Bitcoin trading is a way to profit from price fluctuations in cryptocurrency. Instead of buying bitcoin on exchange and guessing for a price increase in a short time, cryptocurrency traders are increasingly employing derivatives to speculate on both rising and falling prices to take advantage of the volatility of the bitcoin.
1. Users should learn what moves Bitcoin’s Price:
To profit from a rising market or to avoid the next bubble, users must first comprehend the elements that influence bitcoin’s price:
a) The Bitcoin Supply:
The present bitcoin supply is covered at 21 million units, which will be depleted by 2140. Because bitcoin has a limited supply, its price may grow if demand rises in the coming years.
b) Bad News:
Any breaking news regarding bitcoin’s value, security, or long-term viability could depress the coin’s overall market price.
c) Bitcoin’s Integration:
Integration of Bitcoin into banking frameworks and new payment systems is crucial to its public profile. If this is completed successfully, the demand for bitcoin could increase, impacting a price increase.
d) Major Events:
Bitcoin values are affected by regulatory changes, security breaches, and macroeconomic news. Any agreement between users on how to boost the network could boost trust in bitcoin, impacting the price to fly.
2. Pick a bitcoin trading style and strategy
a) What is Day Trading Bitcoin?
Day trading bitcoin means users will open and close a position in a single trading day, which means users won’t be exposed to the bitcoin market overnight. This implies users won’t have to pay for overnight funding for the position.
b) What is Trend Trading Bitcoin?
Taking a position that corresponds to the current trend is known as trend trading. If the market is in a bullish trend, users would go long, and if the market is in a bearish trend, users would go short. If the trend were to slow or reverse, users would consider closing one position and opening another to follow the new trend.
c) Bitcoin Hedging Strategy
Hedging bitcoin is taking an opposite position to one user currently has open to reduce the risk exposure. If users are concerned about the market moving against them, they will do so.
d) HODL Bitcoin Strategy
Purchasing and holding bitcoin is called the ‘HODL’ strategy. Its name comes from a misreading of the word ‘hold’ on a famous cryptocurrency site, and it is now commonly referred to as ‘hold on for dear life.’
3. Select how to get exposure to bitcoin
There are a few different techniques to get familiar with bitcoin:
a) Trading bitcoin derivatives:
Instead of owning bitcoin altogether, users will be betting on its price with CFDs if users trade bitcoin derivatives with us. As a result, users will be able to speculate on bitcoin’s price growing or dropping by going long or short.
b) Buying bitcoin via exchange:
Those that employ a buy-and-hold bitcoin strategy should buy bitcoin through an exchange. This is because purchasing bitcoin through an exchange entails gaining direct ownership of the cryptocurrency, with the expectation that its value would rise.
c) 10 Cryptocurrencies:
Users can trade Crypto 10 Index, which provides users the exposure to 10 major cryptocurrencies like Bitcoin in one trade, in addition to trading bitcoin futures or buying coins directly from an exchange. This index bets on various cryptocurrencies and closely follows or matches their actual market price.
4. Decide if you wish to go long or not
Financial derivatives trading allows users to go long or short depending on the current market sentiment. Going long on bitcoin means users will expect it to rise, while going short indicates them to expect it to decrease.
5. Set Stops and Limits
Stops and limits are important risk management tools, and when users trade along, they will have various options:
- Traditional stops will close the position at a predetermined level, but they may slip if the underlying market price fluctuates rapidly.
- Trailing stops lock-in earnings while limiting the negative risk by following favorable market movements. They, too, are vulnerable to slippage.
- Guaranteed stops close the position at a predetermined level, regardless of slippage. Guaranteed stops are free to set up, but if they are activated, users will be charged a fee.
Trading has grown more accessible, but that does not imply it has become simpler. Users must still take care of a number of things before getting started, including examining the assets, identifying the dangers, and periodically exercising new trading techniques. If you execute it correctly, each session might be an educational trading experience.