How to Trade Litecoin CFDs

13 Min read

Litecoin was one of the very first cryptocurrencies to come onto the market since the explosion of the crypto world - also known as the chapter of decentralization.

Have you heard about Litecoin? Do you know how to trade Litecoin CFDs? Do you trade crypto CFDs, in general? 

In this article, we will provide more information on Litecoin, how to trade Litecoin CFDs and your options for trading cryptocurrency CFDs with Admirals.

How to Trade Litecoin CFDs: An Introduction

First, there was Bitcoin, then Ethereum... And the entry of Litecoin wasn't far behind. 

As one of the very first cryptocurrencies to come into the now-thriving market, Litecoin holds plenty of insight in regards to its historical price activity.

When it comes to trading cryptocurrency CFDs at Admirals, Litecoin (LTC) can be traded versus the US Dollar (USD), which is a crypto pair called LTC/USD, as well as LTC/EUR.

This article will review this financial instrument and how it can be traded. It will also review technical analysis, price movement, expected volatility, and how traders can trade Litecoin on MetaTrader 5.

You can see below, a live TradingView chart, showing the Daily price action of Litecoin vs USD (LTCUSD) so far in the year 2022:

Is Litecoin Volatile?

The short answer is simple: yes, Litecoin CFDs are volatile and show strong price movements.

The LTC/USD crypto pair has shown sturdy momentum, and has seen a significant increase in its average price range.

This becomes easily visible when you add the Average True Range (ATR) indicator to the weekly chart (value 10).

In the chart below the ATR value has risen from a value of about 0.05 to a high of nearly 110, which is a significant increase in its weekly range.

Source: Admirals MetaTrader 5 Webtrader, LTCUSD, Weekly - Data range: from April 5, 2020, to April 3, 2022, accessed on April 3, 2022 at 2:44 pm BST. - Please note: Past performance is not a reliable indicator of future results. 

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How to Trade Litecoin CFDs

Trading Litecoin CFDs is probably not much different than trading a currency pair, commodity or CFD. When approaching the financial markets, it is also critical to keep in mind that traders are well prepared before entering any trade setups.

You might wonder, what does good preparation look like?

Traders should always be aware of three major components before tackling the markets. All three aspects are critical because they support each other and one weak link could lead to failure. These components are:

  1. Trading strategy;
  2. Trading psychology;
  3. Risk management.

A trading strategy or trading plan is important as it enables traders to know how and when to tackle the financial markets. It provides an outline of which tools to use and explains at which moments the odds could be stacked in their favour and when not.

Trading psychology is vital because risking real money will impact your nerves and possibly create fear and a potential rollercoaster of emotions. Trading psychology allows traders to formulate a proper response and helps them handle these situations.

Risk management is critical. It allows traders to protect their capital, which is needed to access the financial markets. Without proper risk control, traders tend to over risk one or a couple of trade setups, which may lead to large losses and drawdowns. See the video below for more details (English only).

Which Strategy Should You Use to Trade Litecoin CFDs?

There are three well-known methods for approaching the financial markets analytically:

  1. Technical analysis;
  2. Fundamental analysis and trading with knowledge of the news;
  3. Wave analysis.

Technical analysis provides an excellent guideline on how to analyse and find trade setups using price action, candlestick patterns, and/or technical indicators. Some traders only use candlesticks for making their decisions, whereas others fully focus on indicators and tools. It is also possible to use a mixture of both price action and candlesticks in combination with indicators and tools.

Fundamental analysis or news trading are also methods used for tackling the markets. These traders review the economic data of each company, country, currency bloc – or, in the case of Litecoin, crypto-news – to assess the future potential of the currency.

Wave analysis is an alternative method that some traders choose to use to help them understand the structure of the financial markets. Wave analysis is based on the Elliott Wave Theory, which explains how trader and market psychology impact market behaviour and price patterns.

All three methods are equally valid and traders can even choose to combine two or all three of them for a full-scale approach. It really depends on the preference of each trader and it always makes sense to try out various approaches to see what fits best with your trading style.

In all cases, a key component is to set up a trading plan, regardless of which method a trader eventually chooses. This trading plan must explain, in simple words, how a trader should approach their analysis, entries, trade management, and exits.

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A demo account is the perfect place for a beginner trader to get comfortable with trading, or for seasoned traders to practice. Whatever the purpose may be, a demo account is a necessity for the modern trader. 

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How to Day Trade Litecoin 

When day trading Litecoin (LTC) versus the US Dollar (USD), it is a good practice to use technical analysis on multiple frames rather than fundamental analysis, which is mostly applied on higher time frames and wave analysis, which is a more advanced technique.

Technical analysis allows traders to build varied trading strategies based on candles, price action, and technical indicators. There is therefore a wide range of options to build a trading method that matches your own unique style. More is explained in the video below which discusses trading systems and methods based on indicators (English only).

One particular technique traders often use is mixing one higher time frame chart with two lower ones for a balanced view of the markets. Here is how:

  1. Higher time frame like a daily chart: this is useful to spot key support and resistance levels and understand the overall market structure.
  2. Medium time frame like a 1-hour chart: this shows the immediate trend, momentum, and key patterns and is used to choose the best direction for trading.
  3. Lower time frame like a 15-minute chart: once the two higher time frames show a 'green light', traders can hunt for trading opportunities on lower time frames, which provides a detailed view of how traders could enter a trade setup.

The 3 step process helps traders avoid trading against the trend or when the price is very close to support or resistance levels. This is of course just one useful tip.

For more value-added advice on trading Litecoin, it is recommended that you join our live trading webinars. Click the banner below to register:

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Can Traders Make a Return on Their Investment With LTC/USD CFDs?

Yes, traders can benefit from the market volatility of the LTC/USD pair, like other financial instruments, to earn pips and a return on their investment. There is little difference between trading the EUR/USD, USD/JPY or LTC/USD from this perspective.

It is important to keep in mind that the pair of financial instruments do not have high spreads and show decent volatility and price movement. After that, it is really up to the trader to find a chart and/or system that suits them well and matches their trading style.

Traders may make a profit from trading LTC/USD, but keep in mind that long-term consistent profitability requires proper investment in your trading skills.

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How to Trade Litecoin CFDs: Conclusion

The world of cryptocurrency trading is certainly an exciting (and volatile, risky) one. It has opened a whole new realm within the trading sector, and with that has come a potentially flourishing vertical to trade within.

In regards to how to trade Litecoin CFDs, you have many similar options to the Forex market, as well as other cryptocurrency CFDs as well.

Did you know that Admirals offers 30+ cryptocurrency CFD pairings to trade on? Click the banner below to see what options you have for trading:

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The given data provides additional information regarding all analysis, estimates, prognosis, forecasts, market reviews, weekly outlooks or other similar assessments or information (hereinafter “Analysis”) published on the websites of Admirals investment firms operating under the Admirals and Admirals trademarks (hereinafter “Admirals”). Before making any investment decisions please pay close attention to the following:
1. This is a marketing communication. The content is published for informative purposes only and is in no way to be construed as investment advice or recommendation. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and that it is not subject to any prohibition on dealing ahead of the dissemination of investment research.
2. Any investment decision is made by each client alone whereas Admirals shall not be responsible for any loss or damage arising from any such decision, whether or not based on the content.
3. With view to protecting the interests of our clients and the objectivity of the Analysis, Admirals has established relevant internal procedures for prevention and management of conflicts of interest.
4. The Analysis is prepared by an independent analyst (hereinafter “Author”) based on Brandie E Blackler, Financial Analyst and Writer, personal estimations.
5. Whilst every reasonable effort is taken to ensure that all sources of the content are reliable and that all information is presented, as much as possible, in an understandable, timely, precise and complete manner, Admirals does not guarantee the accuracy or completeness of any information contained within the Analysis.
6. Any kind of past or modeled performance of financial instruments indicated within the content should not be construed as an express or implied promise, guarantee or implication by Admirals for any future performance. The value of the financial instrument may both increase and decrease and the preservation of the asset value is not guaranteed.
7. Leveraged products (including contracts for difference) are speculative in nature and may result in losses or profit. Before you start trading, please ensure that you fully understand the risks involved. 

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