Bitcoin Trading – 9 Solutions for Newbies
So, bitcoin trading: what it is, how to start and what to pay attention to – we suggest studying 9 simple solutions.
Don’t confuse them with professional investment advice, rather take these decisions as talking points to think about. If you need investment advice, consult professionals.
Our goal is to show novice traders and crypto investors how to start trading bitcoin, and that the first steps can be clear and uncomplicated.
Solution #1 Learn all about bitcoin
Learn what you are investing in. It is easy to get euphoric, believing that the price of bitcoin can reach a million dollars per coin, or vice versa, drop to a thousand. Analyze forecasts and what they are based on. Read more, monitor the market until you feel like you are starting to feel it. Then btc trading will bring what you expect.
Bitcoin is still not legal tender except in a few countries. Governments and banks do not like bitcoin as much as its owners. So far, digital currency is an additional asset class.
The issuance of bitcoin is limited to 21 million coins. About 17 million have already been issued. The ability to trade a fraction of bitcoin allows you to divide these 21 million by 100 million times – theoretically. It works like this: on the exchange, we most often indicate the amount we want to invest. The exchange calculates how many coins or what part of bitcoin we can buy with this amount.
Solution #2 Trade on the exchange yourself, and not through a broker
How to trade bitcoin on a crypto exchange? You can do it yourself or through a broker. Usually, intermediaries are approached by those who do not have the time or experience (knowledge) to trade themselves. Commissions for various services of brokers can be up to 15% of income in total. The same or more (depending on the country) will cost income tax.
If you are faced with a choice, start trading bitcoins on the exchange yourself or through an intermediary, try it yourself. It’s not that difficult. But save on commissions to the broker. And knowledge and experience is again.
Solution #3 Choose a reliable crypto exchange
So, you have decided that you will trade bitcoin on the exchange without intermediaries. Now all you need is to choose a reliable crypto exchange . You can see tops by queries, for example:
- The best regulated cryptocurrency exchanges (Europe, USA, Asia, etc.)
- The Best Regulated Platforms to Buy Bitcoin
- Cryptocurrency exchanges with a low deposit
- Crypto exchanges with margin trading
- The best cryptocurrency exchanges user reviews
- Top cryptocurrency exchanges by trading volume, etc.
It all depends on what you want to get or how you are going to trade. If the goal is a one-time trade in bitcoin (purchase, sale) or altcoin, then crypto exchangers can be easier and faster, but commissions there can be higher than exchange fees.
A reliable cryptocurrency exchange is, first of all, a regulated cryptocurrency exchange. Read here about how to choose it.
Decision #4 Develop a trading strategy
You have already decided that trading bitcoin on the exchange is your option. Are you going to make short-term trades or do you want to choose long-term investment? Or maybe you are interested in the medium term?
Strategy is something to think about. But no matter what cryptocurrency trading strategies you choose, each will require rational, balanced decisions and discipline.
Long-term (long-term investment) does not give lightning-fast results, it can be stretched out for years and become a way of life. “Why trade when you can hod,” say those who invested in bitcoin many years ago, when the rate was ridiculous by today’s standards. As practice shows, they all benefit from Buy & Hold and the wild volatility of bitcoin. The main thing is to keep bitcoins in a cold wallet.
Short-term (short-term investments) is built on quick earnings from exchange rate changes during the day. Of the short-term disadvantages, commissions for trading and the instruments used are charged for each transaction, they are different for each exchange. It is important that the income from trading is greater than the commission. Otherwise, there is no point in trading – except for experience.
The medium-term (medium-term investments) is usually based on the trading time interval from a week or two to a month.
A very volatile cryptocurrency market often changes the “mood”. He needs to be watched. Bitcoin trading and trading, in general, will require some effort on your part. You may want to choose a different strategy to make more money and adjust to the current market when it is in a strong bearish trend and is trading in a tight range. If you are not careful, then without trading experience there is a big risk of getting losses.
Decision #5 Use stock instruments
It’s good to ask yourself how to trade bitcoin before you start trading.
All transactions on the exchange, like bitcoin trading, are made according to orders (orders). An order is an order to buy/sell. Orders are different. Of the main and common ones, are market, limit and stop losses.
For example, you bought a piece of bitcoin for $500 at a market price of $6600. This will be a market order – the usual buy/sell at current prices.
Now you want to make a quick profit and sell your piece of bitcoin when the price rises. Or buy more when the price drops. You place a sell limit order at $7,000 and a buy limit order at $5,000. In limit trading, you can set a price limit – buy below or sell above the current market price, and this will always be a deal at a price better than at the time the order was placed.
Let’s say you want to sell bitcoin because the price is falling. You bought a piece of it for $500 when it cost $6600 per coin and you don’t want to lose much. The price can drop, for example, to $3,000 per bitcoin – then you will lose more than half of your investment. So you put in a $6,500 stop loss to sell your piece if the price starts to fall. In this case, you won’t lose much.
A stop-loss allows you to set a price limit, but it will be a trade at a price worse than at the time the order was placed.
Some exchanges charge lower fees for limit orders than for market orders. There are also platforms with free limit orders. If the crypto exchange you choose rewards you for using certain types of orders, try to use them.
Bitcoin margin trading is also an interesting tool that significantly increases both profits and losses. It can also be called leverage or bitcoin trading with leverage. You take a kind of loan from the exchange, pay a commission for it, and after a while you return it. Read more about margin trading in our article.
Decision #6 Explore risks
We have written more than once about what risks exist and how they can be avoided. Let’s briefly recap:
Be careful and beware of scams, ignore sites that promise you quick and easy money if you only give them X, Y and Z.
Do not download random wallets or follow random links so as not to install malware on your gadgets. Beware of spoofing. Double-check that you are using the correct link. Some scam sites may use a similar domain for phishing scams. Always check things like this.
Choose regulated exchanges. The cryptocurrency market and bitcoin trading is like the Wild West without a sheriff. According to statistics, mostly unregulated platforms become victims of hacker attacks.
Ignore market noise, do your own market research. Trading cryptocurrencies on the advice of other people who are not professionals is not the best way to invest. Even professionals make mistakes. You alone are responsible for your own transactions and investments!
Do not share your private keys or passwords with anyone. If you can avoid connecting to the network when entering your private keys and passwords, use this.
Decision #7 Do not invest more than you are willing to lose
Don’t invest more than you can afford to lose. Betting that you will never have to work again if you invest all your savings in bitcoin is like playing the lottery.
At the moment, bitcoin is both king and queen. But this may not always be the case, and it is likely that BTC may eventually be replaced by another altcoin. Yahoo used to be a search giant too. Now it’s Google.
Decision #8 Start with a small investment
Statistically, the larger your investment, the greater the potential risk/reward per position. A reward is good, but in order to receive it, it is important to limit the risks in the short term. The reality is that the risk at large stakes (relative to your investment portfolio) outweighs the potential rewards.
Let’s say you invested $100 and want to get $225 out of it. If you turn it into $25, getting back to $100 becomes a challenge. Not to mention getting $225 off the remaining $25:
- $100 is a 300% increase from $25
- $225 is a 900% increase from $25
With your contribution, you can afford to lose 5%:
- if you risk 5% of $100, you risk $5
- a return to $100 from $95 would require an increase of approximately 5.264%
Of course, it will take longer to get $225 through such small bets, but you will have more opportunities to make a profit and avoid losses. Plus, you will gain skills that will help you rely less on luck alone.
Decision #9 Diversify your investment portfolio
If you bet on only one bitcoin (or only one altcoin), then in case of failure, you can lose everything. Let’s say you use different strategies, which to some extent protects you from this. But this is not accurate, because if you are a beginner and just starting to try your hand at trading, then you will not have enough experience to quickly respond to the “mood” of the market.
There is nothing more frustrating than getting frustrated with bitcoin, switching to ether or other alts, missing the bitcoin price jump in the meantime, returning to it and missing the ether price jump. If you invest in several coins at once, you will not miss their giant price spike in a short time.
While not the most profitable tactic, diversification helps investors weather the turbulence in the markets.