Trading Bitcoin can be very risky, and this is because the price of Bitcoin is generally volatile. But good traders know how to take advantage of this volatility and use it to their profit. Their ability to make profit out of Bitcoin is due to a combination of luck, skill, knowledge and a good trading platform. So if you want to join these successful Bitcoin traders then here's what you need to know.
1. Understanding Bitcoin
If you are going to trade bitcoin, then you should know a few important things about it first. Firstly, bitcoin is a type of cryptocurrency, and like most cryptocurrencies, its price and value is determined by the number of users who use it.
However, no one really knows how many people use and rely on bitcoin, but optimists believe that the number will rise in the years to come. Pessimists, on the other hand, believe that Bitcoin doesn't have much of a future and will likely lose value in the future.
Secondly, the price of bitcoin does not reflect its actual value. When bitcoin's price relative to the US dollar rose to $20,000 sometime in 2017, it vastly inflated its actual value. Today, the price of Bitcoin is around $3,600. Some investors believe that it will rise again at a later date, while others believe that it will fall further to $2,000. So before you invest in Bitcoin, keep in mind that you're putting your money in a volatile financial instrument.
Lastly, you should remember that the crypto-currency market is always open, and unlike stocks and currency markets, cryptos are traded all day, every day. So if you want to trade or invest in Bitcoin, be prepared to monitor your investment daily or you could end up losing a lot of money.
2. Choosing A Bitcoin Platform
When you're ready to buy Bitcoin, the first step is to look for a reliable bitcoin trading platform. A good platform doesn't just let you buy and sell bitcoin, it also offers you charts, news feeds as well as input from other crypto traders and investors.
A good trading platform also allows you to keep track of the price of bitcoin every minute and every hour, each day, because as any trader will tell you, time plays a critical role in trading.
Lastly, given the sensitive nature of trading, you'll need a platform that offers certain security guarantees. So look for a trading platform that offers excellent security and backup protocols.
3. Trading Bitcoin
Trading Bitcoin is the same as trading any other commodity. You buy low and you sell high. The best way to go about this is to set up a bitcoin trading strategy.
Your strategy should cover issues like your entry price (the price at which you buy bitcoin), your target price (the price at which you sell bitcoin) and your stop loss (your exit strategy in the event that the price of Bitcoin doesn't go your way).
Additionally, you will also need to learn how to read charts, so that you will know where the price of Bitcoin is trending. Once you have all of these things in place, then you can begin trading Bitcoin.
Trading bitcoin is never easy. The risks are always high, though the rewards are considerable as well. Presently, the value of Bitcoin is more or less stable, but the future can offer big losses as well.
You can avoid a lot of the risk and optimize your gains by following the advice on this article. So before you start trading Bitcoin, be sure to review the information listed here and then incorporate them into your trading strategy.