Comprehending the basics of cryptocurrency trading, every novice trader is faced with standard situations that can bring both substantial gains and become fatal. Therefore, in order to skip the “self-cone-filling” phase, we suggest using the recommendations of a specialist when drawing up a personal trading strategy. Moreover, in this review, the author focuses on four main topics related to trading:
- determining the features of Bitcoin trading;
- Analysis of the basic concepts that a trader is faced with when trading on the exchange;
- A brief introduction to the “reading” of price charts;
- And finally, the main trading errors that beginners make will be considered.
So let’s get started…
Bitcoin Trading vs. investments
So, what is Bitcoin trading and how does it differ from cryptocurrency investments?
By investing in Bitcoin, a person buys cryptocurrency with a long term perspective. In other words, the investor expects that the value of the virtual coin will ultimately increase, that will be inherent in the asset along the way. As a rule, behind investing in Bitcoin is a belief in technology, ideology or the project team.
Thus, if Bitcoin investors buy crypto in the long term, then Bitcoin traders buy and sell digital coins in the short term, choosing the moments when, in their opinion, will be maximum (optimal or satisfactory, depending on selected strategy).
Traders see Bitcoin as a tool for profit, so they don’t have to admire or support the technology or ideology of the product they trade. Of course, ordinary people can also start trading Bitcoin, combine trading with investments. But why are so many users suddenly interested in cryptocurrency trading (especially Bitcoin)? The author sees several reasons for this:
First, Bitcoin is very volatile. In other words, you can only make good profits if you manage to predict market movements.
Secondly, unlike traditional markets, Bitcoin is traded around the clock and seven days a week. Most traditional trades (stocks or commodities) are held at strictly allotted time. With Bitcoin, you can buy and sell assets whenever you want.
Thirdly, the unregulated nature of Bitcoin simplifies the trading process, because you do not need to go through a long account authentication procedure in order to start trading.
Types of Trading
Types of trading determine the style of your trading. So, for example, the daily trader conducts many transactions throughout the day and tries to profit from short-term price movements. Day traders spend a lot of time on computer monitors, so as not to miss the perfect moment for the transaction. By the end of the day, as a rule, they seek to close all their positions.
You can use the popular bitcoin software for all kind of price and trade related transaction for best output.
This type of trading focuses on trading in a very short period and is focused on many transactions with minimal gain. It is believed that this allows scalpers to minimize their risks. So, within one day, the scalper can conduct up to hundreds of transactions.
The next type of trading is swing trading ,which is based on the idea of profit from natural fluctuations in market cycles. Swing traders try to determine the beginning of a certain price movement and enter the deal at the right time. Then they wait for the market to slow down in order to maximize profits. They look at the market as a whole, looking for patterns and models that indicate further price movements. This gives traders some freedom of action, without forcing them to monitor the price every minute, sitting at the monitor. They can open a trading position and keep it open for several weeks (or months) until they achieve the desired result.
But even knowing what trading is and what it is, how can you predict what Bitcoin will do next?
In fact, no one can really predict what will happen to the price of Bitcoin. No one will be able to conduct exclusively profitable transactions, but here is the main idea of successful trading: in the end, you should still see a positive balance of your account, even if several unprofitable positions have happened on the way to your goal.