A complete beginner’s guide to start bitcoin trading
Cryptocurrencies have driven investors and traders crazy with their rapid ROI and futuristic decentralized applications. Platforms that offer the best features to a trader like a live customer, training for beginners and accurate trading calls.
Digital currencies appear to be the main reason for the rapid growth of the decentralized financial industry.
A legendary cryptocurrency that started it all is BTC. If bitcoin had not existed, the cryptocurrency market would not have developed in such a way. Digital currencies undeniably seem like a piece of cake, but the main assembly comes into play when managing the cryptocurrencies properly. Here is a subtle guide to trading bitcoin.
Understanding Cryptocurrency Trading
Many would say that bitcoin is a rather complex concept and difficult to understand. However, the same applies to most trading instruments. The most challenging part of cryptocurrency trading occurs due to its illiquidity and far-fetched nature compared to other financial instruments. This characteristic puts cryptocurrencies in a league of their own.
Most investors are so excited about trading cryptocurrencies that they usually choose this over other traditional investment methods such as Forex. The primary advantage associated with digital trading currencies is their volatile nature, which makes them highly speculative for those trading on a short-term basis.
Primary differences between investing and trading in bitcoin
Bitcoin trading is completely different from bitcoin investing. For example, one can buy a few bitcoins for long-term investment, but he can also trade bitcoin and earn massive returns in just a few hours. However, because the price pattern has been erratic, many investors have chosen to trade cryptocurrencies instead of investing them.
Why is bitcoin considered a good investment option?
Bitcoin has been considered a highly profitable investment option since it was first introduced in 2009. That’s because the bitcoin price continues to increase exponentially every year by thousands of dollars and shows no signs of decay.
Understand the structure of trading bitcoin
Bitcoin trading is quite different from the conventional forms of stock trading. Bitcoin trading is not regulated in most countries, except for a few. The infrastructure behind the bitcoin and altcoin market is not as good as exchanges; therefore, many risks are involved.
The main challenge for bitcoin traders was the security and liquidity issues that people faced earlier in 2018. Nevertheless, with the recent price rise, cryptocurrency exchanges have become more and more solid than ever before.
Perhaps the bitcoin market structure is best described by comparing it to other forms of trading such as the Forex market or stock exchange; it is almost similar to Forex, but a much changed version of the stock market.
Avoid FOMO
When you enter this cycle of an unsustainable bitcoin price rise, there is a chance that you may fall into the FOMO (Fear of Missing Out) trap. It makes you not care about the risk while you are pressured to buy more bitcoins due to price increase. When your risk takes a sudden turn, you fail to set proper stop loss limits, potentially causing you to lose thousands of dollars.
Cryptocurrencies are traded against fiat currencies such as USD or EUR in most exchanges. But from bitcoin exchanges, people can buy other cryptocurrencies like Ethereum and Litecoin using fiat currencies.
Choose the right trading strategy
There are several trading strategies that one can use for bitcoin trading. The most common strategy is known as a breakout, and the other is swing trading.
Suppose you do not have enough knowledge about the cryptocurrency market and have gained sufficient knowledge about the related trading strategies. If so, one should avoid using these two strategies at the beginning of their bitcoin trading career.
Most bitcoin traders stick to a simple system called breakouts which can be implemented in two forms:
- The first form of breakout strategy is known as the “Day Trader” strategy, with which traders make trades when the price moves above or below a certain level by establishing prices too close to each other.
- The other form of breakout strategy is known as the “Position Trader” strategy, which involves opening and closing positions over a set period of time.
Bitcoin trading is completely decentralized and there have been no recommendations from any regulatory bodies to implement rules and regulations for bitcoin trading.
Best Cryptocurrency Exchange
A cryptocurrency exchange is considered the best platform to trade bitcoin and altcoins. Cryptocurrency trading has grown exponentially during 2017 and many people have made massive profits. Numerous crypto exchanges available these days offer a multitude of services.
Bitfinex, Coinbase and Binance are one of the most famous cryptocurrency platforms for trading cryptocurrencies through fiat currencies. Former bankers have founded it as a peer-to-peer Bitcoin exchange that facilitates margin trading with leverage of up to 3.3x.
