5 Bitcoin trading tips for crypto beginners
In just a couple of months, Bitcoin has doubled in price and retail trading of cryptocurrencies has been taking the financial markets by storm. Along with Ethereum and other altcoins, Bitcoin is surging in trading volume while all other markets have been going through quite a bit of turbulence due to the recent US-China trade war.
The crypto markets may have their own bouts of volatility which is also a big attraction for investors because they can get in and out of the market and profit from the rapid movements.
If you are just getting caught up in all the crypto craze, keep reading for some tips that can help squeeze you into the next level of your Bitcoin trading journey.
Get started on the right foot
Crypto enthusiasts mainly enjoy buying and holding their coins and most have actually endured the highs and lows of recent years without budging from their bullish sentiment – even when the price surged to the massive $20,000 levels near the end of 2017.
However, the best way to go about trading Bitcoin and other cryptocurrencies could arguably be by treating the coins as a speculative instrument like a commodity which can be traded via brokerage on the live markets.
Trading Bitcoin through a brokerage provides a slew of advantages but what takes the cake is the simplicity and accessibility of the whole experience as well as the fact that you don’t spend your time worrying about the price going down and losing your investment. Instead, you have the ability to speculate solely on the price and turn a profit if it goes in your direction.
Want to get things rolling?
- Find a regulated CFD broker that offers cryptocurrencies
- Try trading on a demo account to familiarize yourself with the market
- Fund your account and trade on a live account with real money
- You can speculate that the price will go up and go long or that the price will drop and go short
Prioritize low pricing
Since you won’t be doing a one-time purchase and each trade incurs a fee which can slowly eat away at your profits – it’s best to start with a broker that can provide you with low fees. A significant amount of Bitcoin traders usually open at least a couple of trades per day in order to quickly snatch some profits during the market’s sharp moves and if you are going to follow the same strategy – typically called scalping – you should look into the lowest fee structure possible.
As a rule of thumb, the most favorable trading fees (spread) will be on Bitcoin because it’s the most liquid of the cryptos and enjoys massive daily trading volume which makes transactions cheaper and faster.
Cheaper spreads give you more headroom when planning and executing trades and as such, you should ensure that it’s at the top of your list when deciding on the broker you will open an account with. However, always make sure that the broker is regulated since it’s the best step in safeguarding your investment from any kind of malicious activity.
Follow the news; beware of the hype
There’s a big chance that hype from social media is what led you here in the first place but it’s important to not get caught up in it because, more often than not, it may lead to false signals. However, that doesn’t mean that you shouldn’t pay attention to the news. In fact, if anything, you should always be on top of the news. Live news feeds should be a Bitcoin trader’s bread and butter. News announcements from reliable sources usually have a significant impact on crypto rates and as a trader, you can’t afford to not include these fundamentals in your trading strategy.
Admittedly, technical indicators with lines and crosses on the chart may seem a little bit daunting in the beginning, but technical analysis is a crucial part of trading Bitcoin as well as any other instrument. No need to go overboard, however, since one or two indicators should be enough to confirm your reasoning for taking a trade or not.
Some indicators are more complex than others so when you are starting out – it’s more beneficial to start with the simple ones like moving averages and support and pivot points. Traders in financial markets have their own methodology of trading but everyone must look at price action at some point. Technical indicators look for patterns that have appeared on historical data and can help predict future reversals or breakouts. Learning how to apply them on your own analysis can give you confidence in confirming your findings.
Use leverage but exercise caution
Leverage is usually the cause of the downfall of many accounts but what most fail to mention is that it’s the main reason behind all success stories. Typically, the rates of financial instruments don’t move by a large margin and mostly have tiny up and downs that are hard to profit from. However, when you introduce leverage into the equation, things get way more exciting since with the additional buying power that leverage provides – even the smallest price movement can result in a significant amount of profit as well as loss.
Also, you can always scale back the amount of leverage you are using on your trades at any given time. The higher the leverage, the more exposed you will be at downside risks. If you can manage leverage effectively along with a proper money management mindset, your risk will be greatly diminished.