If you’re a beginner in the Bitcoin industry, you may lack knowledge of the best approaches to apply in BTC trading for maximum returns. While there are multiple ways of BTC trading, the strategy you adopt should help you trade with ease and mitigate any risks associated with crypto trading. Furthermore, some trading tactics are more suitable to beginners in the industry and can give you an edge if you’re starting. Because there are various trading strategies for Beginners in Bitcoin trading, it’s critical to understand each of them before choosing a specific method.
Are you a beginner looking for the best BTC trading technique in the market? If your response is positive, then you’ve come to the right place. Please, keep reading to discover different trading methods and the rules to observe to earn more profits. Once you understand the available techniques, go ahead and choose the one suitable for your situation.
Types of BTC trading techniques
Trading techniques can be grouped into two broad categories: active and passive. These strategies are more involved and need more time and focus. Furthermore, active trading methods entail frequent evaluation and portfolio management. Day trading, scalping, trend trading are some key examples of active trading methods.
On the other hand, passive investment methods require a hands-off technique because they need minimal time and attention. HODLing and index trading are examples of passive BTC investment methods.
Because this guideline intends to assist you in discovering the available trading techniques, we shall focus on the active trading methods.
This is one of the most common active trading methods you can use. It entails taking and exiting a position on the same day. Traders using this strategy take advantage of Bitcoin’s price swings, happening each day. Although this strategy is called day trading, traders can work 24/7 as most trading platforms are open throughout the day and night. If you lack the knowledge and skills to trade throughout, the bitcoindigital.io platform can assist you. So, you shouldn’t get stuck if you’re using this strategy. Day trading has multiple pros, including:
- 24/7 market: one of the perks of digital currency trading is that the market operates 24/7. So, you can capitalise on the market that’s always open for business.
- BTC volatility: Bitcoin is an unstable currency, and its swings come with great opportunities for making money. You can take advantage of these price movements to make a kill.
- Unregulated: while traders in the stock markets have multiple trading rules to comply with, the digital market environment has minimal regulations regarding how often one should trade. So, if you’re using the day trading strategy, you can make your trades many times per day. Furthermore, you can trade regardless of your knowledge, amount of money, or age.
Unlike the day trading strategy, where you hold a position for a day, swing trading entails having a position for an extended time, such as a few weeks or a month. The strategy is designed to capitalise on the crypto market movements that take many weeks to happen.
Traders who use the swing trading strategy use a mix of technical and fundamental variables to develop their trading concepts. The plan is one of the best tactics beginners in BTC can use because it requires more time to happen than day trading. Also, you can easily keep track of the trade because of the short time the strategy requires. Additionally, the method allows traders to respond rationally to market the unfolding market situations.
In this form of trading, a BTC trader holds a position for some months to capitalise on directional trends. While using this strategy, you may enter a long position if the value of BTC is on an uptick or take a short position if the price is nose-diving. Trend traders use various tools, such as fundamental analysis, trend lines, and moving averages, to make rational decisions. This strategy is perfect for newbies who understand how to mitigate risks and efficiently conduct due diligence.
Traders who want to make quick money can take advantage of the scalping method. Typically, scalpers avoid the perks that come with huge motions or long trends and instead capitalise on small swings in the market to trade multiple times. As a scalp trader, you can open and exit a position within seconds. Because it’s a High-Frequency Trading tactic, you aim to trade many times within the shortest time possible. As a beginner, it’s advisable to avoid using this strategy until you develop a deep understanding of how the market operates.
Rules for bitcoin trading
Whatever trading method you choose, you can use multiple strategies to maximize your returns. Some of the rules that you should observe while doing your BTC trading include:
- Diversification: BTC trading comes with risks. It would help if you mitigated them by subdividing your capital and distributing it for various positions at multiple levels. Furthermore, you can diversify your trades by trading on other digital currencies in the market.
- Embrace technology for maximum gains: technology is a critical driver that moves the Bitcoin market. So, it would help if you took advantage of the technological tools available to improve your profits.
- Invest what you can bear to lose: some people commit a blunder of investing all their life savings in Bitcoin. While the market can have many good days, it’s essential to execute what you’re comfortable losing. Remember, the digital market is volatile, and sometimes you may incur huge losses. And losses might happen because of other factors, such as hacking, bugs, and controls by the government.
- Follow Bitcoins news, significant events, and announcements: Bitcoin is sensitive to information and essential reports touching the digital market industry. While positive communication can lead to an uptick in BTC’s price, negative statements may weaken the value of the digital currency. So, if you anticipate positive news, you can buy the digital currency and sell it at a profit once the announcement is made. It’s advisable to create alerts and other essential notifications to be abreast of the latest news and crypto updates.
- Avoid being greedy: although you may set higher targets for profits, you must take some profit once you notice a growing trend. For example, if your profit target is 60%, there is no harm in taking a profit once it hits 40%. It’s critical to pick up what you’ve seen instead of waiting for the 60% target. Remember, BTC is volatile, and you may experience a loss before you hit your target. So, avoid being greedy and pull out some profits when the BTC value is growing.
- Make informed decisions: Research is an essential attribute of a BTC trader. Before choosing a specific trading strategy, it’s critical to understand what it entails and why you should use it. While you can listen to what other traders say about a specific design, it’s essential to get objective information from authoritative sources. Therefore, research is a critical component that can enable you to take responsibility for all your trading results.
- Avoid falling into the trap of FOMO: many people lose many because of the fear of missing out (FOMO). FOMO comes from multiple sources, such as media hype and reading specific blogs. The best way of dealing with FOMO is to look at the current digital currency trends to realise that you’re on the right track. Also, remind yourself that FOMO has plunged some traders into terrible scams where they’ve lost massive sums of money.
- Learn from your errors: Mistakes that you make while trading shouldn’t bog you down. Instead, such blunders offer you essential lessons, enabling you to trade with experience. Remember, when you’re starting your Bitcoin trading journey, you’re an amateur prone to make multiple mistakes before finding your footing.
- Have a stop-loss strategy: Bitcoin is a volatile currency, requiring traders to continually formulate a stop-loss strategy if things don’t work as anticipated. Besides mitigating your losses, a stop-loss tactic helps you only to accommodate acceptable losses.
- Choose an affordable exchange: opening many positions each day may be costly. You should, therefore, select an affordable platform that has pocket-friendly charges.
- Understand methods of analysis: In the world of Bitcoin and cryptocurrency in general, it’s difficult to predict what might happen on the price. However, knowledge of technical and fundamental analysis can assist you in making the right moves. Fundamental analysis helps you to get the big picture of BTC. Sources of information for this analysis include news media, technical developments of BTC, laws, etc. On the other hand, technical research focuses on the past trends of BTC to predict the future. This approach uses stats to establish BTC price patterns.
Starting your journey on BTC can be challenging if you don’t understand the best methods of trading. This guide has explored some of the best trading methods you should consider if you’re a beginner in the digital currency world. The article has also covered some principles that you should observe while trading.
The above information does not constitute any form of advice or recommendation by London Loves Business and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Appropriate independent advice should be obtained before making any such decision.