. This means your broker will leave your order pending until this price is realized, or you manually cancel the order.
As you can see, a limit order gives you more control over your trade and is thus preferred by most cryptocurrency traders. That said, which order type you choose will ultimately depend on your trading strategy of choice.
With 'entry strategies' covered, now it's time to look at how you can exit your trades. This is where 'take-profit' and 'stop-loss' orders come into play.
- A take-profit order is used when you want to lock in your profit from your Tezos trade.
For instance, if your profit target is 3%, you will place a take-profit order at 3% above or below the current price. Your broker will automatically execute your order when the value of Tezos reaches the 3% price point.
- A stop-loss order allows you to avoid losing more than you can afford on your Tezos trade. For instance, if you want to stop your losses at 1% - you will place a stop-loss at 1%. Your trade will be automatically closed if or when Tezos coins reach that price level.
We can offer you more insight into these exit strategies with a real-world example:
- You are trading XTZ/USD at $2.35.
- Speculating that the price will increase - you place a buy order.
- If the price rises by 3%, you want to collect your profits.
- So you place a take-profit order at $2.42.
- At the same time, you do not want to risk losing more than 1%.
- As such, you place a stop-loss order at $2.32
As you can see, it is possible to place both take-profit and stop-loss orders on a single trade - on either side of the current price. Whichever direction the price of Tezos moves, your broker will close the trade automatically- at the prices you specified.
In the above example, the trade could go two ways:
- If the value of XTZ/USD rises to $2.42 - your take-profit order will be executed automatically. You will lock in your profits at 3%, and your trade will be closed.
- If the value of XTZ/USD falls to $2.32 - your stop-loss order will be executed. This will limit your losses to 1%, and consequently, your trade will be closed automatically.
How to Make Money Trading Tezos
As is evident from the examples, these orders allow you to automate your trading process effectively. However, these alone are not sufficient to ensure the success of your trades.
When trading Tezos, you also need to consider a few other metrics that will invariably dictate the outcome of your trade - see below.
In order to start trading Tezos, you first need to select your stake. The higher your stake, the greater your profits and potential losses.
For this reason, it is not uncommon for traders to put a limit on the capital they stake on a trade.
This 'bankroll management strategy' helps to mitigate your losses and gives you better control over your trading funds.
As a common rule, many traders never stake more than 2% of their available trading account on a single position.
- For example, if you have $5,000 in your account, you will not stake more than $100 on a Tezos trade.
- Similarly, if there is $10,000 in your account, you will not risk more than $200 - and so forth.
If you are only learning how to trade Tezos today - then such a conservative bankroll management strategy is always recommended. At eToro, you can start trading Tezos with a minimum stake of $25 - making it possible for you to trade without risking huge amounts.
2. Tezos Trading Leverage
Earlier, we mentioned that Tezos CFDs are prohibited in several countries. However, if it is legal where you live - you can take advantage of the opportunity to apply leverage on CFDs.
Leveraging allows you to trade by putting up only a fraction of the total stake amount - essentially borrowing the rest from the broker.
Let us give you an example of how trading Tezoz with leverage works in practice:
- You place a sell order on Tezos worth $5,000
- You apply leverage of 1:10
- Tezos drops in value by 10%.
- Ordinarily, without leverage, your profit on this trade would have been $500.
- But with leverage, your profits will be boosted to $5,000.
As you can guess, leveraging can significantly magnify your profit potential. But take note that it can equally amplify your losses too.
In case you intend to trade CFDs with leverage - we urge that you do so only through a regulated online broker like eToro.
Fees to Trade Tezos Online
No matter how you choose to trade Tezos - in the long-term or short-term, against a fiat currency or a cryptocurrency - you will have to pay fees to your online broker to facilitate your trades.
The fees charged by online brokers vary from one platform to another. Nonetheless, here is a list of the most common Tezos trading fees you are likely to come across.
Tezos Trading Commission
A commission is a straightforward fee that is imposed by your broker on every trade you place.
While some brokers charge you a flat rate, others choose to calculate commission as a percentage against the value of your position.
That said, it is not uncommon for online brokers to execute trading orders at no commission. For instance, at eToro, you can trade Tezos on a zero commission basis. You will only have to concern yourself with the spread - which we discuss next.
In trading terms, the spread is the difference between the buy and sell price of a financial asset - this time, Tezos. The larger the price gap, the higher the spread.
As such, you want to look for brokers offering tight spreads on the cryptocurrency markets.
Unlike the commission, the spread works as an indirect fee. Meaning, if your online broker charges you 1.60% as the spread, you are opening the trade at a 1.60% loss.
You will break even only if your position makes 1.60% in gains. Anything over this 1.60% figure will be considered as your profit.
Other Tezos Trading Fees
In addition to the above, a broker might also charge you various administrative fees when trading Tezos.
- Deposit/Withdrawals: These are payment processing fees charged for deposits and withdrawals. To give you an idea, Binance charges its clients 2% per debit card deposit and Coinbase charges 3.99%. At the other end of the scale, at eToro, you only have to pay 0.5% for deposits. This is applicable only when you fund your account in a currency other than the US dollar.
- Inactivity: The inactivity fee is another common fee charged when you are not actively trading using your account. This will be deducted from your trading funds every month - after you remain inactive for a specific duration of time (usually 12 months).
- Overnight Funding: Overnight funding fees can be considered the interest you pay to your broker to keep your position open overnight. This is mostly applicable to CFDs, but some brokers also charge overnight fees on non-CFDs if leverage is applied.
Once again, the fees you pay will differ between online brokers - so make sure that you do your research before you open an account.
How to Trade Tezos 2021 - Step-by-Step Walkthrough
By now, we have covered all the essentials on how to trade Tezos online.
Do you think you are ready to venture into this exciting cryptocurrency trading market?
If so, follow the steps below to set up your online trading account to start trading Tezos from the comfort of your home!
Step 1: Choose a Tezos Trading Site
The first thing you need to do is to find a decent trading platform. There are dozens of platforms online competing against each other to take you on board as their client.
To help you get started, we have created a list of the most important factors you need to consider while choosing a crypto broker to trade Tezos.
- Regulation: Is the online broker licensed and regulated by a reputable body like the FCA, ASIC, or CySEC?
- Fees: What types of broker fees are you liable for when trading Tezos?
- Payment methods: What payment methods does the platform support?
- Account Minimum: Is there a minimum stake required to trade Tezos?
- Tezos Pairs: What crypto and fiat currencies can be traded against Tezos?
- Trading Platform navigation: Is the platform user-friendly for traders of all experience levels?
- Mobile app: Does the trading platform come with a mobile app?
As you can tell, there is a lot to consider, so it is crucial that you do your homework before finalizing your online broker research.
If you need pointing in the right direction - we are happy to discuss eToro. There are many reasons why we prefer this trading platform over others:
- eToro is heavily regulated in numerous jurisdictions, including licenses from ASIC, CySEC, and the FCA. US residents will be pleased to know that the platform is registered with FINRA.
- You can benefit from 100% commission free trading on all cryptocurrencies like Tezos.
- You can start trading Tezos with a stake as small as $25.
- The platform accepts payment via bank transfer, debit/credit cards, and e-wallets like PayPal and Skrill.
Step 2: Open a Tezos Trading Account
Once you have decided which online broker you want to work with, go to its website and open an account.
You will have to provide some basic personal details such as your full name, address, email, phone number, and date of birth. Most platforms will also require you to upload a valid photo ID - in order to comply with KYC rules.
At eToro, this process only takes a few minutes to complete, as the platform uses automated ID tech.
Note: At eToro, you can upload the above documents at a later date. This needs to be done before you can make a withdrawal or deposit more than $2,250, though.
Step 3: Deposit Funds
With your identity confirmed, you can proceed to add funds to your trading account. eToro supports a range of payment methods, such as debit/credit cards, wire transfer, and e-wallets.
Step 4: Choose Tezos Trading Market
When you have funds in your trading account, you can choose which Tezos pair you want to trade.
At eToro, you can simply browse the trading markets available on the platform or search for the specific pair you want to trade. For instance, you could search for XTZ/USD or XTZ/BTC.
Step 5: Place Tezos Trade
By now, you have completed all steps necessary to start trading Tezos online.
If you have done your research, you can now place your first Tezos trade.
For those who need a quick recap - you can go ahead and take a look at the "Setting up a Tezos Trade" section of this guide.
Based on your speculation, you can place a buy or sell order. When done, hit "open trade" to execute your commission-free position!
How to Trade Tezos Guide - The Verdict
If you want to trade Tezos online - the best way to do so is through a licensed online broker.
Aside from the convenience, you will also be able to trade Tezos securely through the regulated platform in question. At eToro, you get access to over 90 cryptocurrency pairs and a zero-commission rate on all your Tezos trades.
Furthermore, the platform is built for beginners and experienced traders alike - with an array of investment tools at your disposal.
Ultimately, by researching the cryptocurrency markets and learning from guides like ours - you can start trading Tezos from the comfort of your home with ease.
eToro – Best Broker to Buy Tezos XTZ
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.
Is it safe to trade Tezos online?
Yes. It is safe to trade Tezos online - given that you do so through a licensed broker like eToro.
How can I trade Tezos?
The safest and most convenient way to trade Tezos is via a regulated online broker. At eToro, you can start trading Tezos from as little as $25.
How can you make money by trading Tezos?
The profits you make from trading Tezos depend on how well you predict the market sentiment of the digital asset. If your speculation is correct - you make a profit. On the contrary, if your prediction is wrong - you will make a loss.
Is Tezos trading legally allowed in the US?
Yes, you can trade Tezos legally in the US. However, you cannot access Tezos CFDs..
Can you trade Tezos with Leverage?
If you are a US or UK resident, you cannot access Tezos leverage through a regulated online broker. Though you can find unregulated platforms offering leverage - it is best to stay clear of such providers.