Cryptocurrency Pairs Trading: Definition, Explanation, and Example

Cryptocurrency Pairs Trading: Definition, Explanation, and Example

2022-11-23 • Updated

Cryptocurrency is all around us. More and more companies have started accepting crypto as the means of payment (Tesla made so with Bitcoin in Spring 2021 and Dogecoin in January 2022). This article will help you to stay on the edge of technology and, most importantly, get the most from this emerging market. So get yourself comfortable, and let’s start our journey into the world of crypto pairs. 

What are Crypto Pairs?

Naturally, they are similar to currency pairs. Just as it used to be, there are base and quote currencies. The only difference is that they are both cryptos. Pairs have a very simple structure: the first is the base crypto, and the second is the quote crypto, also known as the counter crypto.

Cover_642х361.png

For example: if you buy a BTC/USD, it means that you bought Bitcoin and sold Tether against it, and vice versa. Why Tether and not United States Dollar, you would ask? It is because trading crypto can only happen in the cryptocurrency world. And there is no USD in there. But don’t worry, Tether (also known as USDT or TET) is quite the same as the dollar. This is because they correspond in 1:1 proportion: for $100, you will get $100 in USDT (TET). With FBS, you don’t need to worry about transferring your Tethers in the USD, it happens automatically. Besides, you can deposit to your account both in the USD or Tether (and in the other currencies and cryptos as well).

To create a crypto account all you need to do is to open a FBS Trader application, choose crypto account (or demo crypto account) and tap “Create now”. And that’s all, you are ready to go!

  1.jpeg

We have numerous cryptocurrency pairs in FBS, starting from classic crypto against the dollar. Moreover, with CFD trading, you can trade unusual pairs that you won’t see on ordinary exchanges. Here is what pairs you can trade:

  • Crypto-to-currency (BTC/USD, ETH/EUR, BNB/CAD);
  • Crypto-to-crypto (BCH/BTC, BTC/ETH, LTC/BNB);
  • Crypto-to-metals (BTC/XAU, XRP/XAG).

Yes, you can trade Bitcoin for gold and catch movements of two drastically different instruments. Isn’t that cool?

photo_2022-01-28_16-35-27.jpg

How Crypto Pairs Trading Works?

It is simple. If you think Bitcoin will rise against Litecoin (LTC), you need to buy BTC/LTC. And if you think Bitcoin should fall, you sell the pair. Crypto pairs enable you to analyze the prices of various cryptocurrencies. These pairs help illustrate the relative value of coins – for example:

  • How much Bitcoin is in Ripple;
  • How much Litecoin is in Ethereum.

As more pairs become available, traders have a larger variety of transactions they can perform. To successfully exchange one cryptocurrency token for another, you either need to find an exchange that supports that trading pair, or you will need to perform several transactions between different pairs in order to reach the final result you are looking for.

For example, if a trader wants to exchange Ethereum (ETH) for Ripple (XRP), he needs to find an exchange that supports this pair. In the worst-case scenario, the trader will first have to trade ETH for USD and then exchange that amount of USD for XRP. Unfortunately, the trader will have to pay more in taxes and fees in this scenario, as he has to perform two different transactions. Instead, if the exchange supported an ETH/XRP trading pair, the trader would have achieved the result in a single transaction.

3.jpg

Cryptocurrency Pair Trading Risks

The main risk you can face while trading cryptocurrencies is volatility. As you know, crypto is an emerging market with pros and cons. There are days when Bitcoin can make a 20% move, and you need to manage your risks to trade cryptos. There are several tips for you to get the most from cryptocurrency trading:

  • Always put stop losses. You know that trading is a game of probabilities, and even if you are an experienced trader, every asset can go in the opposite direction. Stop losses will prevent you from liquidation and give you more control over your trades.
  • Try to maintain an appropriate risk to reward ratio. It is a difference between your possible earnings and losses. Usually, traders have a 1:2 or 1:3 risk to reward ratio. This way, traders have a chance to profit even if they have less than a 50% win rate.
  • Look after the Bitcoin, even if you are trading other pairs. Bitcoin is the king in the crypto market, and when the king is falling, almost every other cryptocurrency follows him. Such correlation can be used as an advantage. For example, when you see a double top pattern (a strong bearish chart formation) on the crypto you are currently trading, and Bitcoin is bearish as well, you can consider it a more sustainable sell signal. Thus, the risk of catching a dump transforms into a possibility of surfing significant price movement.

Best Cryptocurrency Pairs to Trade

The choice of crypto pairs depends on your trading strategy, tolerance to volatility, and personal tension to specific instruments. If you understand Dash to USD movements (DSH/USD), it is the perfect pair for you.

4.jpg

Some cryptocurrencies are more volatile than others. For example, Dogecoin (DOG) and Shiba Inu (SHB) are used to have greater moves. The reason for their movements is Elon Musk’s tweets. One of them boosted Dogecoin by 500% in January 2021.

To start with, here are some short explanations of the most popular cryptos available with FBS:

  • The most popular and expensive crypto in the world. Some countries accept it as a means of payment. It’s relatively stable and highly secure because of its popularity.
  • The second most popular crypto. Acts as an Internet computer. You can build decentralized applications with it. Also, it has a deflationary model (the total amount decreases with time) — one of the best cryptocurrencies out there.
  • Elon Musk’s favorite crypto. Over the last year, it has gained more than 153 000% but lost 81% afterward. It was created as a joke but soon became the most recognizable cryptocurrency with an enormous fan base.

To choose a cryptocurrency pair, you need to do some research:

  • First, find out what chosen crypto is about. You can find articles about most of our cryptocurrencies on the site. Ask in the FBS Analytics Telegram channel. More than 2100 traders will be happy to help you. If the crypto catches your attention, then move to the second step.
  • Show your skills in technical analysis. For example, look at the chart and try to understand the movements of the coin. Sometimes it is easy to identify a price pattern. However, you don’t need to rush and open a trade too soon. It’s better to wait a little bit more than to act thoughtlessly.

If you complete these two steps, you are ready to go! Trade smart, and good luck in cryptocurrency pairs trading!

Similar

How Do You Trade a Cypher Pattern?
How Do You Trade a Cypher Pattern?

The Cypher pattern isn’t the most famous trading formation. Nevertheless, this trading instrument can help you better understand and forecast the price moves.

Frequently asked questions

  • How to withdraw the money you earned with FBS?

    The procedure is very straightforward.  Go to the Withdrawal page on the website or the Finances section of the FBS Personal Area and access Withdrawal. You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to the deposited sums.

  • How to open an FBS account?

    Click the ‘Open account’ button on our website and proceed to the Personal Area. Before you can start trading, pass a profile verification. Confirm your email and phone number, get your ID verified. This procedure guarantees the safety of your funds and identity. Once you are done with all the checks, go to the preferred trading platform, and start trading. 

  • How to start trading?

    If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.

  • How to activate Level Up Bonus?

    Open Level Up Bonus account in web or mobile version of FBS Personal Area and get up to $140 free to your account.

Deposit with your local payment systems

Feel the Team Spirit

Data collection notice

FBS maintains a record of your data to run this website. By pressing the “Accept” button, you agree to our Privacy policy.

Callback

A manager will call you shortly.

Change number

Your request is accepted.

A manager will call you shortly.

Next callback request for this phone number
will be available in

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later

Don’t waste your time – keep track of how NFP affects the US dollar and profit!

Beginner Forex book

Beginner Forex book will guide you through the world of trading.

Beginner Forex book

The most important things to start trading
Enter your e-mail, and we will send you a free Beginner Forex book

Thank you!

We've emailed a special link to your e-mail.
Click the link to confirm your address and get Beginner Forex book for free.

You are using an older version of your browser.

Update it to the latest version or try another one for a safer, more comfortable and productive trading experience.

Safari Chrome Firefox Opera