While online trading has become one of the most profitable ventures in recent years, the emergence of cryptocurrency is changing the face of online trading, making transactions faster, more secure, and easier between parties. This post is aimed at helping beginners get familiar with the concept of online cryptocurrency trading, with special focus on Bitcoin.
The Bitcoin Trading Summarized
Bitcoin trading is like any other trading platform, whether reality or virtual. Bitcoin trading involves the act of selling when its high in value and buying when its low in value. Bitcoin trading is much different from investing which requires that owners hold the online cryptocurrency for a longer time period. Trading of Bitcoin requires the trader to understand the market in order to make valuable decisions with regards to buying and selling. It is important to note that successful trading requires that the trader have time, invest effort and gather the needed knowledge to be able to make the best trading decisions.
To Better Understand Bitcoin Trading, We Well Be Discussing Some Important Sub-Topics Below.
- Trading vs Investing
Trading and investing in Bitcoin are two different sides of the same coin as both requires bitcoin. However, in the case of investment, an investor is required to hold the bitcoin for a long term use. In investing, investors believe the price and value of the bitcoin they own will ultimately rise. In essence, bitcoin investment involves holding of the cryptocurrency for the long run.
In the case of trading, this is a rather short-term approach to bitcoin ownership as the owner seeks market trends, deciding on whether to buy or sell off based on the current market behaviors and price fluctuations.
- Bitcoin Trading Types
While all bitcoin traders are interested in making more money from their decisions, there are several ways by which different traders approach the market.
- Day Trading: This involves conducting of multiple trades during the day with the aim to make profit from the short-term price fluctuations. Traders who are specialized in day trading spend a lot of time behind their computers, watching the market and deciding on which ones to buy and sell.
- Scalping: This has become more popular in recent times. Scalping is a day trading strategy which focuses on extremely short-term trading. The idea behind scalping is to make as much small profits as possible from the shortest possible trading decisions. Scalpers are known to conduct as much as hundreds of trades daily.
- Swing trading: Traders who practice this are more interested in making profits from swings in price cycles. Swing traders are interested in specific price movements and make decisions based on this to earn for themselves a wider profit margin.
- Analyzing Bitcoin Movement
As a bitcoin trader, one of the most important questions you will be faced with is whether or not you can correctly predict the bitcoin’s price movement. While it is possible to make some profitable decisions, the real answer to the question is No. Sone traders are however able to use patterns, rules, and methods to get the desired profits from the market. With no one making exclusively profitable trades, the idea remains to make more than you have lost at the end of the day.
In Analyzing Bitcoins, Traders Follow Two Main Methodologies;
- Fundamental Analysis
This method is focused on the big picture. Chances in market trends and bitcoin prices are predicted with an outward look at the big picture and external influences such as latest government regulations, issues arising, and news.
This methodology weighs the impact of external factors and uses this as a predictor of the rise or fall in prices of the bitcoin value.
- Technical Analysis
This methodology involves studying of the market statistics and behavior. Some of the indices which come to play as part of this methodology is the past price movements, trading volumes and more. This approach seeks to understand the patterns and trends in the price and predicts future market price behaviors.
- Bitcoin Trading Terms
While every new sector comes with its own unique terms, the cryptocurrency world is not left out. Below are some of the terms you should know.
- Bitcoin Trading Platform Vs Brokers Vs. Marketplaces
The trading platforms are online websites where buyers and sellers connect. Brokers on the other hand sell bitcoin directly to interested buyers, but this is usually at a higher price. The marketplace, however, links buyers and sellers, allows communication, and allows for trade negotiations.
- The Order Book
This contains all buy and sell orders in the market’s order book. This information is accessible on a trading platform with buy orders termed ‘bids’ and sell orders called ‘asks’.
- Bitcoin Price
The price of the bitcoin is equivalent to the price of the last trade that was conducted on a specific trading platform. It is important to note that there is no single global bitcoin price that everyone follows.
To learn more about Bitcoin trading and trading terms, visit the Website of Oliver Johnson.