If you want to get involved with cryptocurrency trading, it’s essential to do extensive research on the subject matter before embarking on the crypto trading journey, especially on choosing a reputable digital wallet and a crypto exchange. Some of the well-known crypto trading platforms are Binance, Kucoin, Bitcoin Prime, Kraken and many others. In this article, we’ll cover the basics of Bitcoin trading to help you familiarize yourself with the basic terms, making a trading plan, and learning how to execute the plan to gain the most profit. So here’s a quick guide on Bitcoin trading for beginners.
What Is Bitcoin Trading
When it comes to cryptocurrency, it’s better that you do thorough research on the subject to make an educated decision about it. However, in bitcoin trading, it’s a whole different story; it’s how you can speculate the movements in the market value of cryptocurrency. While this method is traditionally involved when purchasing cryptocurrencies, or Bitcoin for that matter, hoping that the prices increase over time, traders are using financial derivatives to know the rise and fall of prices to make the most out of its volatility.
How Trading Compares to Mining
When people typically buy Bitcoin or any cryptocurrency for that matter, it means that they’re buying them for the long term; in other words, they believe that its market value will rise and they’ll get a huge return on investment when it does. Moreover, most of the people who invest in Bitcoin truly believe in the potential of its ideology, technology, and the team behind the digital currency to have real-world usage in the future.
On the other hand, Bitcoin traders only buy and sell crypto for the short term whenever they think that a significant profit can be made because, unlike crypto investors, traders see Bitcoin as a mere instrument for making financial gains. There are even times when traders won’t bother doing thorough research with the technology behind the product they are trading, as long as they see great profit at the end of it.
The Different Trading Methods
Unlike investing that is typically a straightforward process, traders get their profit from making short term cryptocurrency trades. While all crypto traders practice different methods to earn a profit, they still want the same thing. So here are some popular examples of crypto trading types:
Scalping is a day-trading strategy that is slowly becoming more popular than the other techniques. The general idea of scalping is that it attempts to make a substantial profit whenever there’s a change in the price regardless of how small it is, and it’s most often referred to as picking up pennies in front of a steamroller. Moreover, scalping primarily focuses on short-term trading, and it’s based on the idea of making substantial profits from repeated trades that have small risks, thus creating an advantage for traders.
Day trading is closely similar to scalping because this method involves making numerous trades all throughout the day while trying to gain a profit from short-term movements. Day traders typically spend most of their day staring at their computer screen, looking out for a possible trade that can get them the most profit, and they usually close out all of their trades by the end of each day.
Swing traders take advantage of natural swings of the market value of cryptocurrencies; they typically try to see the bigger picture without monitoring their computer screen constantly. For instance, an experienced crypto swing trader opens a trading position and then holds it for a long time, weeks or even months, until it reaches the result they have desired. Swing traders generally try to spot the start of a particular price movement and then enter the trade; they hold it for as long as they can until the price movement dies out and take the profit along the way.
When it comes to trading cryptocurrencies, especially Bitcoin, it can be quite difficult, especially when the market values of crypto keeps correcting. However, if you do your research and develop a solid plan while familiarizing yourself with this guide, you should be able to trade more while being handsomely rewarded for it, even more so than an average experienced trader.