Bitcoin trading is a relatively new concept compared to legacy asset classes such as bonds or equities. Nevertheless, it’s currently one of the most popular assets globally, and for a good reason.
Bitcoin trading is, in a nutshell, the process of exchanging your fiat currency for digital currency (in this case, Bitcoin). The trading process can be highly lucrative but comes with a high level of risk as speculating on Bitcoin’s price movement requires careful judgment, which is evident from the dramatic price swings that Bitcoin has experienced.
The price of Bitcoin can be volatile, to say the least. It has risen from less than $5,000 in early 2020 to the current price of $54,000. However, for someone who can afford to take risks, this price volatility can pay off. This article will take a close look at a few trading tips for someone looking to enter the bitcoin trading market.
Do your research
Before you start trading, it’s essential to know some basics about the bitcoin trading market. It includes understanding what influences the price of bitcoin, how bitcoin is exchanged, and what affects the price movements. So, learn about the basics of bitcoin trading before investing any real money.
Follow market news
Bitcoin trading requires a lot of legwork, from self-education to keeping track of the markets. There are many factors influencing bitcoin price, from government regulation to speculation. As is the case with any financial market, past performance is not always a reliable indicator of future gains or losses.
You need to keep track of new information that has the potential to impact Bitcoin prices. It can be done if you follow the market news on reliable platforms such as Plus 500, enabling traders and investors to keep up with economic events, business, and politics that impact financial markets, including the cryptocurrency space.
Keeping a close watch on top market influencers on social sites like Twitter will also hint at price movements.
Understanding risk
If you’ve decided to begin trading cryptocurrencies, including Bitcoin, you need to remember that investing always carries certain risks. These risks are exacerbated in the case of crypto trading due to the lack of regulation and high volatility associated with it.
So before you invest any money in bitcoin trading, make sure that you’ve considered how much you can afford to lose and how you would manage if your investment were to fail. Don’t venture into the market with your entire savings. Instead, invest a small amount of money, and watch it grow. You may find that bitcoin trading isn’t for you, and if you do, you’ve only lost a small amount of money.
Choose a reputed exchange & a secure wallet
There are many different Bitcoin exchanges, though your choices may be limited depending on your country. You need to choose a reliable Bitcoin exchange that offers competitive rates and suits your trading strategy. A digital wallet is a secure location where your bitcoin is held. There are several different types of wallets, including online wallets, offline wallets, and hardware wallets. Find out which kind of wallet is compatible with your exchange, and use it to store your bitcoin.
Follow a trading strategy
Decide which kind of trading best suits your risk appetite and skillset. If you are new to the market, you may benefit from a simple strategy, such as buying and holding a particular asset. However, there are other options that include day trading or swing trading. Day traders typically take advantage of short-term price movements and exit the market the same day. Swing trading involves in-depth technical analysis and using indicators such as the Average Directional Movement Index or the Relative Strength Index to make decisions.
Limit your losses
Trading is prone to volatility, particularly in nascent markets like Bitcoin. So before you place any trades, it’s crucial to have a plan where you need to consider establishing a stop loss. Stop-loss is a predetermined amount of money that you’ll lose if your trade doesn’t go your way. Establish your stop loss before you trade, so you won’t lose a large amount of capital if markets turn bearish.
Start with virtual money
Before you begin trading with actual money, it might be advisable to practice on virtual trading platforms or simulators to get acquainted with the market and monitor trading performance. Traders can practice a variety of strategies before taking the actual plunge.
You can learn from your mistakes, allowing you to improve trading strategies in the process.
Don’t panic
As mentioned earlier, traders should allocate as much capital as they can afford to lose and gain exposure to Bitcoin. Historically, the prices of Bitcoin have fallen over 90% in the span of a few months but have always managed to stage a comeback.
It might be heartbreaking to watch your investment lose significant value, and you need to be ready for wild price swings if you enter this segment.
Bitcoin trading can be intimidating, especially for beginners. However, with enough practice and experience, you should become more confident in your ability to make profitable trades.
