Reading price charts is challenging when you hardly have any background in Bitcoin trading. When understanding Bitcoin trading, it would be best to begin with basic knowledge. Such includes understanding what Bitcoin trading is, why you should trade Bitcoins, types of traders, and market orders in Bitcoin trading.
What is Bitcoin trading?
Bitcoin trading is not the same as Bitcoin investing. When people invest in Bitcoin, they are usually doing it for the long term. They assume that the price will eventually climb, despite any ups and downs along the way.
People usually invest in BTC because they believe in the currency’s technology, ideology, or team. In the Bitcoin community, long-term investors HODL the currency. As a result, while Bitcoin investors buy and hold for the long term, traders buy and sell Bitcoin whenever they believe that they can get benefits.
Traders see Bitcoin as a tool for making money. Sometimes the technology or ideology underlying the items is not important. You might, however, invest and trade Bitcoins at the same time. Bitcoin trading may have benefits, making it popular among traders.
Why should you trade Bitcoins?
Bitcoin is quite volatile. If you accurately predict the market, you can make a handsome profit. Accurate market anticipation requires a good understanding of the metrics to consider.
Unlike traditional markets, Bitcoin trading is available at all times. Most traditional markets, such as stocks and commodities, have a start and end time. You can purchase and sell Bitcoin whenever you want.
Bitcoin has an unregulated landscape that makes it easy to start trading without long identity verification processes. However, all traders are not the same. There are different types of trading methods that you could use to trade Bitcoins.
Types of Traders
Types of trading vary depending on various factors. Such factors range from your availability to market volatility. Choosing the correct type of trading is essential to help you maximize your profit.
Day Traders
Day trading entails making repeated trades throughout the day to profit from short-term price changes. Day traders spend considerably longer time staring at the computer screens. They usually close all their trades. Day trading is an excellent option if you want to be a full-time trader.
Scalpers
Scalping is a well-known day trading strategy. Scalping is an attempt to generate large profits from little price movements. It is commonly called “picking up pennies in front of a steamroller”. Scalping is a trading strategy that focuses on extremely short-term trading & is based on the premise that it achieves modest profits, lowers risks, and offers advantages for traders. Scalpers can make multiple deals in a single day.
Swing Trading
Swing traders profit from the natural swings in price cycles. They attempt to identify the start of a specific price movement and enter the trade. After that, they HODL until the movement dies and then profit. They attempt to see the larger picture while not continuously staring at their computer screen. Swing traders can initiate a trading position and hold it for weeks or months before closing it.
How to trade Bitcoins?
Nobody knows what will happen to Bitcoin’s price. On the other hand, some traders can recognize patterns, strategies, and principles that allow them to benefit in the long run. There are two primary strategies that you could follow when trading Bitcoins. They are fundamental and technical analyses.
Fundamental Analysis
Fundamental analysis considers the larger picture. Fundamental analysis in Bitcoin trading analyses the Bitcoin industry, currency news, Bitcoin developments such as the lightning networks, global legislation, and any other news or issues that may affect Bitcoin’s success.
Fundamental analysis considers Bitcoin’s value as a technology independent of its current price and external causes to predict what will happen to the price. For example, if a country decides to ban Bitcoin outright, this research will forecast when the price will most likely fall.
Technical Analysis
Technical analysis attempts to forecast price movements by evaluating market statistics such as previous price movements and trading volumes. It attempts to find price patterns and trends that indicate what the price will do in the future. Technical analysis is based on specific assumptions.
Technical analysis assumes that price movements speak for themselves and give the same message independent of what is happening worldwide. This data allows you to forecast what will happen next. Most significantly, no one can forecast the future precisely. A good blend of fundamental and technical analysis will likely produce the best outcomes.
Types of orders in Bitcoin trading
Market order
A market order is an order that will be instantly fulfilled at any price. So, if you put a market order in to buy five Bitcoins, you will find the cheapest sellers possible until it accumulates enough sellers to hand over the five Bitcoins.
You could buy three Bitcoins at one price and the other at a higher price. You buy Bitcoins once the requested amount is reached in a market order. Market orders may cause you to pay more than you intended.
Limit order
With a limited order, you will only buy or sell Bitcoin at your desired price. That means the order might only be partially fulfilled since there would not be enough buyers or sellers to meet your requirements. Therefore, you may not sell the Bitcoins when there is no buyer.
Stop-loss order
A stop-loss order lets you set a specific price you want to sell if the price drops dramatically. This type of order helps minimize losses. It allows you to sell Bitcoins when the price drops to what you would have set. As a result, you would lose as little money as possible. The stop-loss order is like the market order in that your Bitcoins will sell until they are completely sold out.