How to Trade in Bitcoin? – Concept, Process, Price Levels, Trading Strategies & more
Majority of the people is on a look out for – How to Trade in Bitcoin? We have produced the ultimate guide for you, which will take you through the process smoothly.
We have included anything and everything you need, including the mistakes you must avoid. The step by step guide is a saver for sure, and you will find yourself into the trading process sooner.
What is Bitcoin Trading?
Bitcoin trading refers to the process of buying and selling Bitcoins using physical currency.
Throughout this process, traders buy Bitcoins through an exchange at the lowest price and anticipate a higher selling price to derive a profit.
In a nutshell, in Bitcoin trading, traders try to take advantage of price movement.
Lower price encourages traders to buy more Bitcoins, while higher prices encourage buyers to sell Bitcoins and earn profits from it.
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How to Trade Bitcoin?
Every currency is tradable, even though it is a physical currency, like- dollars or rupees, or it a digital currency like- Bitcoin.
Even the method of trading that every currency pair follows is also similar. The entire concept of the trading currency depends upon price.
The rising-prices indicate profitability for traders who have already held a currency. It is the easiest definition to understand bitcoin trading.
However, training in Bitcoin is comparatively easy. Still, the thing that can make you a winning player in Bitcoin trading is the “Price.”
You will have to keep your eyes on every factor that brings a significant rise and fall in the bitcoin price to discover the profitability.
How to Trade Bitcoin? – Step by Step Process
After getting a proper insight into what is required for effective trading in bitcoin, next we will look at the step-by-step process to learn how to trade bitcoin.
Begin with Finding the Best Exchange
In the first step, you will find a licensed exchange. Google some of the best options, choose a reliable source and don’t forget to check people’s reviews on it.
Once you feel fully confident about your desired cryptocurrency exchange, create an account. Exchange acts as a portal where traders can purchase cryptocurrency against fiat money.
So find a trusted exchange, give the required details and proceed with further steps.
(Note: while creating an account, you may have to link a bank account with it for the instant transfer of funds.)
Choose your Currency Type for Trading
After successfully creating the account, choose the crypto-currency type that you want to trade. Crypto-currency exchange offers you multiple currency options for trading.
Such as, if you want to trade in Bitcoins only, choose it and select the currency type in which you will make transactions.
Research the market
Expert traders first give ample time to the market research. That’s why, before investing, you should research the market.
Even though you have already invested the amount, you still have time to know the market.
Choose an effective Trading Strategy
After knowing the market, choose an effective strategy. As we discussed above, you can either choose day trading, scalping method, swing method, or HODL strategy to trade bitcoins.
But make sure that these strategies don’t guarantee you the best results. Still, these strategies can draw excellent results for you.
Such as, if you have a short-term goal or a long-term goal, these strategies will provide you a clear idea on what are the best actions that you can take.
Build a Plan and Take Action
Once after knowing your strategies, long term or short term goals, you will be building the best plan.
Such as when you will enter or leave the market. How much risk are you ready to take, and what is your targeted goal? Build a robust plan and take action accordingly.
Meanwhile, if you encounter any issue, robust planning will help to make you a steady player and avoid big losses.
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Factors Affecting Bitcoin Prices
Below we have listed some of the most influential factors that decide the price movement of Bitcoins. When opportunities are likely to arrive, these factors will provide you a clear insight into them.
Demand and Supply
If you are familiar with this most notable topic of economics, you may understand its impact on bitcoin with no trouble. Fluctuation in Bitcoin prices is a subject of Bitcoin’s demand and supply.
Let’s simplify this fact and understand it better through an example. Bitcoin is like gold; if miners have found a good amount of new gold, the supply will be huge that may reduce the prices.
But due to some factors, if the supply shortens, prices will automatically jump higher.
In the same manner, if the Bitcoin miners found new bitcoins after an extensive calculation, they will be rewarded with bitcoins.
Meanwhile, it will attract more investors, which will boost bitcoin prices at one point.
Media influence plays a crucial role in deciding the price movement of bitcoin.
If the media is spreading its message on a large scale, more public is likely to take action. It can attract people, or it may trigger a panic situation among investors.
The positive media coverage can indicate a rise in bitcoins’ prices, whereas; the negative coverage may lead to a drop in bitcoin prices.
That’s why it will not be a good idea to ignore the media potential because a little news can directly impact the prices of crypto-currency.
Also, get in touch with social networks because what is going on in the market often spreads like wildfire at social networks.
Often political events become the most prominent reason behind a significant hike and drop in crypto-currency prices.
The recent events set the perfect examples here. After pandemic, the relationship between the United States and China weren’t too good that impacted the bitcoin prices.
However, this factor may sound unfamiliar because bitcoins are decentralized. Hence, government regulations have no impact on it. But it isn’t the absolute reality.
In 2017, when China decided to close some trading platforms, a significant drop in Bitcoin prices was recorded.
It can happen in any country; that’s why government policies can impact the bitcoin prices as well.
Bitcoin Trading Strategies
Even though you actively monitor the factors that impact bitcoin prices, there are still fewer probabilities that you will create a profitable position until you employ some fundamental strategies that experts utilize.
Day Trading Bitcoin
As the name sounds, day-trading refers to the process when traders buy and sell crypto-currency on the same day.
The strategy is focused on the speculation of price movements. If the price rises on the same, the trader will earn profit and vice-versa.
In the day trading, traders close their entire position with the end of the trading day. However, the strategy requires the technical understanding of the traders.
The regular analysis of the price movement is also essential in day-trading. That’s why only active traders can better use this trading strategy.
Swing Trading Bitcoin Strategy
The swing-trading strategy is one of the most common strategy types used by bitcoin traders. As per this strategy, traders try to take advantage of price fluctuations.
These traders keep their eyes on the price movement that is likely to move in a positive direction.
Similarly, they invest and hold bitcoins until the desired profit is achieved. These traders don’t actively monitor the price movements but wait for either a few days, weeks, or months.
It is another variation of the day-trading strategy used by many bitcoin traders. Still, it is a different strategy.
Unlike day-trading, where traders purchase and sell assets on the same day before the trading hours end, scalping strategy allows traders to trade assets repeatedly during the trading hours.
As per this trading strategy, traders try to secure small profits by picking up the assets for a few minutes and instantly selling them once the price rises. The entire process goes on.
In this way, traders can trade multiple times in a day. The risk probabilities in the scalping strategy are relatively minimal as traders will be actively monitoring the prices.
HODL Bitcoin Strategy
Long-term traders use this strategy. However, the word HODL is actually a misspelling of HOLD, but it is often abbreviated as ‘hold on for dear life’ that highlights the meaning of this strategy on a big picture.
This strategy is recommended for long-term traders. Such as, if you are confident enough that the particular investment will work well in the long-term scenario and you are ready to take the risk by holding it, you’re following the HODL strategy.
While trading bitcoins, many traders opt for this strategy, and it genuinely provides them great results. Still, traders should have a high-risk tolerance capacity before using this strategy.
Why should you Trade in Bitcoin?
People usually ask- why should they trade in Bitcoin? The reason is very simple. There are some of the great reasons why one should trade in bitcoin about which we will discuss below-
Bitcoin isn’t a Fiat Money
Fiat money refers to a physical currency established and regulated by the government. Hence, a small change in government policies can cause a massive impact on fiat money.
But Bitcoin is a decentralized digital currency; no government and central bank control it. That’s why government policies can’t affect the Bitcoin prices as compared to fiat money.
Bitcoin is also a favorite trading instrument among traders because, unlike other stock markets, it is open 24/7. You can trade anytime in bitcoins.
In most regions, a specific time limit is imposed on the stock market, but bitcoin is all-time available for trading.
Anytime you can purchase bitcoin at the licensed exchange and hold, as long as you want.
Bitcoin is Volatile
Despite the fact that Bitcoins are less vulnerable to market and governmental changes, they are still volatile because their prices can go up and down due to numerous factors.
Still, it is the best trading option among investors with a short-term goal. You can easily earn a quick buck while trading Bitcoin.
Know the Real Differences between various Cryptocurrencies:
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Mistakes to avoid while Trading Bitcoins
Bitcoins are genuinely a precious digital currency; still, people repeat some big mistakes that later put them into a big loss.
Let’s know what these common mistakes are, that you must avoid while trading bitcoins.
Smart action always draws desired results. But many times, this action can promote overconfidence.
Resulting in, you may start taking the wrong action without noticing the exact science.
Perhaps, you have earned a lot from bitcoin trading; still, your modest mistake is enough to invite a big loss for you.
You can never think about trading without a strategy. Even though you are unclear about the market and your purchase instruments, you will be making a foolish mistake.
Trading isn’t a piece of cake; it is more than just investing and waiting for profits. You can lose the entire investment in one shot.
Often people use strategies, understand market behavior; still, they take prompt actions based on emotions.
Such as, a little positive news can trigger greed of investing, but it is also possible that this news won’t have enough potential to bring a desired drop or rise in bitcoins’ prices.
Not learning from Mistakes.
Don’t feel sad if you are failing in trading. These mistakes are precious as they lift your knowledge and raise your expertise.
But if you aren’t learning from your mistakes, you are probably making the biggest mistake.
Finding the best exchange is the first thing to consider before investing in Bitcoins, but keeping the entire crypto-currency in the exchange is probably the biggest mistake you will make.
Instead, choose a separate reliable wallet where you can secure your crypto-currency.
How to Trade in Bitcoin? – Conclusion
So, this is how you trade in Bitcoin. It will initially take ample time to get familiar with the entire process, but the final results will be very satisfying.
However, it is essential to not step into a trading market with the expectancy of earning profits only. If you are a fresher, live in your learning period.
Understand your risk tolerance abilities and take action. Even if you make losses, find out where you went wrong. Learn from your mistakes. In the end, you will surely build a success story.
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