2020 witnessed the rise of bitcoin trading to astronomical levels, with millions of new traders joining in. The upsurge in new investors, technical advancements and the overall crypto penetration has now made manual and automated bitcoin trading a standard affair. Much like the stock market, traders can use multiple trading strategies to churn out profit from bitcoin trading. This article will tell you what influences bitcoin prices and how to do bitcoin trading.
How Bitcoin Price Is Influenced?
Similar to other financial assets, the price of bitcoin changes through the supply and demand numbers. If the supply is high and the demand is low, the prices will dip. However, if the supply is low, but the demand is high, the asset’s price will increase. Beyond this rule, market participation, news coverage, rumours, and even partnerships between entities can change the market’s course. Since the cryptocurrency market received an overwhelming response in the last few years, the market has all-time highs.
How To Trade Bitcoin?
Here are a few steps to get you started with bitcoin trading
- Understand The Market Dynamics: Much like any other financial asset, the crypto market has some dynamics that a trader needs to understand. How the market works, how bitcoin is generated, what are the major revenue drivers for the traders, and much more.
- Choosing The Correct Exchange/Wallet: You will store your crypto in a wallet, and trade it through an exchange. Make sure you choose a reliable platform that helps you in your investment needs.
- Choose The Correct Platform: If you are going towards automated bitcoin trading, then you should choose the right platform that has the best tools for trade automation. Many platforms offer pre-set strategies for you to invest in.
- Choose The Right Strategy: There are many Bitcoin trading strategies, and you should choose the right strategy before you start investing. We will give you some strategies below.
- Understand Your Position: If you go for manual trading, it is essential to understand the position you want to take. There are 2 types of markets — spot and futures. In spot trading, you hold a long position as you get the asset delivery on the spot. In futures trading, you can go both long and short.
- Leverage Trading: You can also opt for Leverage Trading, which enables you to open large deals with a relatively small investment, amplifying your profit chances, but also your risks. It is a high risk-high reward strategy that can help you generate huge returns even on marginal market changes.
- Keep A Close Watch: Be it automated bitcoin trading, or manual trades, keep a watch on the market and your transactions. This will help you understand the market better.
Types Of Bitcoin Trading Strategies
Many trading strategies can be used for bitcoin; here are some of them.
Day Trading Strategy
When you day trade bitcoin, it means that you open and close a position in a single day, so you don’t get extended market exposure. This is done to avoid any overnight charges. Many traders use a bitcoin day trading bot to automate their trades, and trade while they sleep.
Trend Trading Strategy
In trend trading, you match your position to the current trend. Therefore, if the market is going bullish, you take a long position to make a profit as the price of the asset rises. If the market is bearish, you take a short position and make a profit as the price of the asset falls.
Also Read: SuperTrend Trading Strategy with Linear Regression
Hedge Trading Strategy
In hedge bitcoin trading, you reduce your exposure by opening two positions on the opposite ends. This is done to mitigate the sudden change in the market trend. For example, if you are in a long position for some bitcoins, but you believe the market trend is going bearish, you can open a short position on bitcoin with some other amount. Therefore, if the market falls, and your long position fails, your short position will minimise the losses.
The HODL is the favourite strategy of many traders, and translates to ‘Hold On for Dear Life’. So, in this strategy, you buy bitcoin and hold on as long as you believe that no matter what, you will make a profit. Since the market is too volatile, this phrase should not be taken literally, and you should sell it when you feel that you have made enough profit. In automated trading, you can set stop losses, so that the position closes as soon as it crosses a certain threshold.
Bitcoin is one of the most exciting financial assets, and bitcoin trading has become a profitable venture for many investors. Since the market is relatively young, it isn’t too late to enter and start making profits. However, understand the market before you start investing and invest responsibly. It is safe to say that the crypto is here to say, and isn’t going anywhere anytime soon.
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