Bitcoin made an appearance in 2009 and the hype that had been generated in its wake has not lost steam yet. In the last decade, Bitcoin prices have experienced tremendous ups and downs. But, the volatility of the market has not been able to dissuade the investors. Investors are still trying to find the most effective strategies for trading the Bitcoin.
Top Bitcoin Trading Strategies:
- Research: The best and most obvious way to succeed in Bitcoin trading is to always undertake in-depth research independently instead of depending on views of others or trusting rumors. While regular stocks or bonds have inherent risks, Bitcoin prices are guided by speculations. So, the conventional finance theories will not apply here. Investors view and analyze revenues when assessing stocks but there are no such basic indicators when analyzing Bitcoin price movements. Besides, the blockchain technology is not easy to understand and requires substantial time and effort.
- Invest Wisely: Investing in Bitcoin is risk-prone and interested investors must remember not to invest more than the amount they can afford to lose. When you want to start Bitcoin trading you can get your feet wet first by creating a practice account on any one of the leading cryptocurrency exchanges in order to get used to the market.
- Plan Ahead: You cannot consider trading smartly unless you have a plan before you start off. Not having a definite plan of action is a rookie mistake and one that can cost you heavily. Smart traders will know when to get in and get out of the market. They will also know how to implement stop-loss orders to minimize losses.
- Make Incremental Investments: A smart way to trade is to start small, and make incremental investments. So, when you wish to invest a certain amount I Bitcoins, it is better to invest part of it, wait for a week, and then buy again.
- Diversification: This is undoubtedly a great way to minimize risks. There are many cryptocurrencies out there besides the Bitcoin, and it makes sense not to keep your funds in a single crypto asset only. In case any of the components fluctuate, the investors do not end up losing all their money at one go.
- Smart Hedging: To minimize risks it is best to use hedging. There are many tools at the hands of investors to hedge their bets. For instance, a Bitcoin investor could buy options contract delivering payouts in case underlying asset values fall. Investors can also trade futures contracts allowing an exchange for a predetermined amount at a prefixed date.
- Using Wallets: It is advisable to use digital wallets when you trade Bitcoins. Many reputed exchanges have been victims of hacking, like Bitfinex that experienced an incident in 2016. The Mt.Gox incident in 2014 is another such event that culminated in colossal losses. Wallets ensure your crypto coins are secure from hacks. Besides, you can never be sure if an exchange suddenly shuts down; in such a case all money that you have on the exchange will automatically become inaccessible to you.