Guys, what is crypto trading? The simple meaning of crypto trading is to earn money by buying and selling cryptocurrencies

I know you might be wondering whether this is legal or not

And what is the benefit of doing it, because if we have to trade, we will do it in the stock market, so why come to the crypto market?

Let’s try to understand this.

The first reason for entering crypto trading is that if you want to trade in the stock market, it opens from 9:15 AM to 3:30 PM. During this time, you might be working or going to college, which creates timing problems. …

If we talk about crypto exchanges, they are open 24/7 here, meaning you can trade at any time, and the best time to trade is in the evening.

Crypto Trading: Your Guide to Navigating the Digital Asset World

Are you curious about crypto trading but unsure where to start? Perhaps you’re an experienced stock market trader wondering if the crypto world offers new opportunities.

This comprehensive guide will demystify crypto trading, explore its benefits and challenges, and help you understand how to navigate this exciting market.

What Exactly is Crypto Trading?

At its core, crypto trading involves buying and selling cryptocurrencies to profit from price fluctuations.

Think of it like trading in the stock market, but instead of company shares, you’re dealing with digital assets like Bitcoin, Ethereum, and countless others.

Also, if you want to trade there, intraday trading offers leverage up to 5x, whereas in crypto trading, there are no such restrictions

and here you can get leverage of up to 200x. Now, what does this 200x leverage mean? It means that you can take a larger trade with less money invested,

and you make a profit, it can be substantial; however, if there is a risk, you will lose only the amount you invested. …

This is a very big reason why people are coming to cryptocurrency today, and now you might be thinking that a 30% tax applies

You must have a lot of doubts in your mind; all these doubts will gradually get cleared,

and you will understand why people are moving from the stock market to the crypto market these days. So now let me tell you here.

Why Choose Crypto Over the Stock Market?

Many traders are flocking to the crypto market for compelling reasons:

• 24/7 Accessibility: Unlike traditional stock markets that operate during fixed hours, crypto exchanges are open around the clock, seven days a week. This flexibility is a huge advantage for those with busy schedules, allowing them to trade at their convenience, even in the evenings.
• Fewer Restrictions & Higher Leverage: The stock market is becoming increasingly regulated, often with strict rules and limited leverage for intraday trading (typically up to 5x). In contrast, crypto trading offers significantly higher leverage, sometimes up to 200x. This means you can control a larger position with a smaller initial investment, potentially amplifying profits (though it also amplifies risk).
• Understanding 200x Leverage: If you invest 1,000 rupees and utilize 200x leverage, you’re effectively trading with 200,000 rupees in the market. A mere 0.5% price movement can translate into a 1,000 rupee profit or loss on your initial investment.

The Legality and Taxation of Crypto Trading in India

A common concern is the legality of crypto trading in India. Here’s the current status:

• Legality: There is no law in India that declares cryptocurrencies illegal. In fact, the Indian government recognizes cryptocurrencies as “digital assets,” although not as legal tender for transactions. This means you can trade without legal issues, provided you adhere to regulatory requirements.
• Regulatory Compliance: The government has established rules for crypto exchanges, including KYC (Know Your Customer) and AML (Anti-Money Laundering) compliance. Exchanges also need to register with the Financial Intelligence Unit (FIU) to operate smoothly in India. Trading on an FIU-registered exchange ensures you’re on solid ground.
• The 30% Tax Conundrum: The most significant challenge for crypto traders in India is the tax regime. Under Section 115BBH of the Income Tax Act, a flat 30% tax is levied on all profits from crypto trading. Crucially, losses cannot be set off against profits.
  • Example: If you make a 10,000 rupee profit, you pay 3,000 rupees in tax. If you incur a loss, it doesn’t reduce your taxable profit.
  • TDS: Additionally, a 1% TDS (Tax Deducted at Source) applies to transactions exceeding 50,000 rupees annually.

This stringent tax structure has deterred many from engaging in crypto trading. However, there are strategies to navigate this.

Spot Trading vs. Derivatives: Understanding Your Options

Crypto trading can be broadly categorized into two main types:

1. Spot Trading: This involves directly buying and selling cryptocurrencies and holding them in your wallet. The 30% tax rule fully applies to profits made from spot trading. While excellent for long-term investment (buy and hold), the high tax on selling can be a drawback for short-to-medium-term traders.
2. Derivatives Trading (Futures & Options): This is where many traders are finding a way around the 30% tax. When you trade crypto derivatives, you are not directly buying or selling the underlying cryptocurrency itself. Instead, you’re trading contracts that derive their value from the crypto’s price.
   • The 30% Tax Exemption: Crucially, the 30% tax rule does not apply to profits from trading crypto futures and options contracts, as you are not directly transacting in the digital asset. This makes derivatives an attractive option for active traders.

Delving Deeper into Crypto Derivatives

Let’s break down the two main types of crypto derivatives:

Crypto Options

Similar to stock market options, crypto options give you the right (but not the obligation) to buy or sell a cryptocurrency at a specific price by a certain date.

• Limited Leverage: Generally, options offer less leverage compared to futures.
• Expiry Dates: Like traditional options, crypto options have expiry dates, meaning your contract becomes void after a certain period, regardless of profit or loss.
• Theta Decay: Options are subject to “theta decay,” meaning their value erodes over time, even if the underlying asset’s price remains stable. This can lead to losses if the market doesn’t move significantly in your favor.
• Complexity: Options trading can be complex, requiring an understanding of various factors like theta, delta, and implied volatility. Buying options has a lower probability of profit, while selling options carries unlimited risk.

Crypto Futures: The Preferred Choice

For most entering crypto trading, especially from the stock market, crypto futures often present a more straightforward and advantageous path.

• High Leverage: Futures offer substantial leverage, potentially up to 200x, allowing you to control significant positions with minimal capital.
• Perpetual Contracts: Many crypto futures are “perpetual contracts,” meaning they have no expiry date. You can hold your position for an hour, a day, a month, or even a year, as long as you maintain margin requirements. This offers immense flexibility.
• No Theta Decay: Unlike options, futures contracts are not subject to theta decay. Your profit or loss is directly tied to the price movement of the underlying cryptocurrency.
• Simpler to Understand: Futures trading is generally less complex than options, as you don’t need to grapple with intricate concepts like theta or delta. Your focus remains on predicting price direction.

Given these advantages, crypto futures trading is often the recommended starting point for new crypto traders and is widely preferred by experienced participants.

Whereas if you trade in small or new cryptocurrencies, the price can suddenly go very high or very low, which can lead to significant losses. Therefore, it is better to trade in large cryptocurrencies.

In some cases, suppose you have a strategy where you think you will trade in a meme coin when it is crashing; there could be different scenarios there.

But generally, if you trade in Bitcoin, Ethereum, or Solana, it will be much better.

Thank you, may God make your day great and may you be happy, who ever reads my article.…