Bitcoin is undoubtedly the most popular cryptocurrency on the face of the planet. It is widely used, decentralized, and offers benefits. However, it also involves risks because it is volatile. It is subject to price shifts, contributing to both the risks and rewards with BTC trading.How to trade bitcoin? Let’s discuss it in the following.
Know the methods of Bitcoin trading
Buying bitcoins on a cryptocurrency exchange is a common method of trading bitcoin. People buying bitcoins, and then wait to sell them later to make a profit. However, it can be unreliable, as this process depends on the matching serves used by the exchange.
Another one is dependent on price movement speculations, and this does not involve owning a portion of the digital asset. It is a method used by traders via a CFD trading account.
Contracts for difference (CFDs): These are based on financial leverage, which is globally available. Briefly, a CFD is a financial contract paying the differences in the price settlement between the open and closing trades.
It can be used as a hedging tool, in which a user can offset the losses incurred using a physical trade in the underlying market through opening a “Sell” position. This method can be beneficial in the volatile nature of bitcoin trading in which price shifts and sudden movements are common.
Determine which trading strategy to use
The answer to this question lies in your free time, experience level, commitment, and capital invested. No two traders are alike in their trading goals. You need to determine your goals and other factors to choose a strategy that suits you.
Are you planning to trade or invest in bitcoin? Check out one of the following methods.
- Day-trading bitcoin
It involves buying and selling BTC on the same trading day and the placing of short and long trades to capitalize on price movement speculations. In this case, the trader closes his positions at the trading day’s end, leaving no open positions overnight.
It can be the method that you want to choose if you have the time and commitment for the steep learning curve involved because this is very technical and complicated. It is not recommended for beginners, who still are familiarizing themselves with the different trading methods. Ready to analyze a lot of charts? This might be the method for you.
This is based on market movements. It requires holding on to a certain position until the trader notices a slowed down or reversed the trend. In this trading, a position can be held for days or weeks.
Commonly, the swing trader uses technical analysis and signals, such as the moving average convergence divergence and Fibonacci retracement.
How does a swing trader profit from this trading method? They decide and capitalize on the trends as they unfold.
However, they can experience more risks than other types of traders because they keep positions open for a long time. But as the trades last at least a week, this method does not require as much time as day trading does.
It involves placing frequent trades over a very short time, like 20 minutes. Traders using this depend on the small market movements. But then, they should have a clear exit strategy because a loss can directly affect the gains they have already made. It is because they are diversifying their capital risk by spreading their investment over too many small trades.
Need to store bitcoin? It can be unsafe to store it on exchanges because they are targets of cybercriminals and hacking. Did you know that Coincheck was hacked in 2018 and $534,800,000 was stolen from it? Especially if you’re holding large amounts of bitcoin or any other digital token for that matter, you must consider opening and setting up a wallet.
Research the markets
Be as aware and as familiar as possible if you want to trade bitcoin. Stay updated with the latest news, regulations, and other things regarding the market’s macroeconomics and security, country, and industry.
Knowing these things can help you become aware of the market and support future trend predictions. These factors can also offer you insights into the price movement of bitcoin concerning other volatile cryptocurrencies.
Establish a trading strategy
Especially if you’re new to cryptocurrency, you need to build a trading strategy, which can help you sound decisions. It can also help you decide better not to close trades too early or keep them open for too long.
Some tips when devising a trading plan
- Ask yourself: What is my acceptable risk per trade? How much am I willing to risk?
- Choose a risk-reward ratio to know the amount of potential profit to justify the possible loss.
- Choose the cryptocurrency to trade. Should you start with bitcoin or include other cryptocurrencies?
Learn how to trade and monitor
Based on your trading strategy and market research, you can start bitcoin trading. However, you must also know your input position sizing while also adding risk-management options, including take-profit orders.
To trade, you can join a bitcoin trading platform, which can help you analyze and execute trades wisely. There are also platforms, which are accommodating and suitable for all trading experience levels and can be customized to suit a user’s needs and preference. You’ll also find trading platforms, which are available as a mobile app for android or iOS devices.
Place a trade. When you’ve settled your position, place a trade with your bitcoin trading platform. In most cases, you’ll need to enter an amount to stake in the ticket. However, you can also determine your close conditions. Nevertheless, stops and limits are one of the best risk management options you can use.
Learning how to trade bitcointakes some time and effort. But for the serious and committed trader, understanding the process, the complexity, and the risk involved in bitcoin trading can soon pay off, as it increases their chances of dealing successfully with sound and objective decisions. Nevertheless, study the market, learn how to trade, determine your risk tolerance, and establish your trading strategy. Finally, choose a reliable, trustworthy trading platform for the best results.