Everyone has their own methods – and this probably DOESN’T line up with any proven method of seasoned pro ‘day traders’…but I have managed to make enough profit to buy an iPhone for my hubby and a few flights to Queenstown for my little family. I’ve lost on a few trades, but all in all, made a tidy little profit – and keep on doing so.
DISCLAIMER 1: I am NOT a financial whizz kid. I barely passed mathematics in school and was more interested in writing poetry than completing my trig. (Incidentally, when it comes to Bitcoin and the up and down of its value (which happens daily), I have discovered that the more unmathematical you are, the better. Too much analytics kills a killer instinct.)
DISCLAIMER 2: This advice is for the absolute novice. If you’re after comments on things like ‘stochastic’ – read someone else’s blog post.
Here are 7 easy steps to get a novice trader going. I got hooked after step 3!
Step 1: Read up about ‘contract for difference trading’.
I read the really basic tutorial here: http://www.learncfds.com/cfd-tutorial-introduction/ . It gets confusing pretty quickly, so let me summarise: you’re trying to predict whether value (in this case the value of Bitcoin) will go up (in which case you ‘buy’) or down (in which case you ‘short’). You buy Bitcoin, and then predict it will go up or down. When you are right, you make profits; if you are wrong, you make losses.
CFD trading is ‘leveraged’ meaning you put down a small sum as ‘surety’ to but a larger sum. This means you can win fast; but also means you can lose fast. The greater the leverage, the quicker this happens.
Step 2: Open a trading account.
I use Plus500. It takes a while to open an account. Most of the questions are aimed at uncovering if you’re American live in America or have anything to do with America (CFD trading is a no no there). You may have to fill in a survey at the front end too. My results were that I was uneducated about financial markets and they recommended I do not trade!
Step 3: Get free $.
Most trading accounts give you a teeny amount of $ to start trading with for free. Use them. Place your first ‘order’. It’s realllly easy – just ‘buy’ or ‘short’ (see Step 1) and watch what happens. See it as an experiment. Use the demo account option if you’re too afraid of a real live trade. There is nothing like practice. After your first trade, you’ll ‘get’ what the terminology means.
Step 4: Load some real money onto your account – money you can afford to lose.
I started by investing $200. That was enough to play around a bit and was what I could afford to lose.
Step 5: Set rules and stick to them.
You do need a strategy and rules and you need to stick to them to prevent losses you cannot manage. Mine is simple:
- A win is a win – I set trades to close quite quickly. I am not greedy. I would rather a trade closes at $150 profit than have it shoot to $250 profit and back down to -$450 overnight. I hate to wake up and regret not closing when I should have.
- Tight margins – I do not ‘buy’ or ‘short’ without looking at previous days and ensuring that I am going in at the right point to take advantage of a small dip or climb.
- No trading when tired or rushed or emotional or angry or…you get the point – this is a recipe for disaster.
- Read the news – Bitcoin thrives when Trump does something silly. It dives when it’s facing hackers, a security breach etc. Skim the free analysis sites. You may not understand them, but ‘rise’ and ‘fall’ sentiments are pretty easy to grasp.
- Don’t wait! – Killer instinct is key. Bitcoin is unforgiving. Go with your gut.
- (Most set stop losses and you should consider that as part of your strategy. I never do with Bitcoin…most would call me crazy.)
Step 6: Bitcoin is a sure win.
Some would argue with me, but Bitcoin fluctuates daily – both up and down. Watch it for a few days. If you ‘buy’ or ‘short’ at the right level, and set the system to close your trade when you have taken advantage of a small dip or climb, you will make profit.
Important:
- Don’t get a fright when every single trade you open goes into loss at first. This is normal. The ‘spread’ (price you buy at) is higher than the actual price and it’s how the platform makes money.
- Most people set ‘stop losses’ – they set a pre-determined point at which they want the platform to close their trade (so that one bad trade doesn’t take all its capital).
- I set a point at which the trade should ‘close at profit’. Bitcoin is very volatile and as quickly as you are in the green, you could go into the red. I like to set the system to close my trade when I’ve made the profit I want.
- Read the expiry date on trades! My first trade saw me open a trade that would only be valid for ten more minutes. Rooky error.
Step 7: Wait.
It sounds stupid, but most people ‘freak out’ as soon as a trade goes into loss. I have on previous occasion closed a trade that was seriously in the negative only to wake up and see that if I had hung on, I would be well into profit. Bitcoin is scary, but the rewards of hanging on are great.
Good luck! The CFD trading bug bit me pretty hard. I stayed awake for hours on end watching the ups and down (New Zealand is not a great timezone for day trading - nights are when the action starts). I’m smarter now – I set my limits and I sleep while Bitcoin does its thing. It is high risk, for sure. It’s also high reward. Let me know how you go!
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STOPGreat to see how you've embraced trading, Jody!
Thank you - it has me hooked!
need to bookmark this post, and re-read it carefully later :D . thanks for the info
Glad it's useful to you!
Discpline is the key. You can't be hasty on your trades. You really have to HODL and keep the faith! :)
Thanks for joining the conversation! Discipline is key!
My pleasure dear @jodywrites. :) keep us updated for more crypto talks will you? ^u^
Fan-bloody-tastic !!
Peace, Love, Disco baby :)
Thank you hahaha DISCO!
Im doing a similar thing .. using my mining proceeds to play noob-trader through wallets :)
So far so good ..USD$450ish after a bit over a month :) beats playing space invaders !
Dont walk - Boogie :)
This is very impressive - well done
Thank you
Great article , discipline is the key , good luck !
Thanks for that!
Congrats on your results.
thank you!
How do you go about managing risk? This is what really matters when it comes to trading.
Stop losses are great. Also - I invest x amount and then be sure to withdraw that in profits so that I lose nothing financially before placing a risky trade...
Having said that I am a complete novice and you may have better advice - feel free to share it.
Are your stops a certain % of your overall account?
Do you risk less than you are targeting per trade?
If I trade anything other than Bitcoin, yes I set percentages. When it comes to Bitcoin - I take larger risks...let's be honest - it is so volatile that you could be WAY in the red one evening and in the green 12 hours later and stop losses may just lose you money. My secret is investing small amounts of cash...and again, I withdraw what I invest the minute I make $ so that there's no risk. I lose nothing.
Well yes, a stop loss is there to lock in a loss. But the idea is that by locking in a los early when you know you are wrong, that it doesn't get out of control and just 1 bad trade wipes out your entire account.
I can see what you're saying that volatility can mean you'd get stopped out when it's just a whipsaw and the market then goes you way, but without one, what's to stop the market just continuing to go against you? Managing your risk to the downside for that 'what if' bad trade is KEY.
I certainly agree :-) With most trades I set the losses tightly...with BITCOIN I am more liberal...