What makes Bitcoin trading such a desirable option is how lenient the rules are to enter. It is a global currency, so trading it anywhere in the world would not be a barrier. You will not find any official bitcoin trading exchange or official bitcoin price. There are always wild movements of costs that make bitcoin trading so interesting. Any media attention can surge the price of bitcoin till the hype dies. Investors wait for such moments to make profits. The trading of bitcoin works 24/7, so the market is never still.
Bitcoin trading is just a few steps away:
- The first step would be to open an account on any Bitcoin exchange platform. You can check out bitcoin-code.io for easy trading options.
- You need to submit IDs to verify your identification.
- Add money to your account.
- Activate your position on the exchange by buying or short selling.
Bitcoin Trading vs. Bitcoin Investment
When people buy bitcoin with the investment mindset, they are planning to save it for the long term. They believe that the market will ultimately be in their favour, regardless of the highs and lows. The belief in blockchain technology and the team operating the digital currency is what brings confidence.
Bitcoin traders buy and sell bitcoin very frequently, whenever there’s a chance for profit, keeping them only for a short period. For traders, bitcoin is only an instrument to earn a profit. They mostly get attracted by the hype media creates and do not care about in-depth knowledge of the technology.
That being said, some traders study the bitcoin market and experience both the investment and trading sector. The rise in popularity of bitcoin has made every kind of investors take an interest in it.
While the goal is the same, traders find different methods to make maximum profit.
- Day Trading
The trades open and close on a day-to-day basis. The volatility of price movements encourages short-term day trading. You will buy bitcoin, hold it for a few seconds or a couple of hours, and sell it before the day ends to make a small, but quick profit. Day traders are required to spend a lot of time in front of their computers as there are chances of the increasing price at any time of the day.
Scalp traders are not looking for huge profits; they try to benefit from small movements in prices within a day. They intend to compound as many small gains as possible in a short period. They can make dozens or even hundreds of trades in a day. Scalping requires a technical analysis of the market.
- Swing Trading
Swing traders derive their profit from the natural ‘swing’ of the price cycles. The most important task is to spot the beginning of a price movement. They enter the market when the action starts and stick around, holding the coins till the end of the cycle, to gain a considerable profit.
The process of swing trading does not require you to monitor the computer screen all day long. You can check on the updates timely till you reach the desired result. It can take weeks or months until the convenient opportunity arises.
Understanding the basic Bitcoin Trading Terms
Trading Platforms VS Brokers VS Market Places
- Bitcoin trading platforms work as an online medium to match buyers and sellers.
- If you are willing to buy bitcoins directly, you go to brokers. They usually charge a higher fee as compared to trading platforms.
- Marketplaces allow the sellers and buyers to communicate directly without any medium to carry out a trade.
As blockchain technology is designed to keep transactions transparent, a list of the buying and selling orders is recorded in the market’s order book. The buy orders are termed as ‘bids’ as people bid their prices to buy a bitcoin. The sell orders are referred to as ‘asks’ as the sellers ask a specific price for their bitcoin.
Bitcoin doesn’t have a globally defined price. Whenever any exchange platform mentions the term “Bitcoin’s price,” it refers to the price of the last trade conducted on that platform. Bitcoin’s price can be different in different countries. Just beside the price, there are terms like “high” and “low” mentioned. In the past 24 hours, it gives you an idea of the highest and lowest prices of Bitcoin on the platform.
Volume is the cumulated number of bitcoins that have been traded within a period. Works help traders to spot the integrity of a trend. Large trading volumes prove the significance of the direction; lower volumes are not worth investing in.
Market or Instant Order
You can set an order at any price that suits your wishes on a trading platform, and the trade will be conducted instantly. It will match you with sellers who are ready to meet your order.
After you place the order at your desired rate, there are chances to distribute it among multiple sellers. Suppose you intend to buy five bitcoins. The platform filters the cheapest sellers available. Your order will only be completed when enough sellers are accumulated to hand over your bitcoins.
You are not allowed to close your order once it is placed. If sellers’ availability does not match your prices, you might have to buy three bitcoins at your desired price and the other two at higher prices. The disadvantage of market orders is the possibility of ending up paying more or selling for a lower price than you intend to.
It is a safe method to place your order. You can place a limit order on a platform at your desired price. The website matches you with sellers who agree on the price, but if enough buyers are not available, your order might remain unfulfilled.
Let’s say you intend to buy five bitcoins at $10,000 per coin. If only three sellers agree to the price, you will only own three bitcoins at the end of the day. Your order will stay live until other sellers agree to pay $10,000 again.
Stop-loss order is dedicated to minimizing losses. It will save your trading position in case predictions fail to play out. Investors calculate the market risk and decide on a price they can afford to lose if the trade hits a roadblock.
The trading platform is informed beforehand that if the price drops beneath a certain point, I will sell only at a preset price. The disadvantage with this order is that, until your stop price is reached, the market gets the liberty to sell your coins at any price till the order is completed.
Maker and Taker fees
Makers place an order on the order book at a price that might not be immediately met. The demand keeps lingering, thus, ‘making’ the market and keeping it active. Takers are people who are in desperate need to sell their bitcoins and hence set a lower price. The order is completed instantly, “taking” value out of the market.
Makers are rewarded with low fees, and takers are punished with higher prices.
Common trading mistakes
- Funding more than you can afford to lose
Although the price of bitcoin making headlines is alluring, investing everything you have is not a good idea. You might end up losing at all. If you are put under the pressure of losing more than you can afford to, it leads you to make bad decisions.
- Not planning ahead
Most people do not figure out a clear action plan before entering a specific trade. They stay stuck in the cycle without knowing when to exit. Stop-loss order is the method you can begin trading with.
- Fear or Greed
Fear and greed are two emotions traders often go through. Any disturbing news article, rumour, or a sudden dip in price can trigger anxiety within you, leading you to close the trade prematurely. When people create the hype around the next big thing, your greed to be a part of it pushes you into a trade you are not ready for. Let not your emotions affect your instincts and trading skills.
- Not learning from your mistakes.
All trades are not meant to be profitable—the businesses which fail to teach you lessons that are not to be ignored. Gaining new insights from your mistakes will lead you to trade better next time.
Bitcoin trading might seem very profitable from a distance as everyone tries their luck with it. But to become a fortunate trader, you need to invest a significant amount of time. So, acquire as much skill & knowledge as you can about blockchain technology and try to acquire relevant skills. If you are investing for a quick profit, then it is better to avoid trading. Easy money does not come without risks or downsides.