Trading Bitcoin correctly – tips that can help you get started
Proper and effective Bitcoin trading is not magic. However, a basic understanding of how and where to act safely and efficiently is still required. Because of the success of cryptocurrencies, there are automatically black sheep who are out for fraud. Let’s focus on “correct” trading with some of the most important rules. Speculations with derivatives, in which a bet is made on developments in the Bitcoin price without a physical purchase, should only be considered marginally. With a few basics, you should be able to get started with the topic of “properly trading Bitcoin” quickly and without major risks. Of course, the important note on volatility (range of fluctuation) should not be forgotten at an early stage. No matter how well prepared you are for trading, as the trade is also called, start. Cryptocurrencies such as Bitcoin, Ethereum, Ripple and all the others are still subject to significant fluctuations. Such movements can also occur within manageable time windows.
But this can also offer opportunities that you will only encounter so acutely in rare exceptional cases on the stock market and other sectors of the financial sector. Now let’s look at the announced important rules for starting Bitcoin trading. If you plan correctly, you can collect considerable income quickly after the first investment. It is obvious that the rules mentioned here can only be a selection from many. The opinions of real crypto professionals vary as to what the essential tips are. Professionals can usually agree on some aspects.
Rule 1: Which trading variant is best for me?
What sounds easy is often less easy in practice for beginners than it appears at first glance. Because the emergence of new financial products in the field of crypto derivatives such as Bitcoin futures or options (as well as comparable offers based on Altcoins such as Ethereum) is currently attracting many institutional investors. But the approach can also be profitable for private investors. The direct purchase of coins and tokens requires a certain budget. Even if investors only buy fractions of currencies – for example in the form of Satoshi unitsof bitcoin – can be purchased. It takes a lot of patience until minimal investments turn into positive returns. Instead of trading Bitcoin directly through crypto marketplaces or exchanges, options and other derivatives can become a quick route to success. In particular, binary options and contracts for difference (CFDs) are interesting.
Bitcoin can often be traded here with very little capital. The movements of the crypto courses are speculated or “bet” on. Many platforms even allow this with leverage, so that a multiple of the actual budget can be invested in positions. However, the risk is correspondingly high, which is why beginners should approach this route with caution. Many a BTC trader is active in both areas. Derivative products can be used to secure “physical” purchases, which is also referred to as “hedging” in technical jargon. Targeted speculation on falling prices can offset losses from actual price declines.
Rule 2: Find the right exchange/trading platform
The crypto market is now huge, providers from all over the world are also courting customers from all over the world. However, not every platform suits every crypto trader. If you want to trade Bitcoin correctly, you need a serious and transparent working partner. It does not necessarily have to be a stock exchange. Many platforms get their rates from different exchanges and thus always promise the best current prices for buying and selling digital currencies. We recommend operators who are licensed, regulated and/or controlled by the state. A deposit guarantee for the available customer capital on trading accounts should be in place if losses occur through the fault of the provider. Own fault can of course not be secured.
Good portals also offer analysis tools that can be of great help to you when trading. Good customer service should be guaranteed, especially for beginners. In addition, beginners usually want to start cautiously and with little capital. A low minimum deposit amount as well as low minimum investment amounts make sense in this context. You can gain experience particularly quickly and with little risk with a free demo account , as provided by some exchanges and platforms. In this way, beginners learn how Bitcoin trading works properly and which strategies can lead to the goal.
Rule 3: Know the most important factors influencing the Bitcoin price
Anyone who has had experience on the traditional stock exchange knows about the many possible influences on price developments. In order to be able to trade Bitcoin correctly, you should also know what risk factors and positive features there are. Unlike stock exchange trading, cryptocurrencies can be traded around the clock. Thus, the BTC price can also change at any time of the day or night.
These aspects can affect crypto courses:
- Supply & Demand
- the current market capitalization
- News from politics and economy
- Industry News
The generic term “industry news” can include, for example, headlines on further implementations of Bitcoin, innovative blockchain developments, new regulations, reports on hacker attacks, increasing interest in Bitcoin as an industry and much more information. Media reports on political and economic developments are relevant not least because Bitcoin is gaining recognition in the real world more and more quickly.
Rule 4: Find the right wallet for your bitcoins and set secure access data
There have been repeated reports in the past that traders are best off not storing their reserves in digital wallets offered by exchanges and platforms themselves. The reason is repeated reports of hacker attacks with subsequent economic damage for providers and customers. External wallets are often recommended. There is a large selection between paper wallets, cold wallets, app wallets or hardware wallets. There are differences with regard to possible one-off or regular costs. There are always security risks – you should be careful with access codes and other important wallet data. Do not give the data to third parties without further ado. Passwords and private keys belong only in the hands of the wallet owner.
Rule 5: Define suitable strategies to trade Bitcoin correctly
Many trading strategies can lead you to your goal. But not all work equally well for beginners and advanced users. Day trading is a popular strategy. Here everything takes place within one trading day. The so-called scalping sometimes works with even shorter periods of time, but above all it is speculated on small fluctuations in the prices. Automated bitcoin trading is also increasingly finding fans among investors. It relies on software that acts independently on the basis of predefined analysis characteristics, without you having to do anything manually yourself. You will often come across the term “ hodle ” in guidebooks on the topic of “doing bitcoin correctly ”.
Hodlers acquire and hold cryptocurrencies for the long term and do not sell holdings early. The equivalent from normal stock exchange trading is the idiom “buy and hold”. Here, too, speculation is being made on long-term price increases. In any case, a trading plan can be useful. Without a fixed goal in mind, crypto trading quickly becomes pure gambling. Defining your own return targets, your willingness to take risks and the appropriate risk-reward ratio will help you to avoid losses beyond the individual pain threshold. From a professional point of view, it is appropriate not to take the proverbial full risk right away with the first transactions. Approaching it normally proves to be a good way to be able to trade Bitcoin properly.
Setting suitable goals for yourself also prevents ill-considered decisions. There will always be temptations in the form of unexpectedly significant price swings. You should weigh up the extent to which you can and want to afford to take part in a run, both subjectively and objectively. In order to trade bitcoin properly, one must know its limitations. However, this also applies in the event that prices fall dramatically. Anyone who threatens to lose their head in such moments should consider giving preference to less volatile areas of the financial market. Here and there, it is the so-called “big fish” that decide the fortunes of the market.
Rule 6: Learn to live with losses
Anyone who wants to trade Bitcoin properly must be aware of the risks. An important realization of many beginners after some time is: Losses are part of everyday life. Thanks to the high volatility, experience is required. Initially, but not only then, you should not lose your nerve if you are threatened with losses and sell the entire inventory of your wallet directly if a minus is imminent. Many guidebooks point out that returns are achieved on average with about a fifth of all trades. In this area, profits simply have to be so high that they offset the losses of the possibly 80 percent successful positions or still achieve a profit.
Rule 7: Do not just trade Bitcoin and Altcoins out of boredom
It doesn’t work without motivation. Hardly anyone would think of investing money in the stock market just to pass the time. It takes interest and the willingness to deal with the influences and developments mentioned above around the leading cryptocurrency Keeping an eye on Bitcoin and its countless competitors from Ark to Zcash. Always remember: each of your losses is another trader’s gain. Either you really get involved in the crypto market with all its opportunities, risks and special features, or you prefer to look elsewhere for investments where success is associated with less effort and time. However, those who are willing to embark on the adventure of Bitcoin and Altcoins with comprehensive preparation will become part of a growing community and a market that offers some exciting opportunities, especially in problematic phases of the global economy.
With increasing acceptance in trade and regulations, the division continues to grow rapidly, which will result in more products. And so you can always trade Bitcoin correctly in new ways.