Imagine you just bought a large sum of bitcoin and the next day your money doubles, only for you to lose it all in an evening trade. Or is this beyond imagination and has been your reality at some point?
Well, like Liverpool, you should know that you do not walk alone and that several others have suffered the same fate. Most people, like you, are looking for effective ways to trade and this article is your best bet.
What is Cryptocurrency?
Simply put, cryptocurrency is digital money. It is based on a system that bypasses management by a centralized body, that is, banks and financial institutions. This system, which is known as a blockchain, allows individual computers to finalize transactions.
The first cryptocurrency was introduced by Nakamoto Satoshi in 2008 and has since evolved with over 800 currencies including Altcoin, Ethereum, and Tron. The exchange of digital currencies has also evolved as major trades are now carried out by the best crypto trading bots as opposed to individuals.
Despite the seemingly ideal nature of crypto, it has its flaws, the primary one being its volatility. In simple terms, the value of currencies tends to fluctuate often, which makes trading appear to be an extreme sport.
What is Cryptocurrency Trading?
Just like the traditional market system, crypto trading or exchange is the process of exchanging cryptocurrencies for services, regular fiat money, or other cryptocurrencies.
To trade in the crypto world, there are certain gadgets that an individual must possess. One of such is a crypto wallet, which is your first stop. A wallet allows you to store your digital currencies and is considered the safest way of doing so.
When you have your wallet, you can visit an online web service to purchase some cryptocurrency that can be bought with conventional money. You can also exchange currencies on these platforms.
There are certain things you should consider before you buy your digital currency. You need to get basic knowledge of the currencies available and decide which you want to buy. Let's go with the oldest and most valuable digital currency in the crypto world, Bitcoin. You also need to study price action and carry out an adequate risk analysis to decide when to buy and how much to buy.
What Are Effective Bitcoin Trading Strategies?
Now that you have some Bitcoin in your wallet, you need to learn when and how to sell it unless you're saving it for potential growth. This can be profitable in the long run, but if you are not willing to wait, Bitcoin Trading is an effective strategy.
Due to its high value, Bitcoin can be exchanged for virtually any other cryptocurrency, and you can trade Bitcoin manually by simply buying low and selling high. Here are some steps to follow:
• Bearing in mind the volatility of digital currencies, you must study the factors that influence the price of bitcoin, some of which include an increase in demand for bitcoin, integration of bitcoin into traditional payment systems, negative news, and so on.
• You need to determine your trading style. This includes day trading, which is simply capitalizing on the short-term price movements by opening and closing a position within a single trading day.
• Another is trend trading where you align your position with the current market trend while the hedging strategy allows you to enter a short trade when the price declines on a position you have already opened.
• You'll also need to decide your exposure to bitcoin. You can trade bitcoin derivatives where you do not directly own the bitcoin, thereby protecting yourself from the liabilities or you can buy through an exchange with 100% ownership amongst others.
• The next step is to study the market and decide to go long or short. If you expect a price increase, you go long and if you expect a fall, you go short.
• Also, you need to set stops and limits as tools of risk management.
• When you open a trade, you need to keep a close eye on it to ensure that your position is profitable.
• Finally, you can close your position at any point you deem fit to claim your profit or count your loss.
If you feel burdened by the lengthy process, there is a replacement for trading bitcoin manually, which is the application of automated bots. Trading bots have permeated the crypto world and are better and more efficient at timing the market. They are reliable, secure, profitable, transparent, and easy to use. It is also important that you carry out in-depth research before choosing a trading bot.
Some of the crypto trading bots include:
• Bitcoin Robot is the first bitcoin trading bot that has now evolved to trade other currencies. The bot, which is quite popular, requires the computer to be on for it to complete a trade, unlike the newly developed bots.
• Cryptohopper is a relatively new bot that thrives on its cloud technology. This means it can run continuously and trades can be carried out at all times. The app also caters to both new and expert traders as it has an external trade signaller to run its trades while allowing experts to tweak the settings to input their trade signals.
• 3 Commas is also a new bot that operates on cloud technology. Its originality is its ability to close the market at the user's most promising position. It also allows the user to open several crypto trades simultaneously.
• Zignally exemplifies transparency. This free bot allows users to communicate directly with its developers and also allows them to personalize their trading methods.
• Gekko is an open-source bitcoin trading bot that is free for all users. The bot is connected to the Telegram messenger and sends notifications to the user upon completion of a trade. It is also programmed with a set of trading strategies but allows personalization.
• Other trading bots include Zenbot, Gunbot, Kryll.io, and Hassbot, amongst several others.
Whether you decide to trade bitcoin manually or utilize one of the crypto trading bots, it is important to remember that the crypto market is volatile. Its currencies experience high percentage fluctuations daily, with no value increase sometimes. You should prepare for risks and carry out proper technical analysis just like you would for traditional stock market trades.