How to trade Bitcoin correctly?

Bitcoin is one of those digital currencies that the demand continues to grow every day.

20 April 2020

Bitcoin is one of those digital currencies that the demand continues to grow every day. Due to the fact that its value is constantly changing, the bitcoin trader can use it for their professional purposes and thus make a profit. This financial instrument is characterized by crazy volatility. If you manage to get into the trend, then the profit can be simply colossal. The risks are also very high, but if you correctly approach the process of buying and selling, then they can be bypassed, thereby always remaining in the black.

How to start trading bitcoin on the exchange?

In order not to lose your entire deposit at the first entry into the market, professional traders recommend starting trading on a demo account. This will allow you to better understand the trading platform used, as well as hone trading strategies. Regardless of whether you are trading Bitcoin or any other cryptocurrency, you need to consider how long the project is and whether it will close in the near future. Experts point out that Bitcoin as such will disappear after 2100. Thus, you can still invest in this cryptocurrency for a long time. To start trading with this financial instrument, a trader will need to take into account several main points for this:

  • The maximum and minimum indicator of the course in separate time intervals;
  • News background around this cryptocurrency;
  • Upcoming economic events that directly relate to cryptocurrency.
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Professional traders know that it is strongly discouraged to enter the market at the maximum trend indicators. If the rate of the cryptocurrency approaches the maximum, then you should not buy a coin. The same is true with the reverse situation, when the course approaches the minimum indicator. As practice shows, at such moments the course can turn sharply and go in the opposite direction.

The nuances of trading bitcoin on the exchange

As the charts show, trading bitcoin on an exchange is very similar to trading with traditional currency pairs. Candles are also formed here, a trend appears and the rate can fall sharply, or soar up. However, things are a little different with cryptocurrency. The historical framework of the coin is very limited, which cannot be said about popular currencies, in particular, the dollar or the euro. In addition, bitcoin is not directly tied to any country, so any events that take place in individual states will not affect the bitcoin rate.

Technical analysis for trading cryptocurrency is suitable, but it must be applied with some amendments:

  • The rush around the sharply jumped rate has a special effect on the value of the coin, but you shouldn’t rely heavily on this factor and “drain” all your coins at once;
  • The market is interconnected with trends. This rule works not only with currencies, but also crypto. If the trend begins to change, then the course itself will begin to change along with it, while its movement will be gradual, and with a slight correction;
  • The dynamics of the value of bitcoin is so high, then there have not been any repetitions of the price in it yet, so the rule “history repeats itself” is definitely not worth it. It is likely that this will change over time, but certainly not now.
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As you can see, fundamental analysis is suitable for trading bitcoin, but you shouldn’t be completely guided by its principles either. As for fundamental analysis, traders hardly use it. The question arises – how to successfully trade bitcoin on the exchange? There is an answer, and it is quite simple. Experienced traders simply constantly monitor news on social networks and are active participants in thematic forums. It is here that you can find the reason that can lead to both an increase and a fall in prices. For example, news about the next hacking of a particular cryptocurrency exchange can make a special contribution. Such news is a way to undermine confidence in bitcoin, which means that it will adjust its rate to the disadvantage of the coin itself.

What strategy should newbies use?

As practice shows, bitcoin trading on the exchange shows itself perfectly when using a strategy such as scalping. Its main feature is short-term market entry. In this case, it is not worth counting on a large profit, but it is this strategy that allows you to bypass the big risks of incurring serious financial losses. The advantage of scalping lies in the fact that this strategy is very easy to use, so it will be very easy for a beginner to deal with it. To count on a fairly large profit, you need to work with a large lot, but here again there are very serious risks, so beginners are advised to follow a conservative approach.

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