Trading in cryptocurrency is not an upcoming trend anymore, it has risen so much over the last decade that now it has become a huge industry, especially in markets such as forex trading. These markets are now mature and handling trillions of dollars of trades daily. So, it is only natural for people to trade on such platforms and advantage of the ever-changing market and make a profit off of it.
Many people are trading currencies, commodities, and even stocks on such platforms to profit from their volatility. Traders like to choose volatile markets because these are the markets that give them the most opportunity to profit from short-term trades. As a result, they choose various currencies and stocks that are volatile and in the case of cryptocurrencies, the most volatile cryptocurrency right now is Bitcoin.
Hence, the reason for its popularity is that there are myriad ways you can profit from trades on platforms using Bitcoin as a cryptocurrency. And here we will be discussing how you can achieve that.
Key Steps To trade a Bitcoin
When trading Bitcoin on different platforms, you must understand that anything can happen. Just because, now you are on the trading platform doesn’t mean that you will get rich overnight. There are four steps that you must first understand before even thinking of trading Bitcoin. So here are some prerequisite steps you must take if you aim to trade in Bitcoin.
- The first step required to get started is to buy Bitcoin from a Bitcoin exchange so that you have actual cryptocurrency to trade on a specific trading platform that way you can avoid scams.
- The second step involves creating an account on a Bitcoin trading platform so that you will be able to track and monitor all the changes occurring in the price of Bitcoin.
- The third step involves you depositing all your Bitcoin onto that platform so that you have cryptocurrency available for trading purposes.
- And the fourth step involves you understanding the basic principles of trading therefore, you can devise new strategies based on your own experience and intellect. These are the four essential steps you must learn and take to heart if you want to be a successful Bitcoin trader.
To trade Bitcoin, you must first need to understand a few core steps of trading, if you are to avoid scams and other losses that can happen if you aren’t careful about these things. So here are five different concepts that you need to know and understand to make sure that you are in a safe area.
Longing and Shorting
These aren’t tricky terminologies that have some rocket science behind them. These are traders’ terms that they use to describe buying or selling. Long means that you are buying an asset for a long duration, and you will hold on to that asset.
On the other hand, a short means that you are selling your asset, and you will be either taking a profit or a loss on that particular trade. So if anyone says “I am going to short, I don’t see anything in near future” it means that person is going to sell his share, or in our case crypto coins, as they don’t think it will profit if they keep it for any longer.
Futures Trading and Spot Trading
These are the two different concepts that are very frequently used when you are trading in Bitcoin cryptocurrency. Future trading and Spot trading, are two different ways of trading on different platforms.
Spot trading is a form where you will be trading your Bitcoin without any leverage on the spot. You will trade directly with your current cryptocurrency, and the profit will return to your account.
On the contrary, Futures trading is a form of trading with leverage because you will be trading on futures contracts instead of actual Bitcoins that you currently own or have in your account.
Using Futures trading has advantages for you to do so. However, if, for some reason, your parade does not go as planned and you have raised the leverage to an absurd amount, it will cause you a very significant loss as well. Your balance on the platform for exchange purposes will be used as collateral and will be subtracted from your account. Also, keep in mind that different platforms have different rules and regulations for Futures Trading. Currently, the most popular is ByBit, because it has very flexible rules and regulations for its readers, giving traders an advantage.
Resistance and Support
These concepts are much like supply and demand in the real market. The main aim of resistance is to ensure that the price doesn’t go beyond a certain level, making it much more expensive. On the other hand, support makes sure that the price goes lower so that the traders who are waiting for their chance can buy the stock at its lower point. So basically, traders will short their stocks at resistance, and they will long at the support. It will be most profitable when it goes up again. These are the basic trading strategies you must understand while trading.
It is an intelligent way of trading Bitcoin and is very commonly used. Using charts can help you divide the perfect strategy for profit-making in Bitcoin trading. There is also something known as a breakout trading concept. According to this concept, what you have to do is whenever the price goes beyond the support or resistance level, you short or long the stock. You can notice this quickly on the chart if the support and resistance lines meet together, that is the point where the price will leave the range of the support and the resistance range. At that point, many smart traders will identify and notice the breakout point and long their trades because it is very profitable.
There are a lot of charts and patterns that you must familiarize yourself with to make sure that you understand how the trade is going to end up. There are three board categories of these patterns: reversal, continuation, and bilateral. Each of these type patterns has further different categories and subtypes.
Reversal patterns have patterns and charts like the double top, head and shoulders, rising wedge double bottom, falling wedge, and inverse head and shoulders. Similarly, there are six different types of continuation patterns: falling wedge, bullish rectangle bullish Pennant, rising wedge, bearish rectangle, and bearish Pennant. The third type of pattern is the bilateral pattern with charts called ascending triangle, descending triangle, and symmetrical triangle.
All this may seem too overwhelming at first but once you get started by learning any one technique and just enter the industry, you will automatically learn all the patterns.
The last basic concept that you must understand to make sure that you are making a profitable trade is risk management. Risk management, or in other words known as stop loss, is a tool that is offered by many trading apps and software that will make sure that the loss is going below a certain point. The trade will automatically close itself so that further loss can be avoided. This way, not only will you ensure that you are not losing any money, but in case you forget about anything, automatically closing a trade can be helpful because it will protect you from a significant loss. Otherwise, there is an excellent chance that you will continue to lose money and eventually lose all the sum that is present in your account. keep in mind that when you are on a trading platform, you are there to win, however, it does not mean that you stop caring about losing money.
Therefore, you must stop losses at every trade so that the losses can be minimized as much as possible. It is crucial because even after you have a lot of money, you must protect the capital you have earned after meticulously strategizing every move. It is also one way that you can become a successful Bitcoin trader.
Types of Bitcoin Trading
Bitcoin trading is a vast market, and there are three major types of Bitcoin trading. Frequently people choose a different way of trading and you have to decide what suits you the most. These three types of trading are known as Swing trading, Day trading, and Passive trading.
Swing is a type of trading where you continuously observe the market for several days or weeks before you make your move. The second type of trading is known as Day trading, wherein you make your trading on the same day on which you observe the market. Passive trading is a type of trading wherein you make prolonged moves and hold your positions for a long time. It is more closely related to investment banking than active trading.
As cryptocurrency is independent of government and centralized authorities and works via peer-to-peer exchanges. Therefore, having in-depth knowledge of crypto trends is important before you are planning to invest in cryptocurrency. It consists of basic steps from choosing a service or menu for purchasing Bitcoin to making an order after realizing all the safety and security issues.
Read more: How to buy bitcoin