Bitcoin is the world’s first and most popular cryptocurrency and considered to be the second most revolutionary breakthrough after the internet in the 21st century. An anonymous person or group of people called Satoshi Nakamoto claimed to be the creator of Bitcoin.
Bitcoin is vastly popular for its unique features of finite numbers, decentralization, peer-to-peer operation and transparency. Trading Bitcoin has high volatility and having high volatility always increases the chance of making good profit.
How does Bitcoin Operation work?
As you already know that Bitcoin is a cryptocurrency; with a finite number of 21 million, it doesn’t have a physical existence like the paper currency we use in regular life. Bitcoin has to be mined using high-end computers. As per reports, 1800+ Bitcoins are mined every day and for every new Bitcoin miners are rewarded with 12.5 Bitcoin. Miners are not only responsible for mine Bitcoins, they also have to verify Bitcoin transactions.
The technology of Bitcoin was derived from blockchain that doesn’t store data into central storage but into a series of sequential blocks. This enables transparency to the users, as anyone can look into the blockchain ledger and can’t make changes to the existing data.
Why do you trade in Bitcoin?
As you already know that bitcoin has high volatility which results in the chances of making more profit, traders get attracted to it. If the traders can predict the market correctly, there are opportunities to make a really good profit by trading bitcoin. Nevertheless, do not forget that your prediction may not come true every time and there is always a risk of making significant losses too. However, unlike other markets, Bitcoin gives you the flexibility to trade 24/7.
You can literally buy and sell bitcoin whenever you want to. Being a global currency, it doesn’t get affected by the economical uncertainty of any country.
How do you trade Bitcoin?
Starting to trade in Bitcoin is easier than in any other trading market. You certainly don’t need to go through a long paperwork and verification process. You’re just a few clicks away to get started in trading Bitcoin. There are vendors who work as the service provider for exchanging bitcoin. You can take their service for trading.
Things you need to know before trading Bitcoin
You must need to know about the variables, Do-es and Don’t while trading bitcoin. If you have no idea about this, you’re certainly going to mess it up and lose your money. So make sure you’re following the things listed below.
- Variables that impacts on Bitcoin prices:
There are factors that impact the rate of Bitcoin in the market. As Bitcoin is limited in number and when all of them will be mined, the price of bitcoin would definitely swing. Besides, any security issues over the media or any multi-billionaire making comments on Bitcoin on social or community platforms will have an effect on Bitcoin.
- Know your trading:
You must know what type of bitcoin trading you’ll be doing. There are different types of trading styles in bitcoin trading, such as Day Trading, Trend Trading, Bitcoin Hedging and HODL.
Day Trading in Bitcoin trading is similar to other trading markets. Traders will open and close a position within a single day. This will work just fine for the short-term traders who are interested to trade in bitcoin’s short-term price movement.
Trend trading in simple terms is just to follow the trends. Suppose the market is in a bullish trend, you would certainly go long in that case but if the market trend is bearish, you will just go short. If the trend is going to reverse, you will consider closing your position and open again with the rising trend.
Hedging is a strategy which is mostly used in the situation where the market goes against a trader. In simple terms, hedging bitcoin means reducing your risk exposure by taking a totally opposite position to your current position.
HODL is derived from the misspelling of HOLD in the bitcoin forum. This is a long-term strategy where a trader buys and holds bitcoin for quite a long time.
- Decide your trading pattern:
There are traders in the market who determine whether they should go long or short depending on the market’s vibe. Going long in trading Bitcoin means you’re anticipating a rise while going short indicates that you’re expecting a fall in bitcoin price.
- Track your trade:
You must monitor your trade whether it’s going the way you anticipated it to be. Closely monitor the rise or the fall. Take your notes on the market’s trading pattern and decide accordingly.
- Stop-Loss and Take-Profit(SL/TP):
While investing in Bitcoin and managing your open positions, you must activate stop-loss(SL) and take profit(TP) orders. Stop-loss orders are designed to limit the losses of a trader on a certain position, while Take-profit orders allow a trader to make profit with a suggestion where to close out an open position.