Trading bitcoin can be a profitable venture for professionals and beginners alike. The market is relatively new and widely fragmented with large spreads. Margin and arbitrage trading are widely available, and so, individuals can make money trading this cryptocurrency.
Perhaps bitcoin’s volatility and its bubble history are what has brought the attention of new users than any other bitcoin aspect of the coin. Each bubble creates hype that puts this digital coin’s name in the news.
Bitcoin stock trading, compared to other financial instruments has a very little barrier to entry. If you already have bitcoins, you can start trading almost immediately. In most cases, verification is not even needed in order to execute a trade. If you are interested in bitcoin trading, there are numerous platforms that offer this product, but as with any other financial instrument, you need to know what you’re actually doing.
Trading is highly risky, and a stupid mistake could lead you into financial turmoil. So, how do avoid the mistake of losing money when trading bitcoin? Well, the first thing to learn is that trading needs one hundred percent focus and attention. Second, trading is not for everybody. The tips in this read are straightforward and easy to internalize. However, they may be hard to implement in real time as we aren’t rational beings after all.
Tip 1: Understand the Blockchain
Experts say that Blockchain technology has the potential to change everything, including revolutionizing transactions. While this is true, anyone who claims to completely understand how it works and isn’t the creator, Satoshi Nakamoto, is certainly lying to you. Also, anyone who claims to be Satoshi himself is likely lying to you.
Well, fortunately, you do not need to know how blockchain works in order to use it. However, you may want to learn the basics. The Blockchain is a constantly growing list of records, well known as blocks. These blocks are linked together using secure cryptography. The blockchain is by design, resistant to modification and act as a public ledger of transactions.
The transparent and decentralized nature of this technology is what makes it almost impossible to hack. For a hack to be successful, you would have to hack all the computers in the network at the same exact time. That means the larger the network, the more secure and stable bitcoin becomes.
Tip 2: Have a Reason Before Trading
Only enter a trade if you have a concrete reason and have a clear strategy. Note that not all traders make profits from trades as this is a zero-sum game. For anyone that benefits, someone else loses on the other side. Even if you like the idea of trading and making money every day, sometimes it is best to do nothing. There is no fun in skimping and exposing your coins to losses. From experience, there are some days where you just keep your profits by not entering the market at all.
Target and Stop when Executing a Trade
For every trade, it is important to set a clear target point for taking profits and a stop loss level for reducing losses. A stop loss is simply setting a point where if the trend goes against you, the trade closes.
Again, it’s crucial to consider various factors when placing a stop loss level properly. Most people fail when they fall in love with the coin or the trade itself. You may have the perception that the trend will turn and get out with a minimum loss or even manage to gain some profits. Never let your ego taker over and always trade logically. There is no room for emotion in trading and with trading cryptocurrency being, even more, riskier, you ought to do your homework and conserve your investments as much as you can.
The small pig eats a lot, and the big one gets eaten. Well, this applies to market profits in this case. In order to be profitable in trading bitcoin, it is better to go for small profits that will turn into a large one rather than waiting for a peak.
So, manage risk wisely. For example, do not invest more than 2% of your investment capital. Also, setting a target allows you to manage your capital better.
Remember that most traders lose due to greed or fear. The secret to making bank in trading is reducing the chances of losing money.