Bitcoin trading is taking the leading role in the trading market as many people are now looking to make some profit from the crypto space. This is because, unlike the other trading options such as Stock exchange and forex trading, crypto trading as a whole never stops. It is available every time of the day, all week long, making it possible for several people to earn at once.
Trading can be quite difficult as a beginner, because you have not mastered the basic points to note before going into crypto trading. This article will point out the basic things you need to know before you kickstart your bitcoin trading career.
How Is Bitcoin Trading Different from Investing?
Before going ahead to trade bitcoin, you need to know that it is quite different from investing. An investor is someone who buys a specific amount of a particular commodity and intends to hold it for a long time, with the hope of making a profit from it in the long run.
This is not the case with a trader because the trader usually considers short-term gain based on market fluctuation. Hence, while the investor does not bother about the short time price fluctuation, a trader is more interested in the highs and lows of the market. Thus, traders buy low and sell high.
What You Need to Start Trading
Before going ahead to trade bitcoin, you need to know and have some things, and these are highlighted below.
- Register with a trading platform: Different bitcoin trading platforms are available for you to pick. Some are more favorable to some particular countries or regions. Do well to read the review about each one, before deciding to register with the platform.
- Verify your account: Most trading platforms will require you to verify your account before you begin trading with them or to enjoy all the features of the platform. Verification can range from a phone number, email address to ID verification.
- Make a deposit: Once verification is successful, you need to make your first deposit on the platform. It is important to note that some platforms might offer you the opportunity to trade with a demo account. However, this will only be for learning purpose, because you won’t be able to withdraw your earnings from a demo account. Hence, it is cogent for you to deposit if you want to gain on the platform.
Familiarize Yourself with The Terminologies
This is an important point, and that is the reason it is separated from the rest. It is essential for you to know some basic trading terminologies, so you won’t get lost while trading on the platform of your choice. The beautiful part of this is that most of the trading platforms offer educational materials, which will help you, familiarize yourself with these terminologies. However, some of them are highlighted below:
- Bitcoin Price and Volume: Bitcoin price refers to the value of bitcoin at a particular region, at a given time. This can vary from one country to another because of the currency differences as well as the difference in trading options. Volume, on the other hand, refers to the overall quantity of Bitcoin that is in circulation at a given time.
- The Market Order Book: This is usually on the trading page of almost all trading platforms. It shows the buying and selling orders taking place at a particular time in the market. The buying orders are referred to as “Bids”, while the sell orders are called “Asks.”
- Market Order: This is the order placed by a buyer or seller at a particular time, requesting a certain amount of Bitcoin. Once this order has been placed, it will be fulfilled at the lowest possible price. This means that the sellers with the cheapest rate will offer the quantity they have, and the market will automatically do the pairing.
- Limit Order: Limit order allows traders to pick a particular amount at which they want their buy or sell orders to be filled. For instance, if the price is high and the trader is anticipating a low price, the trader can place a limit order, signifying buying or selling at that anticipated low price.
- Stop Loss: Stop Loss is another option that helps traders to minimize their loss while trading. When a stop loss is placed on a sell option, for instance, it means the market should automatically fill an order if the price goes lower than anticipated, hence preventing complete capital loss.
Several other terminologies will be learnt along the way as a newbie trader. However, the ones highlighted above can help the beginning start a successful trading career.
Different Methods of Trading
Different trading methods are available, and it is vital for intending traders to know this. This will help them in selecting which option is the most preferred for them.
- Day Trading: This involves the trader buying and selling in different positions throughout the day. This means that the trader would try to make gain from different daily trend and analysis study. Traders who do this usually spend most of the day viewing their computer screen.
- Scalping: Traders who make use of the scalping technique usually rely on small changes in market prices. This helps them to consistently make small gains, which they believe will accumulate to greater gains in the long run.
- Swinging: Swinging involves leveraging on major market swings to trade. This means that the trader, having studied the market, will enter a buy or sell the option in a strategic position, hoping for the market to remain in that position for a long time. This type of traders can keep positions opened for a longer period than the other two.
There is no certainty in the Bitcoin trading market; however, carefully analyzing and following the trend can result in multiple gains. The market volatility sometimes makes the market seem unpredictable; however, a careful combination of the various trading techniques will go a long way in yielding positive results for the trader.