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How to Buy and Trade Bitcoin

Bitcoin trading involves buying on low and selling on high. Investing, mean buying and holding Bitcoin for long periods by examining the industry as a whole and pricing charts in particular. In order to analyse the price of Bitcoin, there are two main methods–fundamental analysis and technical analysis. Successful trading takes a lot of time, money and effort to achieve it.

Key Takeaways

  • Bitcoin Trading vs. Investing
  • Why one should go for Bitcoin Trading?
  • Important Trading Types
  • Fundamental and Technical Analysis
  • Important Terms related to Bitcoin trading
  • Different Order Types
  • Candle Stick Charts
  • Bull and Bear market
  • Support and Resistances
  • Common Mistakes that Bitcoin traders make

Bitcoin Trading vs. Investing

In Investing, people believe that, regardless of the ups and downs along the way, the price will ultimately rise further. In general, people invest on Bitcoin because they trust technology, ideology or currency team.

In Bitcoin trading, the traders buy / sell Bitcoin in the short-term, when they think some profit can be acquired. Unlike the investors, Bitcoin is viewed by traders as a medium for making good profits. Sometimes, they don’t even bother to study the technology or the ideology behind the product they’re trading.

Also read –  Why to Invest in Bitcoin

Why one should go for Bitcoin Trading?

  • Bitcoin is very volatile. In other words, you can make a nice profit if you manage to correctly anticipate the market.
  • Secondly, unlike traditional markets, Bitcoin trading is open 24/7.
  • Bitcoin is an unregulated currency, which makes it easy for the traders to start trading

Types of Bitcoin Trading

Let’s review some examples of popular trading types:

Day trading

The Day Trading involves execution of multiple trades during the day, and trying to make profit from the price-movements within the day.

Scalping

This day-trading strategy is becoming popular lately. It is tried to make good profits based on small price movements in the scalping strategy. Scalpers can make numerous trades in a single day.

Swing trading

This type of trade tries to take advantage of the natural “swing” of the price cycles. In swing trading the duration of trading ranges from more than 1 day to several days. There is no need to sit in front of the trading terminal in this type of trading style. Instead, positions can be monitored on the EOD basis.

Bitcoin Fundamental and Technical Analysis

Fundamental analysis

This analysis try to predict the price by looking at the big picture. Bitcoin’s value as a technology (regardless of the current price) is examined in this methodology and is determined by the relevant external forces to determine what is going to happen.

Technical analysis

In this study of market statistics, like past price movement and trading quantities, we try to predict price. It tries to identify price patterns and trends based on which it can deduce the future price.

Important Terms related to Bitcoin trading

Bitcoin Trading platforms vs. market place

Bitcoin trading platforms are online sites that automatically match buyers and sellers. A trading platform also differs from a marketplace where buyers and sellers communicate with each other directly so that a business is done.

The Order Book

The entire list of purchase orders and selling orders can be found on the trading platform in the market’s order book.

Volume

Volume is the total number of Bitcoins traded in a certain time period. Traders use volume to identify the significance of a trend. Significant trends generally accompany large trading volumes and weak trends are accompanied by low volumes.

If the price changes suddenly, experts recommend that the extent of the trading volume can be checked in order to see if it is a minor correction or the start of a different trend.

Different Order Types

Market Order

This type of order can be placed on a trading platform and it is fulfilled immediately at any possible price. You only set the quantity you want to buy or sell Bitcoins and order the exchange to run them immediately. Sellers or buyers meet the trading platform in line with your order.

Once you place the order, your order may be accompanied by a number of people at various prices rather than a single buyer or seller.

Limit Order

Allows you to buy or sell Bitcoin at a certain price. That is, the order may not fully be fulfilled because the purchasers or sellers are not enough to satisfy your needs.

Stop-Loss Orders

You can set a particular price you want to sell in the future for a dramatic price drop. This kind of order can be used to reduce losses.

Candle Stick Charts

Now that you know the main terms and conditions for trading, it’s time to take a quick look at the price charts. A popular price chart type, Japanese candlesticks are based on an ancient Japanese technical analysis approach that was used in 1600’s for trading rice.  The opening, lowest, highest and closing prices of the period are represented in each “candle.” This sometimes makes the Japanese candlestick known as the OHLC graph (Open, High, Low, Close).

The green of a candle means that the opening price was below the closing price, and therefore the total price increased over this period. If the candle, on the other hand, is red, then the opening price is higher than the closing price, and the price has decreased.

Bull and Bear market

Most candlesticks usually are green when we are in a bull market. Most candlesticks are red if they are a bear market. These are terms used to indicate the overall trend, whether it’s upward or downward.

Support and Resistances

Resistance and support levels often seem as if Bitcoin’s price cannot break through certain highs or lower levels, when looking at market graphs such as OHCL.

Support levels are, in a sense, the resistance level mirror image. The Bitcoin price seems to be like a “floor” when the price goes down. A level of support is accompanied by many purchase orders set at the price of the level. The more often the price could not historically exceed the level of support or resistance, the higher these levels will be taken into account.

Common Mistakes that Bitcoin traders make

Mistake 1

Risk more than you can afford to lose

The biggest error you can make is that you risk more money than you can afford to lose. Look at how comfortable you are with.  Trading is an extremely risky undertaking. It will affect the way you trade if you invest more money than you can comfortably with, and it may lead to heavy losses.

Mistake 2

You don’t have a plan

Another mistake is that you don’t have a clear enough action plan when starting with trade. In other words, you don’t know why you enter a particular trade and especially when you should leave the trade. Therefore, clear profit targets and losses before trade begins should be decided.

Mistake 3

Fear and greed

Two fundamental emotions control the actions of many traders: fear and greed. Fear can be expressed in the form of an early exit because you read an unsettling news story, heard a rumour from a friend, or were frightened by a sudden fall in price (which can soon be corrected).

The other great emotion, greed, is also based on fear: the fear of failure. You don’t want to miss out upon all that when you hear people tell you about the next big thing or when market prices rise sharply. You could therefore enter a business too early or even delay the close of an open trade.

Mistake 4

Not learning the lessons from past trades

Whether you’ve made a successful trade or not, a lesson can always be learned. Nobody can make profitable trades only, and no one gets to make money without losing money. It’s not necessarily important whether you’ve made money or not. Instead, it should provide new insights for the next time.

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