Before diving into the exact matter regarding trading bitcoin, a diversion is indeed necessary to understand certain aspects of bitcoin, its function and the position it holds in the current century.
The emergence of bitcoin as an important digital money
The rise of bitcoin is basically against the traditional fiat money. Unfortunately enough, though, this particular form of digital money has made itself integral in the current century, only a handful of the entire population is cognizant about it. Many people involving themselves in it, investing their money in it, are ignorant of its proper functioning of the ways it could be renovated for the benefit of the world. Hence, there is a necessity to be equipped with everything regarding bitcoin in order to avoid deceit or frauds or illegal activities while trading it.
What is bitcoin?
Stating the definition that is mostly followed for bitcoin, it is a decentralised cryptocurrency which requires no mediator or intermediaries while transferring money from user to user or peer to peer through a process known as mining.
Bitcoin is regarded as the most convenient cryptocurrency in the domain of digital money, invented with a motive to be beneficial for the world and transform finance of the modern world.
How does bitcoin work?
Bitcoins, being digital in nature, are basically computer files. Bitcoins are stored in digital wallets which is reminiscent of the storage of paper money and coins in a leather wallet in the real wallet. The transaction is done by transferring amounts to other people. Every transaction that would be made, would be recorded in a public list known as the blockchain.
Bitcoin resists the possibilities of frauds committed by people by spending coins they do not own.
Why bitcoin is in demand?
The fact about bitcoin that it is not under the domination of banks or governments, arrest the interests of many. This is a reason why people now are preferring bitcoins over real cash. It is much more convenient than real cash as it involves no mediator and people are at authentic liberty to spend the bitcoins they own.
Questions on its security
Re-iterating the point that every transaction is kept as a record in a public list named blockchain. Bitcoins are developed with advanced technologies and hence chances of creating plagiarising them are slim, nearly impossible to be precise. Though it would be wrong to deny the thefts and frauds that have occurred over the years the number is comparatively less than bank robberies and thefts.
How to trade bitcoins?
Trading bitcoins involves no hassle as it is pretty straightforward a process. To state the obvious, the profits are directly proportional to the increment in the prices of bitcoins. The entry into this trade is nothing but a cakewalk. However, it is not be dealt with reluctance learning how easy a process it is. It needs to be dealt with care in spite of being easy in order to avoid risks.
A guide to trade bitcoins
Before learning the ways to trade bitcoins, know the various kinds of trading so that you can save yourself from indecisiveness. As per IG, there are four main kinds of trading bitcoin.
- Day trading
- Swing trading
- Passive trading
Day trading is particularly for those who receive advantage from the short term opportunities in the bitcoin market which happens through the development of news or emergence of patterns.
In this pattern of trading, the traders, keep a track of trends in prices unless the prices are confronted with a reversal. This particular form of trading would be advantageous to one who wants to have the advantage of market momentum.
The strategy of scalping is beneficial to those who wish to make several trivial profits instead of awaiting a monumental opportunity.
If you are a patient individual and are ready to wait for big opportunities then this form of trading is ideal for you. You can get in when the price drops and similarly opt out when there is a fall in price. This strategy, like all the other strategies, is straight forward but is timeless as well. If you are eager to learn and experience bitcoin along with involving yourself into business then you should definitely choose this pattern of trading as unlike the other forms of trading, the process of buying and selling might require days, weeks, months or even years.
Analyzing fundamentally and technically
The next step is that of analysis. In a trade of bitcoin, analysis is an important step to perform since the process is virtual in its entirety.
- Fundamental analysis
When you are analyzing your coins fundamentally you need to look at its developments that are taking place, the mainstream integration of coin and to check whether or not any company is involved in that integration. This check is important as this can have heavy impacts on your price in an optimistic sense.
- Technical analysis
The importance of technical analysis of coins is in parity with that of the fundamental. It is useful for a trader as this analysis helps the trader to predict the future of the price movement of the bitcoin currency. An advanced technical analysis, however, can help you to gain an intensified perspective of the coin you are trading. Hence, you would basically be able to make conjectures regarding the prospective movements in the price of the coins.
Mistakes to avoid
It is to be kept in mind that a mistake can penalize you heavily. So it is necessary to learn about the common mistakes that traders make and take lessons from them.
- Traders sometimes tend to exceed the limit of trade, a tendency which is owed to the volatile pattern of bitcoin. However, such a tendency can get you in a fix. According to many, bitcoin is somewhat like gambling. It is beneficial if and only if done properly and being in limits.
- Before trying your hands in bitcoin trading, conduct proper researches as trading without any strategy or little knowledge would be preposterous.
- Divest yourself of emotions while stepping into such a trade. You need to be completely professional and make dealings on rational terms. The two emotions to be gotten rid of are fear and greed. Obliterating them save you from putting yourself in harm’s way.