Crypto Trading in India: Regulations, Strategies, Opportunities

The history of crypto in India is short but impressive. Five years ago, crypto exchanges were virtually nonexistent. Today, there are at least 15 million crypto traders in the country. Multiple news reports in 2o22 stated that India-based traders hold at least $5.3 billion in cryptocurrency, making it one of the top crypto trading countries.

If you’ve been planning your debut in the crypto market or need to advance your knowledge of crypto trading in India, you’re in the right place. Here’s where we share all you need to know on the topic of crypto trading.

Cryptocurrency trading: What’s that?

Trading is the process of buying and selling assets by timing the market. Studying short-term market trends can help traders buy and sell an asset for a profit. Crypto trading is also the same, except that traders wager on crypto price movements.

By employing different techniques, crypto traders take advantage of the crypto market’s volatility to gain favorable earnings.

Please note that crypto trading is not the same as crypto investing. Trading is all about using market information to earn profits in the short term, with the returns gained daily, monthly or quarterly. Unlike crypto investors—who employ a long-term approach—crypto traders don’t need to hold crypto for a long time.

How to trade in crypto?

There are two significant ways to buy and sell cryptocurrencies—using Contracts for Differences (CFDs) and exchanges.

How to Trade Crypto Using CFDs

CFDs provide a perfect platform for speculation and fast earnings for traders who wish to take advantage of market volatility. Traders use them to bet on price movements without actually holding the asset.

To trade cryptocurrencies using CFDs, you need to register with a CFD trading provider and enter a contract. The contract makes it possible for you to speculate about how crypto will fare within a given time frame and make a profit if you are right. Based on the fate of the crypto during the period mentioned in the contract, you could make a profit or a loss.

For example, suppose you speculate and take a position that crypto will increase in value within a certain period. If the crypto’s value increases by the close of your position, you’ll make a profit. But if its price falls, you make a loss.

Trading successfully with CFDs requires an understanding of the fundamentals of the highly volatile crypto market.

How to trade Cryptocurrency in India using an exchange?

Cryptocurrency exchanges are an excellent alternative to CFDs. They serve a very different purpose. Crypto exchanges are platforms where people can buy, sell, or hold crypto of their choice—from Bitcoin to Litecoin.

To trade in crypto using an exchange, you need to use the following steps:

• Sign up on a crypto exchange. The first thing to do is create an account on an exchange of your choice. There are many crypto exchange platforms in India, and the best platform for crypto trading in India is CoinSwitch. Most reliable exchanges will require you to submit a Know Your Customer (KYC) form before you do anything else.
• Add funds to your account. Once you have activated your account, you can either transfer funds into it, or you could link the account on the exchange to your bank account.
• Pick a project. Next, you need to pick a crypto project you want to put your money into. Most crypto traders choose one of the more popular cryptos, such as BTC or ETH, since they are believed to offer the best value. But some smaller cryptos can also provide stable returns.
• Trade. After picking the crypto you wish to trade, you place a buy order. Once the order is executed, you could hold it in your wallet and sell it when you feel you might get the best outcome.
• Store your crypto. If you’re holding crypto for the short or long term, you need to have a wallet to store and access it. You can take advantage of secure software and hardware wallets to protect your assets.

How to exchange cryptocurrency in India? 

To exchange your cryptocurrency in India, all you need to do is follow the above steps and sell the asset on the market you want to exchange. When you have the corresponding INR in your wallet, you can buy the crypto you’re looking for.

Crypto investing vs. crypto trading

Crypto investing and crypto trading are often confused. They are used interchangeably partially because they are both used to generate earnings in crypto. But, to understand the differences between crypto investing and crypto trading, it’s important to recognize that they reach their goals differently.

1. Investing is long-term, and trading is short-term.

Crypto investing is usually a long-term strategy as investors choose to hold (or HODL) crypto to capitalize on changes in value. Investors speculate when the prices of their coins will rise.

Crypto trading is a short-term strategy buyers use to leverage volatility in their favor. Market prices change within minutes and days, so a crypto trader has to be proactive and attentive while studying changes. Trading offers faster returns compared to investing.

The frequency of trades is low in investing; traders buy and sell at a high frequency. Crypto investors have low trade frequencies since they prefer to hold for the long term.

Investors forecast huge sums in gains over months and years. In comparison, traders choose to trade frequently, making gains by the minute, day, or week.

2. Investors use fundamental analysis; traders use technical analysis.

Crypto investors rely on fundamental analysis—a periodic evaluation of the long-term potential of a crypto project. Fundamental analyses are in-depth studies. They take adoption rates, usage, and even the teams behind the crypto into account. Crypto traders, on the other hand, rely on technical analysis—predictions that use historical analysis to predict future prices. Technical analysis provides traders with ways of predicting the direction of prices and market positions amidst volatility.

3. Investors tolerate volatility; traders thrive on it.

Investors look at the long-term potential and performance of crypto. They are less concerned about changes in value or prices in the short term. Crypto investors operate by taking advantage of the short-term changes in crypto prices.

Crypto trading strategies

Day trading: Day traders enter and exit trades within the same day. This trading strategy involves constant and persistent monitoring of the market with a view to benefiting from price movements. Technical indicators help crypto traders plan their entries or exits.

Scalping: Scalping involves using trading large volumes as a means of earning profits, even if it is minimal earnings from each transaction. Scalpers are usually involved in different trades each day. A scalper’s earnings can accumulate throughout the day since they trade frequently—every few minutes sometimes.

Momentum trading: As the name suggests, momentum trading capitalizes on trends—either a rise or fall—over a period of time. Traders who use it benefit from crypto momentum, such as booms caused by the crypto being featured in the mainstream media on any given day or by its popularity peaking over a few weeks.

Swing trading: Swing trading takes advantage of anticipated price movements, with the trade lasting between a day and a month. Swing traders use technical analysis, which looks at significant price movements in the short term. The technique, however, exposes traders to risks because crypto values might change overnight or on weekends in unanticipated ways.

Other strategies: Traders in India can also look up other strategies too, including Range Trading, High-Frequency Trading (HFT), and Dollar-Cost Averaging.

It’s a good idea to start with market research while picking a trading strategy. Traders who go in without a plan usually make mistakes are they are more prone to social media hype. Another good practice is diversifying your portfolio across different cryptos to cushion yourself against dramatic shifts.

Best cryptocurrencies to trade in India

The Indian crypto market offers traders a wide variety of cryptos to choose from. While there are many great options, some are known to give traders better results than others. Some of the best cryptos to trade in India in 2023 include Bitcoin, Ethereum, Tether, Binance Coin, XRP, Cardano, and Solano.

Is crypto trading in India legal?

Yes, trading and investing in Crypto is legal in India because the industry is unregulated, but crypto is not legal tender in the nation. The government has introduced a flat 30% tax on investment income from crypto trades. It is valid for the current fiscal year.

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