Guide On Trading Bitcoin & Crypto
The complexities of Bitcoin trading may seem challenging but they aren't as difficult as you think. Listed as the number one cryptocurrency, and for good reason, Bitcoin become fairly easy to purchase and/or sell depending on what it is you want to do. While Bitcoin, for most of you will be the first time you have purchased, its important to note BTC has had its ups and downs in price action, and with a little patience has always outperformed the general and traditional markets on a longer-term time frame. This makes it a great investment as well as trading and speculative vehcile. This is an ideal environment for modern-day traders to work with. It's also welcomed a considerable amount of media intrigue to the market. This guide will demonstrate what it takes to trade Bitcoin and some of the other altcoin cryptocurrencies on the market.
How To Trade Bitcoin
Most investors/speculators keep an eye on Bitcoin's price to maximize their profits. With this in mind, Bitcoin is fairly easy to manage once you know how it all works, so you can easily join in on the fun.
For those interested, they might be asking themselves, what's required to get started?
What's needed to make sure you're trading and investing properly with the bitcoin and crypto markets?
The key to remember here is to remember no one gets rich overnight, trading and investing takes a lot of research and time. But with the right tools and a community that surrounds you, advances into success can be made quickly once you put in the work.
You must invest your energy into learning the same way you would any new art form. When done properly it can be extremely lucrative!
This guide will offer insight into trading Bitcoin and how to maximize returns with the right mindset.
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Technical Analysis The Benefits of Tradingview & Bitcoin
The beauty of entering this market has to do with its uniqueness and newness. The market is newer than traditional options and deserves your attention. There are many reasons for Bitcoin trading becoming a wonderful option for traders. Charting can be one of the most difficult tasks when it comes to learning technical analysis. Tradingview is one of the best ways to chart track ana analyze the trader's tools. If you have not done it yet, going in and signing up for a tradingview account is going to be an easy way to start to get your feet wet in this fascinating ecosystem. We have a great guide for beginners on how to use TradingView.
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Bitcoin is a Separate Currency
Yes, Bitcoin is not fiat currency. This means it is not regulated by the government in any specific country. Instead, it has its economy, which is spread across the planet over the Internet. This ensures it's able to react to different events around the world.
A good example of this would be some of the more recent events that have changed Bitcoin's price.
1) Brexit
The first event was Brexit, which brought immediate concern about traditional markets and where the financial world was heading. As soon as the UK decided it was time to opt-out, there was a dramatic impact on the local economy. Binance noticed a sudden upsurge in demand as more and more traders entered the crypto market. This demand meant Binance was able to allow users to trade using British pounds and/or Euros.
2) Demonetization in India
Narendra Modi and his cabinet decided it was time to demonetize by changing the viability of Rs.500 and Rs. 1000 notes. As soon as the declaration was made, India's leading crypto trading platform (Zebpay) saw a rise in demand. This shot Bitcoin's price upwards in value.
3) Trump Becoming US President
This was a shocking win for the financial markets to bear and this meant they plummeted. Trump was declared US president and the major stock markets started heading downwards. According to market research, Australia's markets dropped by approximately $30 billion. On the other hand, Bitcoin was heading upwards as soon as the announcement came through. The price continued to fluctuate at the time.
After looking at all three of these international events, it's clear there's a simple reality to keep in mind with Bitcoin. Whenever the financial markets take a hit, the first thing investors do is run towards cryptocurrencies such as Bitcoin. They like heading towards a market that won't ruin their investing potential.
24/7 Access to the Trading Markets
While traditional stock markets work based on a set schedule, the same doesn't apply to cryptocurrencies. The markets are always open because this is a worldwide market. Whenever a person wishes to buy/sell Bitcoin, they can do so in a matter of minutes. Working hours simply don't apply here with Bitcoin. There are so many cryptocurrency exchanges to work with and each one runs around the clock.
Bitcoin's Price is Volatile
Since this is an emerging market, Bitcoin and cryptocurrencies are volatile. This means the price movements are aggressive, fast, and often come out of nowhere. The volatility isn't a bad thing because it allows traders to make smart returns throughout the day.
How does Bitcoin work?
Before heading into the world of cryptocurrencies and Bitcoin, it's important to know how it works. This is all about understanding the intricacies of managing cryptos. For those unaware of what Bitcoin is all about, here's a brief look into the asset and how it works. We are currently working on more training and educational content to help you understand how the blockchain and cryptocurrency world function. We know this space can feel overwhelming, but the blockchain is simple, if you want to understand it in just a few words, think Digital Scarcity, Digital Deflation, Security! These three keywords are why this technology is so powerful.
Blockchain Technology
A programmer with the pseudonym "Satoshi Nakamoto," is behind the creation of Bitcoin. This cryptocurrency has been built on the shoulders of blockchain technology.
With blockchain technology, the emphasis is on using a time-stamped record of data that is spread across a cluster of individual computers. Each computer is owned by a different entity making it an immutable record. The data is set up on blocks and locked in place digitally similar to a real-world chain. So, what does this mean then without the tech speak?
In essence, a blockchain is similar to a universal ledger that can be downloaded or used by anyone.
The average person can use the blockchain to:
-Analyze data that's been added to the ledger
-Figure out when records where changed on the blockchain
-Look at previous entries without making changes because the ledger is supposed to be immutable. This is what makes the blockchain technology such an empowering solution for managing data.
Bitcoin has been able to provide the perfect way to use this technology while allowing people across the world to manage transactions without fear. Everything is easy to analyze with the help of the immutable universal ledger.
How Do Transactions Work?
The reason Bitcoin has taken off and become such a popular asset has to do with transactions and being able to send Bitcoin without needing a financial institution or account. In general, the average person becomes their bank without needing anyone else. How is this done? A person will have access to their public key, which is their public access point to the Bitcoin.
The user is also going to have a private key (which isn't shared) and can use this to access their Bitcoin. These keys are mathematically created ensuring their legitimacy on the blockchain. It's a simple process. The public key is more of a public address people can use to receive Bitcoins heading your way (i.e. email address) while a private key is more of a personal access point (i.e. PIN code for your bank account). One you can share and the other you shouldn't.
Keeping this in mind, let's simplify things just a little bit more:
-The public address can be sent to anyone without hesitation.
-The private key should be kept close to your heart.
This should help understand what Bitcoin is all about and how it works. Due to Bitcoin's underlying features, it's become one of the more prominent digital assets in the world. Having this information in hand, it's time to dig deeper and understand what it takes to trade Bitcoin properly.
Cryptocurrency Exchanges
When it comes to managing cryptocurrencies such as Bitcoin, the exchange is a major part of the process. This is a gateway between fiat currencies and cryptocurrencies. In traditional terms, a cryptocurrency is similar to a stock exchange except cryptocurrencies are traded as assets. Investors/traders can hop onto an exchange and buy/sell cryptocurrencies easily. We have just recently worked on a new post about our top 5 favorite crypto exchanges, click here for more information.
The average trading platform has a few goals in mind:
-It intends to make the buying/selling
-process as easy as possible
-Offers affordable rates
-Allows all types of crypto traders to make trades
The world of cryptocurrencies has two types of exchanges:
Fiat to Crypto
Beginning with fiat to crypto, the emphasis is on buying cryptocurrencies with nothing more than Fiat currencies. The exchanges allow traders to swap their funds for cryptos in one go. A good example of this would be cryptocurrency exchanges such as Bitbuy and Coinbase. With BitBuy, traders can purchase coins such as Bitcoin, Bitcoin Cash, Ripple, Litecoin, and Ethereum.
Crypto to Crypto
The second type of Bitcoin exchange would be a direct cryptocurrency for cryptocurrency setup. This means a person can hop online and trade their Bitcoin for Ethereum or Bitcoin for Ripple. A good example of this would be Binance, which is the largest Bitcoin exchange in the world. These exchanges are designed to help traders with their trades.
Bitcoin Trading Strategies
When it comes to trading Bitcoin, there are a few ways of doing this and it ends up coming down to what you want. Certain people are going to have unique strategies in the market and it's important to understand yours before you start trading.
1. Day Trading
Let's start with day trading. This type of trading looks to work within a single trading day.
Traders want to find short-term opportunities in the market based on potential news items or patterns. They aim to close the trade within the same day.
2. Swing Trading
A swing trader works around a longer timeframe. The price movements are all about finding trends that are going to last for a few days or weeks. It's all about playing with the market's momentum.
3. Scalping
This is all about micro-trading and working within short timeframes. A trader may complete the trade within a few minutes while scalping. It's all about small percentage points in profit.
4. Passive Trading
This is the most common type of trading among investors and is all about maintaining a long-term view. The investor finds a good, long-term opportunity and invests in something that should grow for years to come. The goal is to get in early before the price starts rising over the coming months, years, and even decades.
Fundamental Analysis vs Technical Analysis
Analysis plays a big role in how a trader goes about their work on the market. They often rely on their ability to fundamentally or technically analyze a digital currency.
Fundamental Analysis
The idea for this analysis is to take a look at where the asset is heading over the long-term. This means are the fundamentals good (i.e. whitepaper, potential growth, partnerships)?
You are going to have quite a few details to go over when it comes to this type of analysis. These can include:
The developer's activity in the coin's Github. Are they working on this project regularly? Are the starting to show an increase in activity on the mainnet?
The ability to integrate a coin into the mainstream markets. Is the team behind this coin able to spread the platform's worth? Is there an increase in price action based on potential partnerships. A good example of this would be Stellar rising after partnering with IBM.
World events can also play a role in how a crypto's price acts
It's often going to come down underlying variables when it's time fundamentally analyize the digital currency.
Technical Analysis
This type of analysis is all about patterns and determining future price action based on historical movements in price. This is seen in various markets whether it's the stock market, forex exchange, or of course cryptocurrencies.
This analytical technique emphasizes the idea of working based on established patterns. Experts have spent years understanding the market's psychology and how it responds to certain highs or lows. It's all about figuring out what's going to happen next.
Mistakes to Avoid While Trading Bitcoin
1) Getting Impatient
The first mistake traders make has to do with following the herd. This means when the price goes up, they want to buy in as soon as possible. They don't even look at the price and this ends up being similar to gambling away money. The goal is to learn what the market has to say and having a process in place rather than getting impatient. People that gamble their money often end up losing it all.
2) Trading without Reason
Entering the market without understanding how it works or what an asset is all about is horrible. This is how people end up spending money on the wrong coins and don't know what they're getting into.
You have to understand what type of trading you want to do. This should set the foundation for your actions. Don't follow what other people are doing as that isn't always right.
3) Trading Based on Emotions
This is all about wanting to get ahead of the market and make as much money as possible. Don't trade based on fear or greed. It's about understanding what a coin has to offer and whether or not it has the potential to grow. Greed ends up leading to bad trades that cost a lot of money.
Emotional trading is never a good option and only leads to major issues as a trader. Make sure you can control these emotions before you start trading,
4) Not Adapting or Learning
Everyone starts as a beginner but the best traders are those willing to learn. They are willing to see what others have done and what's not working. They don't keep making the same mistakes without realizing what's going on. This is all about learning how the market works and then adapting along the way.
5) Keeping Assets on the Exchange Indefinitely
It's okay to keep assets on the exchange as a trader over the short-term. However, it is never a good idea to keep them there forever.
Understanding Cryptocurrency Wallets
When it comes to managing your coins, it's time to look at cryptocurrency wallets. Exchanges aren't safe. It's important to have your cold wallet to keep the funds in. There are two types of cold wallets: hardware wallets & paper wallets.
Hardware Wallets
Beginning with hardware wallets, these are physical devices such as the Ledger, which can be used to store your coins. You can use them as a USB drive. You have to realize these are still prone to security issues but they are far better than leaving coins on Bitcoin exchanges. The right company can offer enough protection to make sure your funds are in good hands. Always make sure to buy an original hardware wallet because a pre-owned one may lead to serious security risks.
Please note, even if you end up losing the hardware wallet, you can get it restored with a backup. It's all about creating the backup wallet (i.e. online hot wallet. This allows you to restore the cold wallet with the right private key. When it comes to your coins, this extra layer of security is never a bad idea and can keep the coins safe forever.
Some of the new hardware wallets include:
-Keepkey
-Ledger Nano S
-Trezor
Paper Wallets
The second type of cold wallet would be the paper wallet. This can be found as an offline cold storage option for cryptos. In general, a person will print out their public/private keys onto a piece of paper and then put this paper away in a safe spot. The idea is to have QR codes on the piece of paper, which can be scanned whenever you are ready to access your coins. The beauty of this solution is knowing you don't have to worry about hardware malfunctions. Just take care of the paper and your funds are going to be as safe as you want them to be.
When it comes to paper wallets, you can make them without having to pay a cent. The same cannot be said for hardware wallets, where there is a set amount to pay for the actual device. This is ideal for those looking to go with a budget-friendly option. Simply head over to Wallet Generator and create a Bitcoin paper wallet in no time at all.
Concluding Thoughts
This guide on how to trade Bitcoin should provide a wonderful launching pad for your trading goals. It's all about learning and adapting to this market. Over time, you will be able to learn how things work and what's required to see results. Take the first step by making a trade on Bitbuy or Coinbase and get started with your journey! If you have any questions feel free to leave a comment below or contact us here! If you want to learn more about Bitcoin and other cryptocurrencies head to our homepage.
