1. Why choosing the right trading pair is crucial
The cryptocurrency market is highly volatile, and the liquidity and depth of trading pairs directly affect the speed of order execution and slippage.
Trading pairs with high trading volumes and liquidity usually have smaller bid-ask spreads, making them more suitable for newbies to reduce trading costs and execution risks.
The volatility differences among various trading pairs are significant; while high volatility may offer great potential returns, it also comes with higher risks of liquidation or losses.
2. Choose the six core criteria for trading pairs (for reference only, not as an investment basis)
Liquidity and 24h Trading Volume
- Liquidity : Reflects market depth, directly determining whether large orders can be executed with low slippage.
- 24h trading volume By observing the 24-hour trading volume, one can understand the market activity level of a trading pair. A larger volume indicates that both buyers and sellers are more active, resulting in smoother transactions.
- Practical suggestions Select the top 20 trading pairs by daily trading volume, such as BTC/USDT, ETH/USDC, etc.
Volatility and Risk Management
- Volatility : Indicators such as price fluctuation amplitude, K-line Average True Range (ATR) can quantify the strength of volatility.
- Risk Control If you are trading short-term, you need to avoid trading pairs that are too calm (few opportunities) or too volatile (frequent stop losses).
- Practical suggestions Newbies can first accumulate experience in medium to low volatility pairs, and then gradually try high volatility pairs.
Project fundamentals and market capitalization
- Market Cap Large market cap projects have stronger resistance to decline and are harder to manipulate.
- Team and Ecosystem : Pay attention to the project’s white paper, team background, and on-chain activity to avoid “fake projects.”
- Practical suggestions : Prioritize trading pairs of projects ranked in the top 100 by market capitalization.
Transaction fees and spread costs
- Transaction Fees Different trading pairs may have different Maker/Taker fees.
- Buy-Sell Spread The instantaneous price difference between limit orders and market orders indicates that the smaller the value, the better the liquidity, which helps to reduce transaction costs.
- Practical advice Use limit orders (Maker) to obtain lower fees, and pay attention to the price difference when placing large orders.
Correlation and Diversification
- Correlation High correlation assets held together lead to concentrated portfolio risk; low or negatively correlated assets can effectively diversify risk.
- Diversification It is recommended to allocate funds to 3-5 low-correlation trading pairs, balancing both yield potential and reducing systemic risk.
