Good Bitcoin Trading Strategy

Good bitcoin trading strategy

Cryptocurrency Trading Guide: The Execution Behind Bitcoin Trading

Bitcoin Trading: The Upside

Trading with Bitcoin can be a daunting prospect.

There are a lot of articles and opinions floating out there that only further confuse this. But an agency whose job it is to offer clients advice on how to move forward during competitive markets may actually suggest using Bitcoin for transactions. Why is that?

Permission Not Necessary

Bitcoin is not like a fiat currency.

This makes it not dependent on government, gold, financial institutions, or international organizations. It has no borders, it cannot be banned out of existence, and is mostly untouched by the devaluation of other currencies.

The digital currency Bitcoin is also completely free to use.

Seizures Not a Risk

Fiat currency is technically borrowed from a bank.

Since we keep money in banks, it can be seized for various reason by government entities.

Good bitcoin trading strategy

This includes creditors that have judgements against you.

Bitcoin does not have this problem. It can never be seized because you OWN it. Blockchain tech means it can’t be stolen and you are the only person with the digital keys to it.

It’s Limited Supply

Current fiat currencies fall prey to devaluation because of money printing but bitcoin is more scare than that.

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New coin can never be made. There will always be a finite amount of 21 million once it is all mined.

This limited supply keeps certain value, becomes predictable, and cannot be influenced by speculators.

Easy and Fast

One of the best things about Bitcoin is its speed.

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Transactions can be completed near instantly because of the peer-to-peer transfers the Blockchain insists upon.

Bitcoin almost never has fees attached.

Visa, PayPal, and Mastercard charge clients fees through their banks when making transactions (its why some stores require a minimum $5 payment to purchase with a card, in order to make it worth it for them to allow you to charge with a card).

This is the reality with all central payments systems.

Anonymity

Another big benefit to Bitcoin is its anonymity. Transactions with Bitcoin keep the user hidden if wanted, and that includes from government. It does not require name, email, or any sensitive information of its users in order to take part in it. While this started out as a benefit of high crimes, cash still reigns kind and it has since slowed down.

4 Popular Options for Shorting Bitcoin

The air is full of optimism around cryptocurrency and it's not hard to see why.

The bearish market in Q1 has been nullified by an absolutely stunning rise int he fortunes of most coins during April and it was all because of Bitcoin. Once the big coin started steamrolling the trading charts, everyone else followed.

These days, people are waxing lyrical about a new bull market that will eclipse the previous one and many are looking to get rich by hodling for as long as possible.

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Sweet. If you think that's all pie in the sky thinking by traders who should know better, then you are definitely looking to short Bitcoin and make a fortune off of others' misery. If that sounds like you, then here are the 4 most popular options for shorting Bitcoin in today's market.

Prediction Markets: Difficult for beginners, great for blockchain savvy traders

Blockchain powered prediction markets are perfect for shorting anything.

It is the best way to bet that Bitcoin will fall, and that right soon.

Good bitcoin trading strategy

Platforms such as Augur and Veil will allow you to wager against the further price increase in Bitcoin.

What is usually done is staking another cryptocurrency that Bitcoin will fall. Let's take Ether as an example and the Veil platform to expand it.

You can set a wager with 0.9999 ETH that Bitcoin will fall on a predetermined date. The other option would be that it would rise. Should you turn out to be right, you would be paid out in Ether.

Prediction markets might not be classic shorting of a currency, but they are exceedingly similar and they are something that only very technically savvy investors that understand smart contracts should be using. If you are not clued up with regards to how these prediction markets truly work, you might look at another method such as using a digital asset exchange.

Digital Asset Exchange: the easiest method to short Bitcoin

You won't find an option to short Bitcoin on all exchanges, but ones that do offer this ability are Bitfinex, BitMEX, and Kraken.

The method which you would use is to sell the digital currency at the current point and buy it back when it is priced lower.

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How would you do this? Well, the first thing you need to do is borrow the asset and this is all done behind the scenes on the exchange side. You will be paying a small fee for borrowing the asset which will be deducted from your profit (should you make any profit).

Many exchanges that offer an option to short sell cryptocurrencies also give the traders the option to enable margins.

Good bitcoin trading strategy

This then allows traders to use leverage in their trades which can boost profits massively.

CFD: The Classic Short Bet System

Private investors might find it easier to use CFDs (contracts for difference) that are found on any good retail brokerage exchange.

CFDs are common in the currency, and commodities speculation markets and they have the benefit of the trader not needing to own the asset.

While it was different some time ago, today all major brokerages support Bitcoin trading and you can short sell to your heart's desire. It is also easier if you are already using a brokerage to speculate on other assets such as currencies, stocks or commodities. If you are here looking for the easiest way to short Bitcoin but have little to no experience with crypto exchanges, then your best bet would be to use your brokerage account and use the CFD option to trade in Bitcoin.

Bitcoin Futures: Sell them for a profit

A futures contract is considered a derivative financial instrument.

You can find them in all sorts of places such as BitMEX, which is an unregulated cryptocurrency trading market.

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Alternatively, you can use the Chicago Mercantile Exchange which is a properly regulated (and leading) US-based derivatives exchange.

What is a futures contract? It is simply a contract that allows the holder to buy a certain asset at a certain price at a certain point in time. This allows you to bet on an asset's price without needing to own the asset itself. Putting it into context, you could sell a contract guaranteeing the buying party Bitcoin for $5200 dollars in June of 2019.

If the price falls to $4200 in June, the sale goes through and your profit is $1000 on the trade. While futures Contracts are much more specific, that is the general way it works.

Choosing the Right Benchmark to Measure Your Investments

For the most part, the reason why many people have run away from the crypto market is because of its instability.

The market is popular for many things including its ripeness for investors but also its volatility. However, with the recent upward streak Bitcoin has been experiencing for a while now, there has been a noted incursion of investors into not just the Bitcoin space but the entire crypto market in general. However, for investors who don’t know a lot about crypto, the market is largely based on unusual technology and this might be a bit daunting for most people.

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It is for this exact reason that it’s almost compulsory for you to understand exactly how the market works and what particular moves to take and when to take them.

Measuring the Success of Your Investments

The only way to know if your investments are really paying off and you’re not just wasting money is to properly measure them with a particular yardstick or benchmark. Doing this precisely tells you if you’re making or losing your assets and helps you re-strategize if the latter is the case.

Normally, this is a very easy concept but if you’re investing in crypto, setting the right benchmark might be a bit tricky.

Crypto investors, for example, have to figure out whether or not the success or failure of their investments should be measured with the crypto itself or with the fiat currency used for the purchase. If you’ve ever wondered which one is best to measure your investment, the best answer is that it depends on how you purchased these cryptocurrencies in the first place.

Bitcoin Trading: The Upside

The options on buying into a particular asset are to either use fiat currency or to use another crypto to get in. The following are likely scenarios for both methods.

Using Fiat to Buy-In

If you buy into the market using fiat then that currency is the benchmark to use in measuring your gains or losses. Doing this makes things a bit more straightforward.

If you decide, for example, to buy $1,000 worth of Bitcoin and we assume that the current price is $8,000 then what you get is 0.125 BTC.

This would mean that if there is a 100% increase on Bitcoin and it’s now valued at $16,000 then you now have 0.25BTC at $2,000 making you an extra of at least $1,000 if you decide to dump your entire wallet balance.

This is the easiest and most straightforward way to measure the success or failure of your investment but it would mean that you only stick to cryptos that let you buy with fiat.

Using Bitcoin to Buy-In

This method is also not difficult but a bit less straightforward than the previous.

The entire market currently has at least $2,000 different assets and for the most part, you can’t buy in with fiat. Most of them would require you to buy in with another crypto first, like Bitcoin. If you use this option and you’re to properly measure your investment with an asset you used Bitcoin to buy, then the only way to measure either your success or loss is using the current Bitcoin value.

Because of the market volatility, once you’ve made the purchase, you cannot use the value of Bitcoin at the time of purchase to calculate this.

Let’s say you buy Bitcoin at $X and then use it to buy an altcoin at $Y per coin.

Good bitcoin trading strategy

If after a while the value of the coin becomes $2Y, then normally it would be considered a good investment because you have at least doubled your funds. However, if BTC becomes $4X during the same time, then you have lost considerably regardless of the $2Y your altcoin is currently worth. This is because leaving your funds in Bitcoin would have given you more profit and the mere fact that you used up your Bitcoin to buy something that didn’t also quadruple in value, made you a loss.

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This is the proper way to use Bitcoin as a benchmark for measure loss or gain if you used Bitcoin to make the purchase.

Final Thoughts on Using BTC (Satoshi) Ratio Metrics

Knowing the right benchmark for measuring your investment is very important. When dealing with crypto bought with Bitcoin, it helps to use Bitcoin as a benchmark. Not only can you easily tell if you’ve made a profit or loss, but it can also help you decide whether it’s better to leave your funds in Bitcoin or even buy into a different altcoin if there’s one that has done considerably better than BTC.

Biggest Cryptocurrency Mistakes Traders Make When Getting Started

As you can see, entering the world of cryptocurrency can be like visiting the Land of Oz – once you step through that door, everything is different even if you are accustomed to traditional markets and conventional wisdom.

Let's cover costly mistakes virtual currency investors make when starting out trading their favorite digital assets.

If you're a crypto trading rookie, you'll learn all too soon that you're not in Kansas anymore, so here are ways to avoid the top 5 mistakes new traders often make.

1.

Don't Diversify Too Quickly

You might have been told never to put your eggs in one basket when it comes to your investment portfolio, but in the world of cryptocurrency trading, it's absolutely possible to have too much diversification, and much too soon.

The reason you need to slow your roll in this circumstance is that the digital currency landscape right now is that it's kind of akin to the Wild West – there are so many altcoins out there now that it's almost impossible to know which ones are legitimate and which ones aren't.

The trick is to do your research and choose widely-distributed coins with high market capitalizations and trading volumes that have shown their longevity.

Start with Bitcoin, of course, but then just choose one or two altcoins at first until you've got some experience under your belt.

2. Don't Spend Too Much Time Trading

This sounds counterintuitive, but it's entirely possible to end up making less profit by constantly trading. New crypto traders can often become so passionate about the digital currency markets that they spend every waking moment watching price fluctuations and trying to find the perfect trade, but doing so can be utterly exhausting in a hurry.

You need to temper that passion with wisdom.

The crypto markets are so active that even if you miss what looks like one amazing opportunity to profit, they'll be five or ten more down the line just waiting for you. Trading while you're fatigued can lead to stupid mistakes because you're thinking emotionally instead of logically.

3. Don't Panic

The altcoin scene is incredibly volatile.

This can create a lot of uncertainty in the heart of a novice trader, and that can all-too-easily generate feelings of panic and fear in your gut – which is the worst emotional state to be in while trading.

Just as trading while you're fatigued from spending too much time watching the markets can be disastrous, making trading decisions because you're feeling panicky about your investment can be a terrible choice. While there's nothing wrong with trusting your gut, never make a decision based on panic and fear.

4.

Don't Fall For Scams

The natural inclination for crypto investors is to identify a new altcoin with the potential for growth, invest heavily when it's still inexpensive to do so, and then reap the rewards when the value increases. That being said, the altcoin market is growing so quickly that many new digital currencies hitting the market might not be good long-term investments.

It might be galling to be cautious when it comes to investing in new altcoins as they hit the market, but doing so shields you from being involved in a scam in the making.

Being screwed by a pump-and-dump scheme – something that happens all too often in the world of cryptocurrency – can keep you from watching your investment disappear overnight.

Even worse are proprietary altcoins that are available only through a closed system. These coins – usually pre-mined by the company that created them – are only tradeable within this company's closed system, and are extremely susceptible to value manipulation. Be exceedingly cautious before investing in one of these types of altcoins.

5.

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Don't Select The Wrong Exchange

Just as the number of altcoins hitting the market is growing exponentially, the number of cryptocurrency exchanges that you can trade these currencies on is also increasing.

The problem is that not every new exchange is created equal; new and untested exchanges could turn out to be a nightmare in the event they don't honor withdrawals or become inaccessible at the wrong time.

Begin your crypto trading career with long-standing, well-respected exchanges that support a wide number of already established digital currencies.

While it may seem like you're missing out on an opportunity by doing this, keep in mind that the ability to reclaim cryptocurrencies from unknown, untrusted companies can be next to impossible.

Watch Your Step & You Won't Fall

The world of cryptocurrency trading is by turns exciting, exhilarating, and terrifying.

You don't want to end your crypto trading career before you've even gotten started, so ensure that you take conservative risks until you've garnered some more experience.

Novices can easily fall through the cracks of this highly complex world, especially when it comes to altcoins – and missing these pitfalls is even more likely if you're inexperienced.

However, these five tips should help you navigate these murky waters and come out the other side without losing your shirt.

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This leads us up to our next point in the pecking order.

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