There are two ways to look at bitcoin: fundamental standpoint and technical perspective.
To understand why you must have a bit of exposure to bitcoin at all times, you must ensure to understand the essentials of BTC. You can indeed become a better trader in bitcoin markets when you know why BTC matters from a fundamental standpoint and why it makes a massive difference for wall street mavens and technologists alike.
Remember that bitcoin adoption is steadily taking place as governments give banking charters to organizations like Kraken and ventures like Galaxy Digital work tirelessly to bring more institutional money into the cryptocurrency sector in the early years of bitcoin.
Let’s check the top 12 tips on trading bitcoin and take a few of the fundamental factors of bitcoin after. This will allow you to understand and enable you to approach bitcoin trading from a different higher-level view.
Tips on Trading Bitcoin
#1 Bitcoin Trading Tip: Have Two Bitcoin Accounts
Many professional traders will have two BTC accounts. The first account is the one that they continue to add bitcoin to regularly no matter what. The second BTC account is the one that they will use to trade in the markets. They will have this distinction because it will enable them to separate their trading from their long-term investing.
People do so to ensure long-term storage and safety of these long term bitcoin assets. As they continue to invest regularly they can store up a great deal of BTC and possess massive value in their long-term bitcoin holdings while actively trading with their short term trading accounts.
A few traders will make the decision to merely hold on for dear life with one long trade. That means that they will ensure to hold the asset for as long as they can. If you used this strategy since the start of bitcoin, you would have seen amazing returns.
The consensus is that bitcoin is still merely drop in the bucket. Therefore, BTC has substantial upside over the course of several decades if everything proves to be accurate.
As such, you will see a low but not insignificant segment of the bitcoin population that will adhere to this strategy and hold BTC for the long haul. Indeed, volatility may come their way but they will still not let go of bitcoin unless they must. These people insist that BTC price at the start of 2018 was just the start and that there is a long way to go.
It is necessary to have stop losses in place to mitigate losses on these long trades so set it at a place where you feel comfortable and can exit your position as necessary automatically.
#2 Bitcoin Trading Tip: Treat Speculation as a Business
You are investing time, money, and effort into your bitcoin trading. You, like other traders, do so, because you want to make a profit. That means you should have a plan of action and have specific rules that you will follow no matter what. As you follow your plan and learn, you will revise it and still follow regular principles that keep you with the right bounds so as to always stay in the bitcoin game.
Your trading plan will treat the speculation as a business, input rules, state the entry position, the potential exit moves, and overall risk management.
Thankfully, you can have an adaptive plan with tools such as backtesting and paper trading. Testing for viability is possible and quite necessary to create value. When you develop your plan, see that it shows results, you can implement it.
Never look at speculation as a hobby or something you do for fun because you have real money at stake. There must be a genuine commitment to learning and earning within the business. Otherwise, what are you trying to gain with trading? You must understand the game and evolve each day while earning.
Paychecks in bitcoin trading are not automatically given for showing up. You must be right and you must continue to learn and stay invovled. This is a business that will cost you and reward you.
It comes with uncertainty, varying levels of risk, and taxation.The bottom line is that you must take it seriously.
Here are the top ten tips that you would want to cherish and hold dear as you go about trading bitcoin.
#3 Bitcoin Trading Tip: Comprehend Technical Analysis
Once you have truly soaked up the fundamental aspects of bitcoin and genuinely understand why it exists, then you can dive into technical analysis and earn money.
Technical analysis will not come easy but thanks to automated trading platforms and other options you can learn and practice each day.
Traders appreciate technical analysis in bitcoin because it helps them see the short term truth in BTC price activity and helps them adjust their positions accordingly to gain value and add to their portfolio. Technical analysis especially helpful in a world where bitcoin is an emerging asset class that people are trying to figure out.
A wide variety of events, market stressors, and news stories can have an impact on this decentralized currency and its peers. As such, speculators will view charts regularly and conduct technical analysis to profit in the short term. They will read candles, look at different chart formations, and make bets accordingly.
Spend at least an hour a day on technical analysis, studying it in and out to become a better trader and make the right moves. If you do so, you will not be right a 100% of the time but can make higher quality decisions. Remember that price analysis, market indicators, and other components such as charts in technical analysis can serve you well.
#4 Bitcoin Trading Tip: Marathon Over Sprints
Remember that you should not speculate or trade if you do not have the proper information or knowledge to do so. For instance, traders will set up hypothesis by looking at charts during technical analysis and form an opinion. They will also look at the fundamental analysis and other factors while setting up trades.
Remember that speculators will not move in a helter-skelter fashion and move money around and make bets merely because the bitcoin market is open 24 hours and seven days a week.
Do not make trades without conviction and due diligence as you are placing money on the line and it more difficult to gain money back. On another note, you must rest and refresh your mind to gain more insights and learn more information that can impact your trading.
You do not want to experience burnout while trading bitcoin and losing your sense of mission and sharpness. Indeed, keep your mind sharp and gain more value each day.
Create a schedule that makes the most sense to you and keeps your life in harmony. You must be able to carry that schedule for quite a while and be consistent. It is not about today or tomorrow, but how are acting regularly months and years in your trading career.
Minimize subpar performance by implementing a sustainable trading regimen.
#5 Bitcoin Trading Tip: Stay Aware of Fundamental Factors
Remember that bitcoin is an emerging asset class, and positive news events as well as negative news events can have a significant impact. For instance, if you notice that a government is looking at banning BTC exchanges in that nation, it may cause a bit of fear and the price may drop.
Conversely, if you see that an exchange like Kraken got a banking charter, people may perceive that as a positive movement and increase the price of bitcoin. Why? That kind of news would make it seem as if BTC is more legitimate and the government and financial institutions are recognizing that it is so.
BTC and the digital currency market is full of surprises and that is why you must look at economic, fiscal and other troubles present within the world while also having an eye to innovations and actors within the bitcoin world.
#6 Bitcoin Trading Tip: Minimize Downside Risk and Utilize Stop Losses
Volatility is great and can help to ensure gains in any market for professionals. But those who are novices must make sure to think about volatility and set up trades to defend their positions. Volatility is great if you are ready for it and understand how to ride it to create massive gains. Many people panic and make irrational decisions during volatility causing them to lose money in the short term.
Bitcoin can move up and down regularly making it extremely volatile and perfect for those that love to understand risk and gain value from it.
If you know how to move with bitcoin, you can generate immense value. The volatility exists regardless of the market segment you trade in. It can be CFD, futures, or the spot market.
Remember that utilizing stop losses lets you minimize loss of capital. You want to capture the upside but want to make sure that you don’t lose a good portion of your money in the meantime.
Stop losses will help to protect capital and will vary based on the market sentiment.
#7 Bitcoin Trading Tip: Minimize Downside Risk and Utilize Stop Losses
Leverage is your friend and your enemy. The beauty of borrowing money to trade is that it can help you increase your profits but it can also increase your losses.
Now, everyone hears this fact but everyone still continues to make the mistake of using too much leverage on a bet and finding their faces figuratively ripped off by the markets. You do not want to engage in reckless trades and fiscal management.
You want to stay in the trading game for a long time not for just a few days. But you also want to win. So remember that a lack of leverage can minimize performance and decrease returns but excessive leverage can bring about more risk.
The issue is that leverage can turn against you in regular markets but it can be even worse in bitcoin where it is regularly hostile via volatility. You can control your leverage and exposure through futures products. You can avail of these provisions through entities such as the CME, and other sophisticated companies that have been around for quite some time.
But even futures can be complex because they can take a lot out of your initial funds at first. Size your positions with three present investments in specific positions.
#8 Bitcoin Trading Tip: Going With Trends
Amazing money managers trade with the trends and win. They do so because they realize that a market in motion is likely to stay in the same motion until a reversal occurs.
A trend will continue in the direction and reach new levels of negativity or positivity. Those who allocate capital wisely will see that if they follow the trend it keeps going in their direction, they will continue to amass more profits.
Traders will continue to keep their trade open for as long as they believe the trend will go. The timeline might vary for some as it can range from hours to months. Bitcoin was on a strong positive trend in the late months of 2017. It then went on a strong negative trend throughout 2018.
Of course, trends can reverse and that is why you must make sure to keep a close eye on the market and stay aware of what may take place. Technical analysis can help you see near term reversals. Aspects sch as the RSI and SRSI can be helpful here.
#9 Bitcoin Trading Tip: Utilize Breakouts
A breakout strategy is beneficial in that it can help you catch a huge upswing. The idea here is merely watch the charts, learn the bitcoin movements and then open a position at the start of the trend. The earlier you are in spotting the trend the more profit potential there is for your portfolio.
The main principle here is that bitcoin can breakout of the varying range it was in the past. It will push through the resistance range and continue up for a short period before ranging or reversing slightly.
Professionals will turn to signals and indicators via MA, the MACD, the SRSI, or the RSI.
Once you know the movement, you can open a position and stick with it for quite some time.
#10 Bitcoin Trading Tip: Start with Feasible Capital
Most traders enter the game and will start with capital that they can afford to lose. You never want to lose money but if you are going to lose money better that it is money that you don’t need to have.
You do not want to sacrifice your food or rent money and place it into the markets hoping for a great return. That is not a great condition to be in as you make your moves.
Do yourself a favor, save money and place it into your trading account. Keep on saving and adding to your account until you reach a certain level and then you can begin your trading journey.
It is better to start off your journey in a comfortable starting point than feeling as if you are risking capital that you must have for other necessary purposes. The idea of discretionary capital is of great importance in trading. You do not want to borrow from your kids future or from other areas to fund your trading.
#11 Bitcoin Trading Tip: Stick to Reality
Many people develop a methodology based on opinion. That is a bad idea. You should create on based on facts and hard data. You should create a methodology based on your readings of the market and the data present within the market.
#12 Bitcoin Trading Tip: Hedge
Do not trade on emotion and seek to find ways to hedge your portfolio. You want to make sure that you have other positions that can offset potential mistakes in your initial position.
For example, if you choose to long bitcoin, you may open up a futures contract and short. You are covering your bases. But remember that hedging requires great thought because you lose value and opportunity.
The Fundamentals of Bitcoin
Bitcoin continues to confound people because it is a scarce good. Recall that there are only 21 million BTC present, of which a few thousand or million are gone forever. But bitcoin is fascinating because its monetary mechanisms are automatically enforced, and its fixed supply will continue to remain that way.
Its different characteristics give it immense value and make it to where it is the name brand hard money asset in the digital asset sector. It is also a store of value asset, similar to gold.
Bitcoin is unique because it is simple, possesses credible monetary properties, and scarce. It acts similarly to cash in the three-dimensional world in that you can track it but not as easily as with regular bank transfers.
You will also note that bitcoin embodies the nature of convergence in world economies, both developing and developed. For instance, when developed economies do well, developing economies prosper as well. In the same vein, when BTC is growing and increasing in price, other cryptocurrency projects also grow and see more interest.
This is a powerful phenomenon to pay close attention to as this linkage seems inevitable and continuous for the long-term. This convergence is so because bitcoin is an emerging asset leader in an emerging asset class. Innovation can take place in decentralized finance projects, but BTC can continue to absorb more value due to its simple structural and sustainable nature.
The next component that you must realize about bitcoin is that it is global in nature due to a decentralized payments network, the internet, and the world wide web. That means you can send BTC to someone else across the world without a third party. You don’t need to be on an exchange, you just need a wallet, bitcoin, and the other person’s address.
The globalization aspect of bitcoin is intriguing as that means people around the world can hold value in a non-state oriented store of value. Remember that globalization in BTC makes it where you can increase trade with others without relying on tertiary parties. The adoption of bitcoin becomes relevant when local currencies lose value and purchasing power declines.
Thanks to bitcoin’s open source nature, people all over the world can adapt BTC technology and will not have to re-invent it, a much more complex task.
Companies and individuals have a vested interest in increasing the value of bitcoin and using it to minimize potential economic issues. Individuals must make sure that it gains in value and invest in the ecosystem through labor, education, and general productivity.
The point is to discover new knowledge, additional production techniques, and allocate value to higher productivity areas. To encourage further interest in holding value in bitcoin you will also see organizations that will take in BTC deposits and provide interest regularly.
What happens is that bitcoin absorbs more value and becomes a robust monetary medium.
But other factors cause confusion in the digital currency markets. The primary factor is that bitcoin is not the only digital currency. Indeed, it is the leading one, but it isn’t the only one. That makes people wonder which digital currency is the strongest and will stay for a long time? Which one will gain more value over time?
No one wants to hold BTC while it goes the way of Netscape or Myspace. They want to hold bitcoin if it continues to remain strong like Google.
That confusion causes consternation in the markets. This is taking place at time when bitcoin ranges in the 100 billion market cap area. That is a tiny fraction compared to the total value present in stocks, or bonds that have over 250 trillion in value. Even Gold has a large portion of the value, with over $7 trillion in purchasing power.
Pockets of the bitcoin investing and trading base believe that BTC can become the global currency and think from that perspective when investing in bitcoin. Sure, a majority of surface-level traders may not subscribe to this notion, but it is surely a belief among the builders, technologists, and older BTC community.
These groups of contributors and thinkers subscribe to the notion that while it may be a low probability event, it can grow to become a necessary commodity in an ever complex and turbulent financial and economic world.
That level of conviction requires diving into foundational principles present within bitcoin. These foundational principles revolve around simplicity, ease, longevity, and distribution.
The question is what makes bitcoin a superior monetary leader now and in the future?
Bitcoin and Money
Bitcoin aims to be a form of money, nay, it aims to be the best money. That is an audacious goal, and if it succeeds even partially, it can be a positive to those who invest and hold the asset.
Why?
Money has a large total addressable market. Recall that every country in the world has its independent fiat currencies. Each nation realizes that money is essential and is a core part of societal infrastructure like air and water.
You must have durability and reliability in your money to continue contributing, staying productive, and earning while at peace. You need to believe that money will enable you to purchase the same or more goods tomorrow as it does today.
Fiat currencies are tied to debt and do go through long periods of manipulation to minimize national debt burdens. To preserve wealth, people will invest their fiat currencies into assets that should appreciate in value.
Bitcoin makes money more simple and encourages global convergence for the communication of value. Money does not derive value from a government but from the level of networks and activity tied to that money.
Yes, money is a crucial component in the matter of all types of exchange. You can hold money today for consumption tomorrow.
A common currency allows for pricing value simply as demand and supply increases and preferences change. Exclusive monetary mediums allow for simple economic coordination. Individuals utilize money to conduct exchange in hte present and in the future. Therefore, people will utilize the best money that will preserve value in the present and continue to preserve that value into the future.
Money must be constant, have units of measure, and facilitate exchange. These components coupled with scarcity, units, fungibility, reliability, transportation, and other components gives money value.
If bitcoin grows in value, gains more consensus, and increases its monetary network, then it becomes a monetary medium that captures more information. Trends continue to show that BTC adoption accelerates as fiat currencies show significant weakness.
More networks of technologists and individuals continue act and build systems that reward activities with bitcoin distribution. Trends and foundational principles indicate that BTC will serve as the gold standard for years to come.
Now, if bitcoin has a small market capitalization and trends indicate further value aggregation in the network, those who invest early on can see significant capital appreciation.
Bitcoin and Threats
As a trader you must think deeply about the problems that may affect bitcoin and why it may go down in value in the near term as it trends up over the long – term.
Threats to value aggregation and price increase in BTC include various factors. A few of these factors are present below:
- Loss of short term faith due to cyberattacks on exchange assets
- A decline in the stock market taking liquidity out of all asset classes due to general fear
- An external event such as a pandemic or other factor that renders economies frozen temporarily
- Natural disasters
- Government threats to minimize liquidity by banning trading on exchanges
- An attack on bitcoin itself
- Substitutes like gold or other digital currency
Cyberattacks
We have seen the effect of cyberattacks on exchanges that take bitcoin away from holders to cyber thieves. These thieves instill fear and cause temporary tumult during the hack that will cause a decline in BTC price values. The bitcoin price will then trend upward as it has time and time again.
Stock Market Decline
A general decline in the stock market indicates a sharp contraction in the markets and in the economy. The economy may continue to stay in a slump while the stock market can come back to life relatively shortly if the necessary institutions input proper liquidity and lending into the system.
As professionals saw with the COVID-19 pandemic in 2020, the 2008 financial crisis, and other crashes, the market would decline significantly before going up again. Investors tend to have a wide range of assets that build up their portfolio and may sell off assets in difficult times, and bitcoin may be one of these assets.
In times of extreme volatility, investors may choose to play it safe by holding cash instead of something that they think has a significant portion of risk. That is why even if bitcoin is uncorrelated in the markets people want to make sure they can buy essentials and stay safe and secure during times of extreme stress in the financial markets.
This is likely to be a recurring problem as markets become more volatile due to aspects such as inflation, interest rate increase and declines, amid other aspects.
External Events
External events cause significant worry because they are not expected. These largely unknown risks cause issues and disrupt financial markets as investors and professionals search for information and allocate capital accordingly.
Many tend to panic, and this will bring about massive volatility in the financial markets. If the external event persists at a great, amount then people will continue to stay in a state of panic but if it declines in power then people will revert to normal actions and behaviors stabilizing financial markets.
Governments, Attacks, and Substitutes
Individuals must also watch for government sentiment toward exchanges and if they seek to shutdown exchanges. These facilitators of bitcoin movement help to conduct price discovery across the globe. A decline in market participants removes liquidity from the system and minimizes total visible market cap.
Attacks on bitcoin itself are rare but may pose existential threats to the system.
Finally, substitutes such as gold exist, but bitcoin has better properties that make it sound money and a superior medium.