The Beginner’s Guide to Bitcoin Trading
Learning to trade Bitcoin is tough. Trading any asset is high risk with potentially high rewards. In the cryptocurrency market, both attributes are super-charged. The massive swings that can occur within just a few hours are far more exaggerated than they are in other markets. The price of Bitcoin alone can shift by 10% in just a few hours. This was evidenced as recently as two days ago (July 20, 2018).
Of course, such huge swings can be great for traders. However, they can also completely wreck your positions when they go against you. Trading is like playing poker, if you’re good, you expect to win more than you lose. The important thing is you will lose. The poker analogy extends here because keeping a cool head when you do lose is vital to long-term success in either field.
Ask Yourself: Do You Really Want to Trade this Market?
The first thing that’s important when starting out as a Bitcoin trader is being honest and realistic. Do you have the money to comfortably support yourself whilst you learn? This market is a 24-hour-a-day deal. You need to sleep so that’s four to eight (eight?! Yeah, right!) hours out of your day already. If you then need to go to a job, how much time will you actually have to study the markets? You don’t get to pick and choose when the markets make a move, you must be ready and waiting for them. In crypto, this can happen at a moment’s notice. Trading is stressful and in a never-stop market.
The second thing you need to ask yourself: “Do you have the patience to sit alone in an office chair all day staring at a single (or multiple) charts on a screen?” The life of a trader sounds amazing on paper. If you’re one of the 4% of traders who don’t lose money, maybe you’ll one day retire to the lavish Mediterranean marina lifestyle depicted in the movies. However, it’s much more likely that you’ll lose money trading. You might fluke a series of great plays in a bull market (not so difficult to do when everything is going up). However, just one poorly timed trade could wipe out all the profits and more from multiple trades.
Learn About Trading
If you’re reading this far into this article, we presume you still want to become a cryptocurrency trader. Getting started trading begins many hours away from exchanges and starts with learning patterns, signals, and other theoretical concepts. It requires an investment of much more than money. You need to learn and learn hard before you start.
The first step is to find yourself some good resources. A general understanding of markets would be a great starting point. Websites like Investopedia can give a great base level of knowledge for trading but they won’t be enough.
After getting to grips with how markets work generally, it’s time to explore some trading-specific resources. Follow popular traders who turned their hand to cryptocurrency markets in YouTube and various social media. Some even have their personal websites and blogs with loads of resources about different trading indicators, how you should use them, and offer consultancy services for the most committed aspiring traders.
Learn Some More About Trading
You might think after you’ve read through professional traders’ literature, you’re ready for your first trading account and a mammoth session at the charts. Well, no one is stopping you from doing just that. However, you will almost certainly lose money if you just go wading in.
Next, try out everything you learned using the play money offered by trading games and simulators. It might not be real cash, but you can get a very good understanding of how to use features like stop losses, limit orders, and other types of buy and sell options. After a few weeks applying the concepts you’ve learned to these risk-free trading simulators, you might finally be ready to take what you’ve been working on to the markets for real.
Find a Suitable Venue to Trade at
This is where it all gets real. Finding a cryptocurrency exchange to buy and sell digital assets at is easy. There are loads of them. However, you need to ask yourself: “Do I want to trade just Bitcoin or other altcoins?” as well as “Do I want to use a dollar-pegged coin like Tether or trade into real fiat currency?”
The answer to the first question should be straightforward enough. It will influence which exchange you eventually use though. If you want to trade just Bitcoin, you will need to give the second question proper thought. Since they lack a license to work with real money, many exchanges use something called a stable coin to allow traders to get out of the market without actually cashing off the exchange or going into real dollars. A good example of one of these is called US Dollar Tether. USDT is hugely controversial in the crypto space, however.
Should You Become a Cryptocurrency Trader?
It might be a long slog getting up to speed with everything you need to learn and based on the estimates that 96% of people lose money trading, it’s probably not going to be worth it for you. However, if you’re committed or think you can become part of the 4% that beat the markets, why not!? The best thing about cryptocurrency trading is that there is virtually no barrier to entry. You can literally just sign up for an exchange and start buying and selling if you want!