How to trade Chainlink coin

How to buy Chainlink coin: investing vs trading

When investing, you’d be buying Chainlink coins, which means you’d own them outright. Investing involves paying the full value of the Chainlink coins upfront; would be a capped risk and any losses would be on the amount you paid. We don’t offer this on our platform.

When trading Chainlink with us, you won’t own the LINK cryptocurrency coin outright, however, you can still speculate on its price movements on the market through CFDs. Since you don’t own the Chainlink coin, you can go long (‘buy’) or short (‘sell’) when trading, (but you can only go long when investing).

Trading leveraged products with us enables you to get exposure to the full value of the underlying asset at a fraction of the cost by using margin (an initial deposit). By giving you full exposure, it potentially increases your profits if you make the correct predictions. Note that your losses will also be magnified when trading leveraged products, and you should always manage your risk carefully. You should also note that daily funding charges apply when trading CFDs and these can accrue over time.

Investing in Chainlink (LINK)

Owning a stake in the Chainlink network means you’ll buy the LINK cryptocurrency (invest). Once you’ve got ownership of the LINK tokens, you can make gains on your investment by selling them if the coin increases in value. If the coin decreases in value, selling them would result in a loss.

To start the Chainlink investment journey, you’ll have to find an online broker that lets you buy cryptocurrencies. You’ll need a Chainlink wallet to keep your LINK coins until you decide it’s time to sell them. We currently don’t offer this possibility.

Trading Chainlink with CFDs

Trading on Chainlink with CFDs, or ‘contracts for difference’, involves speculating on LINK coin’s price – whether it rises or falls. Your profit or loss will depend on whether you’ve made the right predictions.

Keep in mind that, when investing, you wouldn’t take direct ownership of LINK coins, so there would be no need for you to open an exchange account or Chainlink wallet.

Here’s how trading Chainlink with CFDs works:

• Open a trade: trade Chainlink by going long (‘buy’) if you predict a price rise or short (‘sell’) if you think it’ll fall
• Pay an upfront margin: open your position with a deposit – called margin – which is a fraction of your total market exposure. Trading Chainlink will give you exposure to the underlying cryptocurrency without taking direct ownership
• Use leverage: when trading Chainlink with CFDs, you’ll use leverage. This provides full exposure to the underlying Chainlink coin at a fraction of the cost you’d normally pay upfront. Any gains and losses made from leveraged products can be magnified – always take measures to manage your risk
• Beware of the risks: your losses could far outweigh your margin, since profits and losses made on the leveraged products is calculated based on the total position size and not the initial deposit. When trading with us, make use of our risk management tools
• Remember overnight funding costs: keeping a short-term trade open overnight comes at a cost. You’ll be charged a daily interest fee that’s applicable to cash CFD positions held through 10pm (region)

How to trade Chainlink

Once you’ve done your research and monitored the market performance of Chainlink, you could decidethat you’re ready to take a position.
Here’s how to trade Chainlink with CFDs:

1. Create a CFD trading account or log in to your existing account
2. Open the trading platform and type ‘Chainlink’ into the search bar
3. Select ‘buy’ or ‘sell’ on the deal ticket
4. Set your position size, as well as your stops and limits
5. Click ‘place deal’ to confirm the position and open the trade

You can practise trading Chainlink with us by opening a risk-free demo account. You’ll get $20,000 worth of virtual money to test out our platform. The demo account also enables you to get familiar with managing your risk when trading cryptocurrencies.

What is Chainlink (LINK)?

Chainlink is a cryptocurrency infrastructure that connects real-world data and smart contracts on a blockchain network. These networks vary from data providers to web application programming interfaces (APIs), enterprise systems, cloud services, internet of things (IoT) devices, payments systems and other blockchains.²

Smart contracts are blockchain agreements and the Chainlink platform facilitates their execution.

Despite the secure and reliable nature of blockchain networks, they lack the capacity to obtain and distribute data to off-chain systems. This is where Chainlink provides a solution; by linking smart contracts to various types of real-world data, payments and events.³ In short, Chainlink acts as a link between oracles or external data sources and the blockchain.⁴

The LINK is a tradable cryptocurrency token that can also be bought by those who want to own part of the Chainlink network. LINK tokens can be used to make smart contract transaction payments on the Chainlink network.

There were a billion LINK tokens distributed during Chainlink’s initial coin offering (ICO).⁴

A brief history of Chainlink

Chainlink was created in 2014 by 32-year-old entrepreneur, Sergey Nazarov, who is a major player in the cryptocurrency market.⁴

The Chainlink network was initially designed as a centralised oracle system with the purpose of verifying incoming data. But Chainlink later transformed into a decentralised oracle network that can link with smart contracts to ensure secure transactions using outside data sources and APIs.³

In September 2017, the Chainlink protocol was produced and in May 2019 it was launched providing a solution to oracle network’s inherent inability to connect blockchains with outside data sources that exist off-chain.⁶

The Chainlink 2.0 whitepaper was released in April 2021, providing more insight on the capabilities of the ‘Decentralized Oracle Networks’ (DONs).⁷ The paper also explained the evolution of the Chainlink network in providing tamper-proof data delivery and secure off-chain computation.⁷

How to analyse Chainlink’s price movements

Before trading in Chainlink, you need to take some time to monitor and analyse the cryptocurrency’s price shifts in the market. You can use technical analysis tools to help you keep track of Chainlink’s price movements. This includes chart patterns and historical trends in market price movements to make assumptions when trading.

You can also make use of fundamental analysis to guide you while you study Chainlink’s historical price charts. Fundamental analysis considers the intrinsic value of Chainlink to determine the true price at which the coin should be trading. This could show you what caused some price movements in the past. However, it’s important to note that past performance of any asset does not guarantee future success.

Chainlink trading strategies

Cryptocurrencies are volatile, and Chainlink is no different. That’s why it’s essential to incorporate Chainlink trading strategies and risk management in your plan.

Consider some trading strategies below:

1. Day trading with Chainlink

   The day trading strategy will involve opening and closing a position in a single day, meaning you won’t have market exposure to the asset overnight.

   You could use day trading as a strategy if you want to gain exposure to Chainlink’s price movements over the short term. Plus, it’ll enable you to trade on Chainlink’s daily price volatility

2. Trend trading with Chainlink

   When trend trading, you’ll take a position that complements the current Chainlink market shifts. Under these crypto market trends, you’d likely go long (‘buy’) if the market is bullish, and go short (‘sell’) if it’s bearish.

   If, after careful observation of Chainlink’s performance, you decide that these trends are changing, you might consider closing your position. You can follow this with opening a new position that is complementary to emerging trends.

3. Chainlink hedging strategy

   If you decide to hedge your Chainlink position, you’ll be limiting your exposure to risk by assuming a position that offsets possible losses against one you’ve already opened.

   For instance, if you own Chainlink coins and you’re worried that the market might move against you due to a short-term drop in value, you’d open a short position on a different asset.

   Then if the LINK price falls, the profits you might make on your short position from the alternative asset you traded will equalise some or all of your losses on the Chainlink coins you own.

4. HODL Chainlink strategy

   The HODL – ‘hold on for dear life’ - trading strategy is commonly used by crypto traders and includes buying and holding your Chainlink token for quite some time. This strategy is mostly used only if you have a positive outlook on Chainlink’s long-term price.

   If your research informs you to go short on your position to make gains or limit your losses, you’d consider setting up stop-losses to automatically close your position. However, you should note that overnight funding charges apply daily and these can accrue over time.

How to trade LINK summed up

• Chainlink is a cryptocurrency infrastructure that connects real-world data and smart contracts on blockchain network
• The LINK cryptocurrency is the token that you can buy to own part of the Chainlink network
• Trading the LINK cryptocurrency means you’re taking a speculative position on the price of Chainlink
• You can trade Chainlink with us using CFDs
• Ensure you monitor and analyse Chainlink’s price movements by using technical and fundamental analysis

Footnotes:

¹ Based on IG Group's OTC data for October 2019
² Binance, 2021
³ BENZINGA, 2021
⁴ smartasset, 2021
⁵ CoinMarketCap, 2021
⁶ Messari.io, 2021
⁷ Chainlink white paper, 2021