Bitcoin trading includes ways on how you speculate the cryptocurrency price movements. While it traditionally involved purchasing bitcoins through exchange with a hope that price will increase in time, many cryptocurrency traders are using derivatives in speculating both falling and rising prices to be able to make the most of the volatility of bitcoins.
Steps to Trade Bitcoin
The following are the steps you need to take when trading bitcoin:
Know the Factors that Move the Price of Bitcoin
Before you trade, take time to know which factors affect the bitcoin’s price. These factors might include bitcoin supply, bad press, integration, and key events. Keep in mind that finite supply could mean that bitcoin’s price might increase if demands will increase in the years to come.
Even breaking news concerning bitcoin’s value, longevity and security will have negative effects on the overall market price of the coins. The public profile of bitcoin depends on its integration to new banking frameworks and payment systems. If these are carried out successfully, demands may rise and can have positive effects on the bitcoin’s price.
Choose an Effective Bitcoin Trading Strategy and Style
The strategy and trading style you will choose will depend on the time you plan to trade. If you choose day trading, this means that you will open and close a particular position with one trading day, so you will not have exposure to the bitcoin market overnight. If you are looking for short term price movements from bitcoin, this strategy is for you. Other strategies include hedging bitcoin, which means mitigating your exposure to risks through taking the opposing positions to the one you’ve already open, HODL bitcoin strategy, which involves purchasing and holding bitcoins, and more. You can visit techtimes.com to know more.
Choose the Way You Want to Gain Exposure to Bitcoins
There are some ways to gain exposure to bitcoin. You can trade bitcoin derivatives, which means instead of owning bitcoins upright, you will be speculating on the price with CFDs. The benefits of trading bitcoin derivatives are margin and leverage, deep liquidity, effective way of hedging portfolio, and protecting from market declines.
Decide If You Will Go Short or Long
Financial derivative trading makes it highly possible to go short or long. This depends on the sentiments of the current market. If you go long, this means expecting the bitcoin’s price to rise. Going short, on the other hand, means expecting the price of the bitcoin to fall.
Set Your Stops and Your Limits
Limits and stops are important tools for risk management. You actually have various tools to choose from when trading bitcoins. Some of these might include normal stops, guaranteed tops, and trailing stops. Make sure to choose a trusted trading platform that offer all the tools you need.
Open and Monitor Your Own Trade
In opening the bitcoin trade, you would buy if you think that the price is going to rise, or you would sell if you thought it would fall. As soon as your trade is open, you must monitor the market to ensure that it is moving the way you think it is. Technical indicators can help you evaluate the market’s current condition, including market sentiments and volatility levels.
Close Position to Get the Profit or Cut Losses
You can opt to close your position anytime you want to get a profit or cut the loss that reached an extent that makes you feel uncomfortable. The money you will earn will be directly paid to your trading account. Your losses, on the other hand, would be deducted from your balance.
Follow these steps, and you will surely achieve successful and profitable trading.