There have been numerous new cryptocurrencies in the market. But Bitcoins still have not lost their charm. There are many traders who find Bitcoins to be a no-fail currency. Therefore if you choose Bitcoin trading then know that it is easier than you might imagine.
Bitcoin is one of the most commonly available cryptocurrencies. Given that it is already close to a decade since Bitcoin came into existence you would be able to learn from the history of it.
What Are the Benefits of Trading in Bitcoins?
Before we get into the ‘how’ of trading in Bitcoins, it is imperative to learn the ‘why’. Here are the perks of trading Bitcoins:
- Bitcoins make a good investment. Therefore if you choose to leave your crypto reserve untapped for a long term then Bitcoins are known to be stable choices.
- Bitcoins are known to be liquid. This makes selling Bitcoins an easy job.
- There is a constant demand for Bitcoins. Therefore the value has been improving consistently though there are some down periods and saturation phases.
- Bitcoin is one of the easiest cryptocurrency to purchase.
- Bitcoin trading is allowed round the clock. Therefore you would be able to make some extra money with Bitcoin trading even when you have a full-time job to take care.
Like other trading instruments, the value of Bitcoin sways based on market demand and other factors. There are also political factors and regulations that influence the price. Therefore Bitcoin trading is not fully risk-free. When you frame a trading plan make sure that you take the risks into account to understand the losses possible.
So How & Where Should You Start as a Bitcoin Trader?
1. Choose your Bitcoin exchange
Bitcoin is one of the most popular cryptocurrencies. There are plenty of exchanges that offer Bitcoin trading. If it is overwhelming then consider the following factors to shortlist your suitable exchanges and trading platforms:
- Consider the modes of payment allowed by the exchange. Choose one that allows you to buy Bitcoins with FIAT currency especially when you are buying Bitcoins for the first time.
- The location of the exchange is the other significant factor. This determines the type of regulations that the exchange is subject to.
- Choose an exchange that comes with transparent processes. Read all the terms and conditions to steer clear of those that carry hidden fees.
- Consider the transaction costs involved. Some of the most popular exchanges charge a huge amount for transactions. Choosing a less popular but reliable exchange can be an economical choice.
- Look at the order book value of the exchange. The volume of transactions that happen in an exchange can be seen as an indicator of the liquidity and the ease of executing a transaction.
- Last but not least is the security of the exchange. Your Bitcoin security should be your number one concern. Look for an exchange that allows secure transactions.
2. Setting up Your Account
The actual steps involved in setting up a trading account depends on the exchange you choose. In most cases, it would take just a few steps. There would be some basic information that is to be provided to create your Bitcoin trading account.
You would then have to link a bank account. This would be the account from which you make your deposits to your trading account. The withdrawals would also be credited to this account by the exchange.
3. Trading approach
Some people choose to trade with CFDs or a contract for differences. This is where there is a Bitcoin contract purchased. You can then choose to long or short the trade. So if the price increases or drops respectively, you make profits. There are others who choose to trade the direct way.
This is where you buy a particular quantity of Bitcoins and then wait for the price to increase. One way to do it profitably is to know when the Bitcoin market is trailing. If you are sure that this is due to a temporary market down period which is likely to get better then you can accumulate Bitcoins during such times.
This way you would be able to buy Bitcoins for a lower price than their stable levels in recent times and then sell them for a higher price. Bitcoins have been around for a long time now. They have displayed a good amount of stability and resilience.
Therefore there is a higher likelihood of Bitcoins bouncing back to power even after market crashes. Like most other trading options timing is everything in Bitcoin trading. There are times when Bitcoin price hikes are said to be bubbles in the market.
You should know when the bubble is likely to burst and stability is prone to occur. This would help you choose the right window to leap into Bitcoin trading.
4. Budgeting & Money Management
Once you know how you would execute your trades you should also define a money management strategy for yourself. The size of the first deposit you make is the first element to add in your budget.
Your aim should be to earn what you deposit. A handy way to avoid losses would be to focus on stabilizing the gains. They could be small ones but steadily your profits keep growing. This would help you take back what you invested.
Whatever is left after this would be more convenient to risk at the market. Know the current price of Bitcoins and the price change that is likely to happen in the near future. This will help you decide the quantity to buy.
Once you have decided on the initial quantity and your budget you would then be able to work on the losses you can afford. Calculate the risk involved and the corresponding losses. Do not risk more than what you can afford to lose.
Even after you start trading always take out some amount of money or Bitcoins to add to your savings. Do not spend all the Bitcoins or profits you make.
Never lose track of your goals. You should spend time to track your progress and make sure that your profits are coming as you had planned. If you have been facing too many losses chances are that your understanding of Bitcoins is missing something.
Therefore you would have to hone your Bitcoin knowledge to reduce the losses and make better profits. Do not ever deviate from your budget or invest more money than what you had assigned in your budget.
5. Know the PROS & CONS of Volatility
The Bitcoin market is known for its volatility. This is both good and bad. Only because of this volatility would you notice price changes in the market. Such price changes allow you to buy and sell Bitcoins at different prices.
But you never know when the volatility shoots up. This means that sometimes the volatility goes out of hand and you would not be able to make sound predictions. This is when you are likely to make bigger losses, unexpected ones.
Therefore, to fare well in Bitcoin trading you should understand the volatility in this market and know how to use it as your strength. Bitcoin trading with a system of any sort could be extremely beneficial in volatile times.
6. Choose a Suitable Duration
Like most other trading ventures you might need some patience when you trade with Bitcoins. Even if you are fully prepared about Bitcoin trading there might be new opportunities unfolding every now and then.
Your trading plan should be flexible enough to allow you to adapt to the market changes. This should be accompanied by the choice of making long and short term trades or investments.
Keep your financial goals and your investment capital in mind to make this choice. Bitcoins work well both for short term trades and long term ones.
So are you going to become a bitcoin trader?
Before you start trading in Bitcoins sharpen your basics. Know how to securely carry out your transactions. This knowledge is indispensable no matter which trading exchange you work with.
Bitcoins and any other cryptocurrencies for that matter, cannot make you rich instantly. The growth might be quicker than in most other markets. This is because the concept is relatively new. But when you think long term Bitcoin trading is definitely profitable.
Slowly but steadily you can build your wealth. This can be done even if you only have a small budget available at hand. Therefore, Bitcoin trading is for everyone, providing a reliable trading strategy to be used.
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