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There has been an ongoing debate about the actual identity of Bitcoin, whether it should be considered as a currency or a commodity.
More and more people however are of the opinion that Bitcoin can, and should be regarded as both a currency and a commodity.
Irrespective of whatever whether it is considered a currency or commodity, our main concern is that the constant swing in price of Bitcoin offers an opportunity traders and investors to make a profit by trading the cryptocurrency, either as a long term investment or in a short term pattern.
What is Bitcoin Trading?
Bitcoin trading is simply the of process of attempting to buy Bitcoin at a certain price and selling at a higher price, the difference between the two prices being your profit from the trade. The major goal being to buy at a low price and sell when the price goes up. It is however important to point out that you could buy at a certain price after which the prices drops lower in which case you would be in a loss.
There are two major types of traders in the Bitcoin market, they are ‘long term’ traders and ‘short term’ traders. Each of these group of traders are classified by how long they may wish to hold onto a given position of trade.
Long term traders are usually involved in studying price trends over long periods of time. This informs their decision to buy and hold Bitcoin also over long periods with the hope of taking profit at a price higher than their original entry point.
On the other hand, short-term traders analyze the daily behavior of Bitcoin price and seek to take advantage of the swings in price. These traders make their profit from the constant daily change in market price.
In its early stages, the swings in Bitcoin price was usually so huge as every little event within the crypto space had very serious impact on the price of the cryptocurrency. As adoption grows and Bitcoin becomes more stable, price volatility has reduced considerably and experts think it is a better time to trade the cryptocurrency, compared to an earlier time.
Trading Rules
Bitcoin trading can be extremely profitable if you follow a good strategy. It all depends on the market movement pattern.
So, as a newcomer to Bitcoin trading, you should follow these guidelines to help you better achieve your goals and get you started on a strong footing:
•Never put all your eggs in one basket. Your capital should be broken into smaller amounts to be invested in different coins. This way, when the price of one coin is going down, another will be going up and some your loss is reduced.
•Do not invest your life savings or money and do not borrow to trade either no matter how tempting it is.
•Take full advantage of available technology in order to gain maximum profit
•Understanding the market is a continuous process and requires a lot of time, concentration and effort. It is very crucial to do research and be up to date with current trends.
•Know when to cash in. It is important to stay focused, unemotional and professional.
•Traders should keep in mind that losing, just as much as winning, is an integral part of trading. It is the cumulative gains that count.
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Nice post, keep the good work. Perhaps it is convenient to mention also the "Arbitrage" aspect of trading cryptocurrencies, since there are a lot of exchanges where one can buy/sell them. In simple terms that would be when the price of one, for example bitcoin, differs between two places or exchanges where is traded, so, for example, one can buy a bitcoin in a exchange where is the lowest price and then immediately sell it on the exchange where the prices is the highest price.
Thanks , really appreciate the nice feedback. will write on Arbitrage soon
Excellent post.
I have found that shorting LTC works pretty well (especially combining LTC/BTC) Get in at bottom, get out on top. Pretty simple when you get used to it. As we know though, crypto is always changing so I'm always adapting to new trading options as well.
I do like Ethereum as a long. I also like Antshares, Waves and Bitshares as LONGs as well. Just my little minnow comment =D
Nice to meet you and have a great weekend!
Cheers!
thank, great weekend to you also
Great post. Very informative. I'm new to cryptocurrency investing and find short term trading a bit confusing. Since, all of the currencies and tokens fluctuate regularly, I don't fully understand what token or currency people tend to convert to when they sell? Do people typically convert back to currencies that do not fluctuate in price rapidly - like fiat (USD/EUR) or Tether (USDT) maybe? For instance, if you buy ethereum during a dip and want to sell when it swings back, do you sell ETH and buy USD? It seems to me that if you plan to convert back to Bitcoin or another token, then you have to be very aware of Bitcoins current price as well? Or is this part of the challenge of trading - knowing the spread between currencies/tokens? This is probably very obvious but its puzzled me for a while now. If you are willing to answer I would appreciate it :)
The only strategy I know is to get in early before anyone else does... And get out before it's dumped...