Bitcoin Trading is speculation on movements in the price of the cryptocurrency. It conventionally involves purchasing Bitcoins. With a hope that the price of cryptocurrency shall rise in future, the Bitcoin traders use derivatives to speculate on rising and falling prices. This is done to make the most of Bitcoin’s volatility.
The position on the price of Bitcoin can be taken with financial derivatives like CFDs. It helps to take advantage of price movements in either direction. Bitcoin trading involves seven essential steps, which shall be discussed further. Make sure you keep reading for more.
Steps To Trading Bitcoin
- Understand What Moves The Price Of Bitcoin
To surge for opportunities, it is essential to understand the factors that affect Bitcoin’s price. Factors like Bitcoin supply, bad press, integration and key events impact Bitcoin’s price.
- Select A Trading Style And Strategy
Before starting to trade, it is crucial to choose a Bitcoin trading style and strategy. Effective trading styles are Day Trading, Trend Trading, Bitcoin Hedging and HODL.
- Select The Exposure To Bitcoin
There are a few different methods to get exposure to Bitcoin. These ways are: trading Bitcoin derivatives, buying through an exchange and crypto ten indexes. To get the exposure of one Bitcoin through an exchange, the full cost of the coin is to be paid.
- Analyse Whether To Go Long Or Short
Trading financial derivatives have made it possible to go for both long and short. The sentiments of the current market are the basis on which this is decided. Going long means it is expected that the price of Bitcoins shall rise. Going short means, it is expected that the price of Bitcoins shall fall.
- Setup The Stops And Limits
Stops and Limits are considered to be vital risk management tools. Different Stops like Normal Stops, Trailing Stops and Guaranteed Stops help manage the risks associated with trading Bitcoins.
- Open And Monitor Trade
To open yourself to trading Bitcoins, you would buy one if you thought that the price would rise, or you would sell one if you thought the price would fall. Once the trade is open, there will be a requirement to monitor the market to ensure that it’s moving in the way you anticipated it.
The technical indicators in the Bitcoin trading platforms help determine the movement of Bitcoin price, and it helps monitor market conditions like volatility and market sentiments.
- Close The Position To Take Profit Or Cut Loss
As an investor, you can close your position and take your profit whenever you want. You can even choose to cut a loss when it reaches a level that makes you uncomfortable. The profits related to the trade is directly paid into the trading account.
The Bottom Line
Bitcoin trading has taken the world on a roll, and it has created a major impact on the financial market. The steps mentioned above are the best ways to start trading Bitcoins and consider the associated risks.
