Crypto trading is an art and needs a lot of practice. This is because the cryptocurrency domain is fairly new to us and there are a lot of things that are still not known to everyone. Therefore, it is essential to have the proper information about the same. For this purpose, we have decided to bring you a guide on ‘how to trade Bitcoin’ in particular. So, it would be better if you go through the guide in detail and learn about the steps and strategies involved in the same. However, we would like to note that it is not a guide for Bitcoin trading for beginners but even they can use it if they acquire expert advice along with this.
What Is Bitcoin Trading?
Well, the concept of Bitcoin trading might be a little complicated, but it is no rocket science. With patience and practice, one can surely master the art. Bitcoin trading can be referred to as the act of predicting the largest cryptocurrency’s future price movements and making an investment decision accordingly. Initially, Bitcoin trading meant that people would invest in this digital currency and hold it for a while and wait for its price to increase so that they could sell it to earn profits. This act was performed for trading Bitcoin for profit using its volatile nature. However, with time a host of other strategies have come in.
What Impacts The Bitcoin Price Movements?
There are several factors that impact the price of Bitcoin. The prominent ones have been noted below. Also, this is the first step when ‘how to trade Bitcoin’ is considered.
- Supply Of Bitcoin: The Bitcoin supply currently is about 21 million tokens, which is estimated to be exhausted by the year 2140. A fixed supply also implements that in the future if its demand rises, the price will also increase indefinitely.
- Integration In Other Domains: Bitcoin has been adopted in various other domains as well including the banking sector. This is why the crypto’s price is affected due to changes even in that domain as well.
- Bad Press: Even the press affects the Bitcoin price movements largely. This is due to the fact that news concerning Bitcoin’s security and value might affect the price negatively if the update is also similar.
- Important Events: In case, there are important updates like regulation and framework, the Bitcoin price might be affected at large. Moreover, acquisitions in the domain also affect the price movements of BTC to an extent.
How To Trade Bitcoin Efficiently?
Bitcoin trading is not a joke, and this is why a lot of things need to be taken care of and different strategies are to be used in the domain for optimum trading experience. The steps to be followed to answer the query of ‘how to trade Bitcoin’ are:
1. Choose A Bitcoin Trading Strategy And Style
The question of how to trade Bitcoin cannot be answered without talking about the strategies and styles involved. There are four kinds of trading strategies that people can consider (this is not a guide on Bitcoin trading for beginners due to the complicated strategies mentioned here). These are:
- Day Trading: If you want to day trade Bitcoin, you need to buy BTC and sell it off on the same day itself. It is a short-term position that you exit within 24 hours. This involves using the little price fluctuations that the crypto will see during the day.
- Trend Trading: This means that you go with the current market trend. In this case, your strategy will be bullish if the market is bullish and vice versa.
- Bitcoin Hedging Strategy: This strategy involves mitigating the risk of holding BTC to an extent by making opposing positions. If you think that the price might fall and you have placed a bullish bet, consider investing in CFDs to minimize the losses.
- HODL Bitcoin Strategy: This consists of buying and holding Bitcoin with the positive perspective that you expect its price to go up in the future. It is a long-term position that any crypto enthusiasts should consider only after proper research.
2. Pick The Way Of Getting Exposure To Bitcoin
You need to choose the ways in which you want to invest in Bitcoin. A few of them are noted here.
- Trading Bitcoin Derivatives: It means that instead of directly buying Bitcoin, you predict its future price movements with the help of CFDs (Contract For Differences). The three types of this trading strategy are leverage and margin, deep liquidity, and hedging.
- Purchasing Bitcoin From An Exchange: You can consider buying BTC directly through a recognized and trusted exchange. Then you can implement various trading strategies on it.
- Crypto 10 Index: You can use the crypto 10 index for trading the top 10 cryptocurrencies along with Bitcoin at the same time in a single trade.
3. Make A Decision If You Want To Go Long Or Short
You need to then understand whether you want to go long or short. This means that you would take up a bullish approach or a bearish one since long here means bullish and short here means bearish. In short, a long position would indicate that you are expecting the Bitcoin price to rise while a short position would imply that you expect the price to fall.
4. Fix Your Stops And Limits
Stops and limits are important tools that are used to mitigate risk. It is an essential point in the guide for how to trade Bitcoin. Some of them are:
- Normal Stops: It will exit your position after the Bitcoin price reaches the price you have set. However, unexpected price movements might cause slippage.
- Trailing Stops: It will adhere to the favorable crypto market conditions to bring you profit and mitigate losses. But it might also cause slippage.
- Guaranteed Stops: It will close your position after the Bitcoin price reaches the price you have set without any slippage. It is free but might require a fee if the stop is triggered.
5. Keep A Check On The Trade
When the how to trade Bitcoin guide is considered, we can surely not forget to remind you that after making a trade or acquiring a position, you need to motor it diligently. You need to keep track of the Bitcoin price movements and whether they match your expectations. Meanwhile, you need to formulate strategies that would be used in the future both for success and failure. You also need to use technical indicators and professional tools that are provided on a number of websites and crypto exchanges for better trading decisions.
6. Exit The Position To Book A Profit And Loss
After you have analyzed the BTC price actions, implemented the strategies, made the trade, and monitored it, it is time to exit positions. In case, you have used a stop and limits tool then it would mostly be automated. However, if other strategies have been used then depending on the nature of the trading style, exiting positions should take place. A day trade should end within the day, while a long-term position can be withheld for longer. You might book a loss as trading Bitcoin for profit is not easy at all.
The Final Exit!
The guide on how to trade Bitcoin has summarized the varied aspects that are involved in trading Bitcoin for profit. Therefore, carefully refer to it before the next time you want to invest in the world’s largest digital currency. Also, we recommend that you research about the various crypto exchanges so that you know the facilities that they provide so you can know about the charges you need to pay or tools you can use. Moreover, consider consulting an expert who deals with crypto trading activities to acquire advice on trading decisions you need to take. But yes, we would also consider bringing a simpler guide that would consider Bitcoin trading for beginners.
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