How to trade ripple: ripple trading strategies
If you want to know more about how to trade ripple, we’ve got a guide for you.
In this guide
XRP is now the world’s seventh-largest cryptocurrency, after it was recently overtaken by the Tether stablecoin. Here is guide on how to trade ripple.
We’ are going to look at the best ripple trading strategies and look at the different ways you can gain exposure to XRP in your portfolio.
But first, here is a quick reminder of what ripple is, and how it works.
Ripple fact file
XRP was first released in 2012
It has a maximum supply of 100 billion tokens
About 46.3 billion tokens are currently in circulation
The coin’s all-time price high was $3.84 on 4 January 2018
XRP is designed to reduce fees for cross-border transactions
It is used on RippleNet, a global payments network
One crucial thing to know before you begin ripple trading is that there are concerns about XRP’s huge supply, and that the token could increasingly lose value over time.
While bitcoin has mounted some impressive fightbacks since it reached then all-time highs of $20,000 back in December 2017, the same cannot be said for XRP. Take a look at this chart of ripple’s price history since 2014.
To put all of this into context, let us compare how bitcoin, ether and XRP are performing against their highest recorded price and when they reached it.
Bitcoin reached its all-time high of just under $65,000 on 14 April 2021, while ether’s record of $4,362.35 came intraday on 12 May this year. However, this year ripple has come nowhere near its all-time high, for reasons we will explain.
At the time of writing, BTC was trading 54% lower than its record of $20,089, while ether was trading 59% below its high watermark. XRP is down 86% per cent from its peak. Even if we look at the 52-week high of $1.96, which it traded intraday on 14 April, we can see that its current price, around $0.53, is down 73% from that.
The reasons behind this are twofold. First, and perhaps most obviously, the cryptomarket was hit by the great crash of 19 May. The market was booming at the start of the year, with many coins hitting all-time highs. However, the crash has hit the market very badly and most coins are nowhere near the heights they were in late April and early May.
The second reason, and the one that is particular to ripple, is that it is currently embroiled in a lawsuit with the United States Securities and Exchange Commission (SEC). The SEC argues that XRP is an unregistered security, a claim that Ripple denies.
Ripple price analysis hinges on the company winning the case. If it loses, then things could go horribly awry. Some experts believe that Ripple has a strong claim, however, and could win the case.
CEO and co-founder Brad Garlinghouse issued a statement, saying:
“What I don’t want is for you to worry. We will get through this, and we will prove our case in court. We have a phenomenal legal team and as I said, we are on the right side of the law, to begin with. Know, however, that the legal system is slow, and this is just the beginning of a long, civil process.”
The lack of certainty will have made people a bit more wary of trading ripple, meaning the price won’t have risen too far.
Those learning how to trade XRP need to remember that, unfortunately, the coin rarely seems to be a strong performer when compared to rival cryptocurrencies. Among the top 25 coins based on market capitalisation (excluding Bitcoin), ripple was actually the weakest in the first quarter of 2020.
This can offer you leverage when you learn how to trade Ripple. Reading market trends and assessing how XRP is faring against rival coins could pave the way for positive trading decisions – but, of course, trends don’t always go the way experts predict.
Ripple trading strategies
A crucial lesson in how to trade ripple lies in understanding that prices don’t need to go down for a profit to be made.
One common approach for ripple trading involves contracts for difference, known as CFDs for short. Well-executed CFDs can be exceptionally helpful tools for speculating on whether prices are going to rise or fall, and a trader does not actually need to own the underlying asset, in this case XRP, to gain exposure.
There are two positions available when you enter into a CFD. Going long means that you believe XRP prices are going to rise, while short positions are available if you think that further downward price pressure is afoot.
Let’s imagine that Billy decides to short-sell 10,000 XRP when it is trading at $0.22. If he decides to close his position when the price falls to $0.19, he would make a gross profit of $300 (commissions and fees may end up eating into this). To cut a long story short, he’s found a profitable sweet spot in the difference between $0.22 and $0.19.
A crucial step when you learn how to trade XRP is to be able to perform technical analysis and delve into charts showing recent price movements. This can provide useful insight on what might happen next. Here are some of the factors that often drive Ripple prices.
Other ripple trading strategies are available. Spread-betting effectively involves making a wager on whether XRP is going to go up or down in a pre-determined period of time. Some exchanges also offer futures for ripple, which creates the obligation for XRP to be bought or sold for a set price on a set date.
CFDs, spread-betting and futures can often be traded on margin, which effectively means you are borrowing from a broker in order to leverage your position. Once you learn how to trade ripple, it is important to remember that to trade ripple with leverage can be extremely risky. Not only can it magnify profits, it can also generate huge losses.
Where to trade ripple
Where are the best places to start trading? Liquidity should be one of your top priorities. This means there are enough buyers and sellers to ensure that trades close quickly. Delays in completing a transaction can result in potentially big losses during periods of volatility.
Likewise, it is important to find crypto exchanges that have a strong record when it comes to uptime. Some trading platforms have landed themselves in hot water after falling offline at crucial moments, leaving users unable to access their capital and take advantage of a sudden shift in crypto prices.
Next, make sure you look for a low spread. This is the term used to describe the difference between the buy and sell prices that have been quoted for trading pairs such as XRP/USD.
It is crucial when learning how to trade ripple effectively to make full use of tools that can help shield you against losses, and protect profits. Stop-loss orders can help ensure that your holdings are automatically sold off whenever they dip below a certain level, though unless it is a guaranteed stop-loss order there can still be some slippage, which you need to account for. Meanwhile a take-profit enables you to bow out gracefully once your targets have been achieved.
We cannot say with certainty what’s going to happen to XRP in the not too distant future. But before you can be confident that you know how to trade ripple, it is important to absorb as much data and history about this cryptocurrency as possible to ensure your strategy does not backfire.
Trade Ripple to US Dollar - XRP/USD chart
It might be, though it is worth bearing in mind the caveats that we have mentioned above. Also, remember that cryptocurrency is a highly volatile market, that prices can go down as well as up, and you should never invest more than you can afford to lose.
No investment can be said to be 100% risk free. However, you can make your ripple day-trading as safe as possible by going to a reputable exchange such as currency.com, and doing your own research.
It is entirely possible that it might, one day in the distant future, but at present we have to be realistic. The coin has been in a pretty tough place lately, with a combination of an overall cryptoslump and the ongoing SEC case hitting the price. We cannot say that it will never reach $10, but if it does, it won’t be for some time yet. That shouldn’t necessarily stop you if you want to trade XRP, you just have to be realistic.
XRP can be traded at a range of different exchanges, including currency.com. Always remember your decision to trade depends on your attitude to risk, your expertise in this market, the spread of your investment portfolio and how comfortable you feel about losing money.