I am truly passionate about Bitcoin and other cryptocurrencies, especially the new and vast possibilities the technology brings us. Blockchain can and is reshaping the financial world as we know it. I have been trading for many years now, including forex, binary options and cryptocurrencies. The latter is what excites me the most. This is why I’ve put together a little guide on how to get started.
Why Trade Bitcoin?
Trading Bitcoin can be very profitable and make you a nice extra income or even become a full time job. I need to point out that this is by no means a get rich quick scheme. Like in any type of trading there are risks. Possibly even higher than with traditional trading. I’m sure we all wish that we had bought some Bitcoin at the end of 2013 and become millionaires overnight, like many did. It was said to be a quick bubble, but oh surprise, Bitcoin is still going strong.
Bitcoin can bring you some nice profits due to its volatility. This is why it is currently my favourite asset to trade with. The price tends to fluctuate a lot even in the course of just one day. That is something you rarely see in traditional currencies. Of course, it can go the other way too, but that’s trading for you. If you can’t take the heat, get out of the kitchen.
The Trading State of Mind
Just like with trading any other assets or financial instruments, also with Bitcoin you need to understand the basics of trading and the psychology behind it. Money management and risk assessment are both hugely important elements to trading Bitcoin successfully. You need to understand that, at times, your own mind will try and work against you – you are more likely to take higher risks when faced with a loss. This is a phenomenon called loss aversion.
Getting to terms with how your brain works when it is dealing with money is one of the biggest hurdles in trading. This is why 95% of traders fail. It isn’t that the market just goes against them but they can simply panic when the conditions or trades go against them, resulting in taking even higher risks. Once you can overcome this, you are on your way to success.
Read more about my view and tips on trading psychology here.
Can’t forget money management either. Have a look in my article here.
Learn the basics, practice a lot on a demo account and awesome things might happen.
Trading Platform and Strategies
I recommend using SimpleFX, I seem to like the hipster platforms that aren’t the top ones. Bitfinex, mind you just had their platform hacked, resulting in the loss of millions of dollars worth of Bitcoin. Making the Bitcoin price plummet almost a $100 as a result. Simple FX allows you to trade Bitcoin, Litecoin, Ethereum and also traditional currencies and other assets. Also you can integrate it to Metatrader and set up your own market analysis. Cool stuff. If trading on the web platform you can also chat to other traders – this is a feature I really love.
I have also tried my 15 minute strategy partly for seeing where the entry points of trades might be. Setting up Moving Averages is also one of my favourite ways to determine trend and to be able to make nice profits in my trades. I am currently working on getting enough content to release a Bitcoin trading strategy video.
Support and Resistance
A very good trading strategy, one that I normally try and include in all of my strategies is using Support & Resistance. Trading advice that is often given is – buy when the price is low and sell when high. Seems simple, right? But how do you know when the price is currently low or high? This is where the market term, “Support & Resistance” is very useful. The principle is the price moves as a wave in a corridor – the floor is considered Support and the ceiling is Resistance.
When you look at price charts you will quickly see that it tends to bounce back from the same levels. This happens because the changes in price happen from traders buying and selling. And as a group people tend to act in the same way, hence making the price move. Traders will buy and sell at the same levels where the price had bounced back previously and it will become a self fulfilling prophecy.
Practice is Key
I cannot stress this enough. When you practice a strategy more and more you will start to recognise the best opportunities. This is where the “gut feeling” comes in. Which in actual fact isn’t really a gut feeling at all. It is simply your brain recognising previous situations that were profitable. And this way you become better in trading. Don’t jump in with a huge investment hoping to become a millionaire overnight. Start small. Learn about the asset. Practice. And then practice some more. Be patient. Know that you will become it. And this too will then become a self fulfilling prophecy.
Hope you liked this article. I will be posting some new videos on Bitcoin very soon!
Let me know in the comments if you have some questions about trading cryptocurrencies and or anything else. I would also really love to hear about your trading experience.