Bitcoin has been very volatile throughout its not-so-long history and has been able to move up and down. We witnessed when due to coronavirus, bitcoin fell to almost $ 3,000 but rose again to nearly $ 10,000. So bitcoin is very volatile and often knows how to make surprises, like the one in 2017, when it reached almost $ 20,000. So, to make profits trading bitcoin, you have to have knowledge, dedication, and discipline.
Below we will give you 5 crucial tips on how to trade bitcoin.
- Trends are very important
- Learn technical analysis
- Manage your risk
- Don’t buy bitcoin just the price is low
- Stay up-to-date
1. Trends are very important
Bitcoin has a unique nature, and it cannot be affected by any company statement or centralized bank since it relies only on solely sentiment to drive price. And this is what makes it unpredictable, becoming very difficult to forecast a particular time when bitcoin’s price may change.
However, if there is one thing that clearly affects bitcoin’s price, it is bitcoin halving.
So, what is bitcoin halving? It roughly happens every four years, and the most recent one was on the 11th of May 2020. There were four in total since the release of bitcoin.
Halving happens when coin rewards for adding new transactions to the blockchain are reduced by half. How does this affect the price? Here we could go back to the supply and demand theory: the fewer bitcoins created, the more valuable those in existence are. In 2013 and 2017, bitcoin experienced two bull runs, and both cases are just a yar after halving happened. With halving happening recently, we can expect bitcoin value to be high, maybe just a year from now. So, this might be a good time to buy some bitcoin.
2. Learn technical analysis
In any field you would like to invest in, you should do some research and get some knowledge related to that field. Many people buy bitcoin without clearly knowing what bitcoin is. But to become a successful trader, you must learn to analyze charts and use technical analysis to strategize your trades. It’s essential to study the volume of the charts to make the right calculations. It might seem difficult at first, but when you get the hang of it, you will find this skill very useful. If you want to be a professional trader, you must learn things like candlesticks and order books.
3. Manage your risk.
Bitcoin is volatile, which makes it very attractive but very risky also. That’s why it is vital to learn risk management before starting to trade. Stops and limits must be included as part of your risk management strategy.
Limit close orders will close your positions once the market has moved by a specific amount in your favor, allowing you to lock in profits. While stop-loss orders will automatically close your position once the market has moved against you, enabling you to determine your acceptable loss. Moreover, price alerts are important too because you can set them to trigger at any chosen price you selected and then get notified through email or apps.
Another useful tool you can use is trading bots. Bots are software that makes trades automatically but on your behalf. Apps such as bitcoinera.app official app are a set of trading strategies programmed into a computer robot. The robot also implements scalping, a strategy that includes benefiting off small price changes. This will take some of the stress away since it does the job on its own.
4. Don’t buy bitcoin just because the price is low
“Oh, bitcoin price is low, let’s buy some,” this is the approach most beginners have when starting their trading journey. It comes naturally since it is more affordable to buy anything when it is cheaper. But the decision to invest in one coin does not have to do with the affordability of it but rather with the market cap value. Let’s take an example: A coin priced at $10 per coin with a total number of 1 million shares in the market is no different compared to the same coin being priced at $100 with 100,000 shares in the market. This is why the market cap value is significant and must be the main criterion when deciding what coin to invest. Try to understand the market better and do not invest in one currency just because the price is low.
5. Stay up-to-date
Staying informed about what’s happening with bitcoin and the whole cryptocurrency industry, in general, is very important. There are many cryptocurrency blogs and websites where you can be informed of all the news happening in the world of cryptocurrency. If you want to be a good trader and make profits, you have to follow the events. If you don’t follow them, you may miss events like halving, for example, which is so important in the world of cryptocurrency. Because if you miss such an event, you risk losing an excellent opportunity to understand more about cryptocurrencies or make more profits. So, stay informed!
Cryptocurrencies are attractive, and they have shown this throughout their short time of existence. All the drama and prices going up and down, such as the one in 2017, have attracted so much attention that people want to invest in bitcoin. All the tips mentioned above are essential, but there is a lot more to consider when deciding to invest in crypto. Everyone invests in making money; that’s why it is crucial to be knowledgeable related to the industry. But, whether you make profits or not, do not get disappointed. So, make sure you avoid emotions because they can affect your decision making when trading. Now that you have these 5 tips on trading bitcoin, the next step is to take action. So, pick a reputable cryptocurrency exchange that will secure your data, offerS a variety of trading pairs, and then select a wallet for your coins.