Introduced to the public over 13 years ago, Bitcoin (BTC) is the oldest and largest cryptocurrency by market capitalization. But while it is today an extremely popular and well-known asset, not everyone fully comprehends what it is or how to trade it effectively.
Bitcoin is notoriously volatile. Because of this, traders can experience massive price swings when trading it, adding to its appeal and risk. As a new trader, this added level of complexity can thus make It hard to know how to trade Bitcoin safely.
If you want to trade this cryptocurrency but have no idea where to start, this article is for you. The step-by-step guide will assist you in making informed decisions in the Bitcoin market.
Step 1: Bitcoin Basics Learning
Do not skip the educational phase. Even though you’ve likely had exposure to Bitcoin through media for the past 3 to 5 years, it’s still crucial to do more technical digging. Read the reliable online website materials for a deeper dive into the technology and Bitcoin specialities.
Keep researching cryptocurrency news and expert opinions even once you start trading. They are usually the only resources you can rely on when making buy and sell predictions.
Step 2: Pick a Bitcoin Trading Style and Strategy
Even though the media is constantly reporting on catastrophic failures and the surprise soaring of Bitcoin, relatively few individuals trust this form of payment. But everyone is aware of the buzz surrounding cryptocurrencies. This provides them with niche markets that support at least two different forms of consumer behavior.
So, what is the right Bitcoin trading strategy for you? It primarily comes down to your experience level, free time, capital invested, and daily discipline.
Everyone has different goals when trading Bitcoin. Some people will re-structure their responsibilities around trading, whereas others will want trading to work around their responsibilities.
Step 3: Consider Pros and Cons
Apart from the 24/7 availability, let’s look through the list of other pros.
Bitcoin Strengths
- Free environment: non-regulated currency globally, which makes it decentralized and transparent.
- Easy start and accessibility: barriers to entry are low. Hence almost anyone worldwide can trade Bitcoin.
- ID theft protection: A one-of-a-kind digital signature ensures the security of your currency transactions.
- Fast payments: settlements usually happen within two business days and are not subject to bank holidays or weekends.
Bitcoin Weaknesses
- Immaturity: experts say that Bitcoin needs at least five more years to overcome market turbulence and stabilize.
- Extreme price fluctuations: Using Bitcoin as a trading instrument comes with risks. High volatility discourages confidence in the currency as a trustworthy financial instrument.
- No insurance: decentralization leads to a few disadvantages in addition to granting absolute freedom.
- Risk of hacking: Bitcoin software is still far from perfect. Its developers are still creating new tools and features to improve safety.
Step 4: Start With Demo Mode
Now, when you have learned the theoretical basis and weighed all the Bitcoin pros and cons, it is time to begin.
- Firstly, you need to find a reliable and licensed broker that offers a wide range of cryptocurrencies.
- Once you find a broker you like, you can then open your crypto account through them.
- If you are a beginner or want to test your skills, start with demo trading. Oftentimes, brokers provide a demo account with $10,000 of virtual funds. You can also choose a trading platform that will suit you best.
Never forget that cryptocurrencies are an innovative technology and heavily marketed industry. Although the growth rate over the most recent decades appears encouraging, we cannot predict long-term outcomes.
Avoid investing your entire life savings in cryptocurrencies, especially if you lack confidence in your ability to evaluate and analyze situations. This is because cryptocurrencies defy accepted economic and financial norms.
Step 5: Trade and Monitor
The next step is to execute a Bitcoin trade supported by your market analysis and trading strategy. You should enter your position carefully and include risk-management tools, such as take-profit and stop-loss orders. Indeed, these trading conditions may be crucial to effective risk management.
Once your trade is open, you’ll need to monitor the market. This way, you can ensure that it’s moving as you anticipated.
Summing It Up
Despite how exciting it may sound, Bitcoin is still developing. So, if you want to start trading cryptocurrencies, proceed with caution. In summary:
- Educate yourself about the crypto market
- Interact with more seasoned traders
- Take risks into account in your strategy
- Keep up with the news and current affairs
