Bitcoin is on the rise and many investors and analysts feel like it’s really the future of the financial markets. If you’re thinking about investing or trading bitcoins, you must read these tips first!
Learn more About Technical Analysis
We all know that bitcoin is a different kind of beast. It doesn’t have any central bank or governing body that influences its value. Different news events can have different impacts, either positive or negative. Its correlation with other securities is rather blurry and dynamic. Overall, bitcoin’s pricing is mostly speculative, breaking conventions in many traditional financial theories.
This is where knowledge in technical analysis comes in handy. It’s a must, if we can say so. So before you enter the bitcoin markets, remember to familiarize yourself with technical analysis.
The price of bitcoin is among the scarce factors that provide clues to its future value. Since there are few market fundamentals, there is an impetus on analyzing pricing charts, indicators, and price action.
Find Your Pace
Always keep in mind one of the most important adages in the world of trading: trading is more like a marathon and not a sprint.
For bitcoin participants, one of the most important tasks is finding a sustainable schedule that you can live with for the longer haul. That’s because if you put in extraordinarily long hours daily, you will almost certainly experience burning out and weaker performance.
It’s impossible to trade effectively for 24 hours and 7 days. The trick is to find a manageable schedule as you outline the best times to trade and focus on those periods exclusively.
Choose the News You Consume
As we have mentioned, news items have a somewhat unpredictable effects on bitcoin’s price. Also, unlike other markets, you don’t have any scheduled GDP releases, EIA inventory reports, and others. These releases help in pricing and give traders some idea what to expect and what to do next. Bitcoin doesn’t have them.
You don’t have to follow up every news item you see online or in other media. When trading bitcoin, you need to be able to distinguish between really important news and those that are inconsequential.
Use Stop Losses
We can’t stress this enough: stop losses are your friends.
Consistent volatility is present in the bitcoin market, and that is what makes it appealing to most active traders and investors. For example, its valuable usually fluctuate between five to ten percent daily. This is a very attractive rate for traders who just so love to take on risks.
Whether you are using CFDs, cash, or bitcoins, you must always use stop losses. The wild, unpredictable swings are good for reaping quick and huge rewards, but they are also one of the main ingredients for a trading disaster.
Be Careful with Leverage
If you have been trading for some time now, you probably know about leverage. It’s a feature of the financial market that lets you control bigger amounts of trades without having to use as big a capital. It’s a great tool for traders if they know how to use it carefully.
Most of the time, the usage of leverage leads to reckless trading behaviors. For bitcoin investors and traders, using leverage is a tough balancing act.