The Secrets of Trading the Litecoin Cryptocurrency

Hello, fellow forex traders!

Earlier, we already looked at how to trade Bitcoin and Ethereum, and today we suggest paying attention to another popular cryptocurrency — Litecoin.

And if all the subtleties and nuances of effective trading in instruments such as EURUSD have long been taken into account by the markets, then when trading Litecoin even the simplest strategies of technical analysis still work well. In other words, this is an excellent chance both for traders and for investors to hunt for hundreds and thousands of percent in profit in a young and dynamically developing market already today.

Today cryptocurrencies are attracting more and more investors and traders around the world. Flows of virtual and unaccountable money are increasing, and the number of companies and organizations accepting payments in both Bit- and Litecoin, as well as in some other cryptocurrencies, is growing rapidly. Low fees and fast transaction speed, as well as a principled emphasis on the personal privacy of holders, have given cryptocurrencies the status of revolutionary modern assets, interest in which grows day by day.

The project was founded and implemented by Charlie Lee, a former Google employee, in 2011. Litecoin (LTC) was created on the basis of Bitcoin's software code and is its fork, or offshoot. It differs, above all, by faster block generation (2.5 minutes, which is 4 times faster than Bitcoin), an increased maximum number of coins (84 million, which is also 4 times more), and a different hashing algorithm (scrypt instead of SHA-256). Today LTC is the fourth cryptocurrency in the world by total market capitalization.

Its development, just like Bitcoin, is based on blockchain technology, implying a distributed data storage system for transactions. It is in this chain of blocks that transfers are confirmed and synchronized, and, as we already mentioned, much faster than with BTC. A transaction is usually completed after 6 blocks are generated, or after 15 minutes.

In general, the main difference of Lite- from Bitcoin lies in the larger total number of coins, higher transaction speed, and a more complicated mining algorithm. In all other main respects LTC is identical to BTC: there is no administrative center, and, consequently, any centralized regulation of the number of coins in circulation is impossible; the issuance process is analogous to the issuance process of Bitcoin, but more complicated; and the currency itself is exchanged for fiat money, BTC, and analogs mainly on electronic exchange platforms such as Kraken or Bitfinex.

Blockchain size, due to which launching a wallet requires more and more time. Since the blockchain is a chain of blocks that stores information about all completed transactions, as their number grows, the software installed on users' computers requires downloading ever larger volumes of data, which can significantly affect the currency's growth prospects in the future.

Ambiguous legal status. Many countries reacted calmly to the appearance of cryptocurrencies on the market, while some see them as a direct threat to the economy. What measures one or another political establishment is prepared to take to restrict or prevent operations with cryptocurrency is unknown in advance. But from a technical point of view, this implies a significant limitation of the internet we are accustomed to as a whole.

Another problem is that cryptocurrencies are backed by nothing except, literally speaking, faith in them. They are not tied to anything, and therefore the prospects for growth or decline in the rate are most often determined by the technical side of the market and are characterized by a comparatively small number of fundamental factors. Nevertheless, among the latter one can single out news and rumors that indicate rising overall market sentiment (the appearance of new cryptocurrencies, public or academic discussions, political criticism, corporate support, and high-profile scandals).

The development of market technologies also significantly affects this market. Thus, in 2014, the median trading rate of Litecoin on some exchanges, whose scrypt algorithm until then had been resistant to ASIC, fell by more than 50% just over three months after companies specializing in the development of hardware for mining (such as Alpha Technology) began producing ASIC products specifically for Litecoin, offering them not only to commercial companies, but also to private consumers.

You can work with the Litecoin chart using the TradingView service, which is available in the online charts service on our website, after first specifying the instrument name as LTCUSD.

Here, you should also choose the chart according to the exchange you are interested in. We recommend working with the most well-known and largest exchanges (such as Kraken or Bitfinex), since quotes can differ significantly depending on the trading venue.

Among popular brokers, Litecoin can be traded on FXopen and Amarkets.

To start with, it is better to try trading on a demo account in order to get used to the trading conditions. The specifications for real and demo accounts do not differ.

Cryptocurrency can be traded around the clock and 7 days a week. This is a trending instrument with short consolidations, and therefore trading systems with not overly large targets work well.

As is typical for many cryptocurrencies, and Litecoin is no exception, the global trend tends upward as volatility generates increasingly strong levels of correction.

Technical analysis works excellently, and even an ordinary moving average can serve as an indispensable indicator for analyzing quote behavior.

Scalping is not our option because of the high spread. We consider trades on H1 and above. Also do not forget that the concept of trading sessions does not apply to Litecoin and activity can arise at any time of day.

It will be useful for investors directly to know that only quite recently LTC emerged from a pit of more than three years. However, by today the excitement has had time to subside somewhat (which can be seen below on the monthly chart), and the further fate of the asset's long-term dynamics remains the subject of heated discussion.

Also, many investors are inclined to use Litecoin as a hedging asset in light of its political neutrality. However, one should not forget that cryptocurrencies are extremely volatile.

As a result, our strategies are predominantly trend-following with not overly large targets. Timeframes from H1 and above, and scalping is not allowed. With long-term investing, it is worth waiting for a correction, after which to buy at the lowest point (in your personal opinion), if the news foreshadows another wave of growth for the cryptocurrency market as a whole. For intraday trading, the simplest textbook strategies are suitable — trend-following and breakout ones. However, try not to miss relevant news and stay aware of the global trend.

Today the cryptocurrency market opens an attractive space both for intraday trading and for long-term investing. The simplest trading strategies work well here, and the influence of rare fundamental factors on the market remains fairly predictable and irreversible in the short term. However, beginners should not be deceived by the apparent simplicity of trading, and to begin with it is recommended to turn to the theory and practice of exploiting volatility. No less should one take into account comparatively higher overhead costs than when working with traditional forex instruments, as well as the need to refrain from scalping, the effective implementation of which will be hindered by high spreads.

Follow the news, and stay aware of current events in the cryptocurrency markets, do not forget about stop losses and money management — and may profits be with you!

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Best regards, Alexey Vergunov TradeLikeaPro.ru