Bitcoin trading relies on speculating on cryptocurrency price movements. Today, cryptocurrency traders use derivatives to forecast rising and falling prices, taking full advantage of Bitcoin’s volatility.
1. Find out the factors that affect the price of Bitcoin
To seize the opportunity, you first need to understand the factors that affect the price of Bitcoin:
- Bitcoin Supply: The current Bitcoin supply is capped at 21 million, which is expected to be exhausted by 2140. The finite supply means that the Bitcoin price could increase if demand increases in the coming years.
- Negative News: Any breaking news regarding the security, the value of Bitcoin will negatively affect the market price.
- Integrated. Bitcoin depends on integration in to payment systems and banking frameworks. If successfully implemented, the increased demand will positively impact the Bitcoin price.
- Major Events. Regulatory changes, security breaches, and macroeconomic news can all affect the price of Bitcoin. The agreement between users on how to speed up the network can also support confidence in Bitcoin and push the price of the cryptocurrency.
2. Choose bitcoin trading strategy
- Bitcoin Day Trading
- Trade with the trend
- Risk room
- HODL (buy and hold)
How to trade Bitcoin during the day
Bitcoin intraday trading means you will open and close your position on the same day. This means you will avoid overnight fees. This strategy can be for traders looking to profit from short-term price movements of Bitcoin and allows them to make the most of daily fluctuations in the Bitcoin price.
Trade with the trend
Trend trading means taking a position in line with the current trend. For example, if the market is in an uptrend, you will go long and if the trend is down, you will go short. If the trend starts to slow down or reverse, you should think about closing the position and opening one in line with the new trend.
Risk hedging strategy
Hedging bitcoin means minimizing risk by opening an opposing position. You would do this if you were worried about the market going against it. For example, if you own some Bitcoin, but are concerned about a short-term drop in value, you can open a short position in Bitcoin with CFDs. If the market price falls, the profit from your short position will cover some or all of the losses.
HODL Strategy
The HODL strategy is to buy and hold Bitcoin. The strategy name is derived from the misspelling of the word “hold” on a popular cryptocurrency forum and is now often said to stand for “hold for your life”. Don’t take it too seriously, though – you should only buy and hold bitcoin if there is a positive long-term outlook for Bitcoin’s price. If your research or trading plan dictates whether to sell positions to take profits or limit losses, you should – or can set a stop-loss order to automatically close the positions.
3. Choose how to buy Bitcoin
- Bitcoin Derivatives Trading
- Buy Bitcoin through an exchange
- Crypto Index 10
Bitcoin Derivatives Trading
With derivatives trading instead of owning Bitcoin, you speculate on the price of Bitcoin through CFDs. Accordingly, you will take a long or short position.
- Leverage and margin: CFDs are always traded with leverage, meaning you will only have to make a deposit – margin – to buy-in
- High liquidity: with a large customer base, the Bitcoin market is liquid, the ability to execute orders at the desired price – even if you trade in large volumes
- Hedging: Shorting derivatives can be an effective way to hedge your portfolio and hedge against market declines.
Buy Bitcoin through an exchange
Buying bitcoin through an exchange is primarily intended for those who use a buy-and-hold bitcoin strategy. Buying through exchange means you own bitcoin directly, with the expectation that the price will increase.
Accordingly, there are several problems when buying bitcoin through an exchange:
- Bitcoin exchanges often lack proper regulation and the infrastructure needed to respond quickly to support requests.
- Tools and servers on Bitcoin exchanges are often unreliable, which can lead to market suspensions or reduced execution accuracy.
- Bitcoin exchanges often impose fees and limit withdrawals from accounts
Crypto Index 10
As well as trading derivatives or buying coins directly from an exchange, you can trade the Crypto 10 Index with 10 cryptocurrencies in a single trade. This index is based on 10 cryptocurrencies and reflects their underlying market prices.
4. Decide Long or Short
Long or Short depending on the current market sentiment. Long when you expect the price of Bitcoin to rise and Short when you expect the price to fall.
5. Stop and Limit
Stops and Limits are important risk management tools:
- Normal stops will close your position at a set level, but they can slip if the market price changes too quickly.
- Trailing stops follow favorable market movements to take profits, while limiting your downside risk; however, can also slip.
- Guaranteed stops will close the position at a set level, regardless of slippage. You are free to place these stops, but will be charged if the stop is activated
6. Open and track transactions
To start trading, you will buy if you think the price will go up or sell if you think the price will go down. When opening a position, you need to keep an eye on the market, making sure it is moving as expected. Indicators can help you monitor the market as well as volatility or market sentiment.
7. Close your position to take profit or stop loss
You can close your position whenever you want to take profit, or stop your loss when the limit is reached. Profit will be paid to your trading account, while your loss will be deducted from your account balance dư
