One of the largest currencies in the world today, Bitcoin has offered great prospects to traders as well as investors. With every passing day, people are getting more interested in Bitcoin and they look forward to utilising it to earn some profits.
However, people often confuse Bitcoin investing with Bitcoin trading. In reality, trading is much different from investing. Thus, before we go into details about techniques and mistakes of Bitcoin trading; it is better to give you a brief idea about what it actually is.
Bitcoin investors are generally the people who believe in the technology and ideology of the cryptocurrency. They buy coins and hold it for a long time to earn profits. On the other hand, Bitcoin traders view the cryptocurrency as a tool for earning profits. They buy and sell Bitcoin within a short-term to gain profits.
But what makes Bitcoin so interesting to the traders?
The foremost thing that attracts the traders is the high volatility of the Bitcoin market. If you can anticipate the market correctly then it will never be a problem to earn great profits from the market.
Furthermore, the Bitcoin trading market is open 24/7. Most of the traditional trading markets like futures, commodities and stock have a fixed opening as well as closing time. But you will never have to worry about that while trading Bitcoins. You will be able to utilise the market 24/7, thus maximising the profit.
Lastly, the trading in Bitcoin is an unregulated process. You do not need to produce documents and withstand a long verification process to get started. You will be able to start trading whenever you want without much hassle.
» Different types of trading methods:
Like any other trading market, there are several trading methods available in Bitcoin trading too. All you need to do is to understand the trading style that suits you and follow it to earn a profit.
So, what are the trading methods that can be used? Well, here have a look:
• Day Trading:
Day trading usually involves conducting multiple trades throughout the day in order to utilise the price movements to earn a profit. The day traders spend a lot of time analysing the market and making their move accordingly. At the end of the day, the traders usually close all their trades and take home great profits.
Scalping is another type of day trading process. In scalping, traders try to make good profits from the very small changes in the price. It focuses on extremely short-term trading and limits the risks greatly. A trader can complete hundreds of trades in a day thereby earning a substantial profit.
• Swing Trading:
Swing traders, on the other hand, try to benefit from the “swing” in the price cycles. They analyse the market and enter the trade whenever they notice a specific movement in the price. They hold the coins until the swing in price concludes and then they sell their coins to take home a big profit. As a matter of fact, they can enter the trade and hold on for weeks until the swing concludes.
» Analysing the Bitcoin trading market: Different methods of analysis
If you are serious about trading Bitcoin then you will have to understand the different methods of analysing the market. Analysing the market is essential as it provides you with a clear idea about when to enter the trade and also helps you understand the right moment for selling your coins.
There are generally two fundamental methods that traders use to analyse the market conditions:
• Fundamental analysis:
The fundamental analysis actually looks at the bigger picture. It actually takes into consideration every bit of information regarding Bitcoin that can affect the price of the cryptocurrency. Whether it is the development of infrastructure of Bitcoin or the regulations imposed by governments on this cryptocurrency in any part of the world, the traders take into consideration all the information available to predict the rise or fall in the price of Bitcoin.
• Technical analysis:
Technical analysis completely depends the on the technicalities. It does not care about the things that are happening around the world that can affect the price. The method takes into consideration the price movements, trading volumes and other key factors to understand the trends in the market in order to predict the future price.
Now, which method do you need to use? Well, there is no correct way to completely anticipate the future prices. However, a mix of both methods will help you better understand the market trends and predict the prices with greater efficiency
» Common Trading Mistakes that you need to avoid:
Well, you now have an idea about the Bitcoin trading. However, there are few mistakes that you need to avoid to be truly successful in Bitcoin trading. Here, have a look:
• Not understanding your risk appetite:
The biggest mistake any trader can make is to overlook their risk appetite. So, what is risk appetite? Well, it is the measure of the money that you can afford to lose on your trade. Trading is not a child’s play; it is a very risky process and you need to be very cautious. Thus, it is always better to trade in accordance with the amount of money that you can afford to lose. Overlooking your risk appetite can prove to be a fatal mistake as you can go on to sustain huge losses in the process.
• Becoming a slave to your own fear or greed:
Too much fear as well as greed, these are the two things that you need to get rid of if you are really serious about Bitcoin trading. Giving into your own fears prevents you from trading freely which can lead you to take poor decisions thereby losing money. You also cannot give into greed; you need to be practical at all times as greed can encourage you to cross your risk appetite which in turn can become the reason for great losses.
• Trading without a plan:
It is never wise to trade without having a proper plan. Trading without a plan means that you are not clear about the perfect time to enter or exit a certain trade. So, it is always necessary to set proper profit goals as well as an exit strategy to maximize your profits and reduce the risk factors.
Well, that’s all in our guide to trading Bitcoin. Be vigilant, understand your risk appetite and trade accordingly to earn great profits and establish yourself as a successful trader of Bitcoins.