There’s so much earning potential in Bitcoin trading, and trading BTC is one of the best ways to earn massive profit. If you are just starting on your cryptocurrency journey and want to bet your money on Bitcoin, it would be better if you will try to understand and grasp the difference between Bitcoin trading and Bitcoin investing.
Isn’t Bitcoin trading a form of investment? It is. But here’s the catch.
Buying Bitcoin for a long-term plan is called “Bitcoin Investing.” People who believe in the great potential in the ideology and technology or Bitcoin purchases Bitcoin to hold it for a very long time. Those who invest in Bitcoin have the confidence that its price will eventually rise, despite the ups and downs that may arise along the way.
Bitcoin trading, on the other hand, is more of a short-term strategy to earn bucks. Bitcoin traders are buying and selling Bitcoins (BTC) at any moment they think a profit could be made. Traders of Bitcoin focus more on using this cryptocurrency’s profitability instead of bothering themselves in studying the ideology and technology behind it.
Bitcoin is undeniably a volatile asset, so you could make a gratifying profit if you will manage to anticipate the market excellently. Moreover, Bitcoin possesses an unregulated landscape that makes it easier to begin trading without needing a long and complicated identity verification process.
Traders can access the market 24/7.
Nevertheless, there are many people out there in the crypto space who trade and invest simultaneously.
Trading Methods
There is one thing all traders want in common— to earn. But although traders have all set their eyes on one goal, there execute different approaches to its accomplishment. Here are some examples of day trading methods that may suit you.
Day Trading
Before, the only people who can make money through trading are brokerages, financial institutions, and trading houses. As time goes by, as people grow savvier on the internet, online trading houses rise in numbers as it became easier for individuals to come into play.
Day trading is a highly profitable career if you will do it the right way. However, it could be pretty challenging for inexperienced traders who don’t have a well-planned strategy in mind. Even the most experienced person can hit rock bottom and come across losses.
The method of day trading involves executing various trades throughout the day, striving to earn profit through short-term price fluctuations.
Day traders usually stick around in front of their computer screen, buying at day, then closing trades by the end of each day. They are generally well-funded and well-educated.
Day trading includes a scalping strategy.
Scalping
Scalping is a style of trading that is used to make a fast profit out of small price changes through reselling. It is getting more and more used nowadays.
In day trading, scalping is considered as an approach to prioritizing high volumes over small-scale profits. Scalping extremely focuses on short-term trading and believes in the ideology that settling on small-scale gains repeatedly builds more advantage for traders and narrows risks.
Scalpers can reach up to a hundred trades in one day.
Swing Trading
Swing trading aims to take favor from the natural “swing” in a price cycle, trying to perceive the beginning of a particular price movement to enter a trade.
Swing traders hold it open until the movement in the market dies out. They don’t constantly monitor their trades and just believe in the big picture within a specific period of time until they get to their desired result.
In a nutshell, the goal of swing trading is to take benefit from the potential price movement. Although some go for volatile stocks in the company of a lot of movement, some traders would rather have a more sedate one.
Nevertheless, swing trading is the procedure of making a guess where a price of an asset is more likely to move next and then entering that position to make a profit.
How to Predict Bitcoin’s Price?
Let’s make this clear.
There is no way a person can exactly predict what will happen to Bitcoin’s price. However, there are certain methods, patterns, tools, and rules that allow traders to make a guess on the possible movement. No one makes an exclusively profitable trade, but there’s still a positive balance at the end of the day despite the losses.
Traders usually use these two principal methodologies while analyzing Bitcoins or anything they want to trade— Fundamental Analysis and Technical Analysis.
Technical Analysis
It is a trading discipline employed to predict prices through market statistics like trading volume and price movements. The technical analysis identifies trends and patterns in price and deduces hypotheses.
The core premise behind technical analysis goes like this: previous price movements will tell you what change will happen next according to history.
Fundamental Analysis
Fundamental analysis is a way of estimating a security’s intrinsic value by studying outside forces like financial and economic factors.
Let’s take Bitcoin, for example.
In order to predict the price movement, the fundamental analysis would consider the “value” of Bitcoin as a technology without considering the current price. Supposed a country wants to ban Bitcoin, then this analysis will assume a dramatic price drop.
This prediction will come from evaluating the Bitcoin industry, its technical developments, currency news, regulations worldwide, and other relative issues or outside factors that may affect the profitability of Bitcoin.
Using both increases the probability of getting a more accurate hypothesis.
Common Trading Mistakes
Here goes the saying that beginnings are always the hardest. Traders commit irreversible mistakes, sometimes not even knowing that is one. Every trader needs to be cognizant of the common mistakes made in order to avoid falling into the trap as well.
In hopes of avoiding possible mistakes, you might make in the future, here are some examples.
Risking Beyond What You Can Afford
Risks are part of investments so if you’re just beginning your journey on Bitcoin trading, make sure to risk the amount you can only afford to lose. There’s no guarantee in the market, so it’s either you end up bringing home tons of profits or end up losing it all.
If you find yourself making this mistake, it’s now the time to stop.
Leaving Money on the Exchange
Not leaving money on an exchange is a ground rule for crypto traders, especially if you’re not trading with it. Technically, you lose control over your money once you let it sit on the exchange.
On chances that the exchange suddenly runs out of business or gets hacked, you might end up losing all of your money within the exchange.
Make sure to move your coins or tokens to your Bitcoin wallet or bank account for safety.
Not Having Plan
Another common mistake beginner traders tend to make is not having a structured and clear action plan. To put it simply, they don’t have a single idea why they are going into a specific trade or when and how they should exit that trade.
Planning is also a vital part of trading. Don’t just give in to the desire to earn money, but do your research and create a concrete plan to succeed in doing it.
Steps in Trading Bitcoin
Trading Bitcoin is no easy task, but the process of how you could do it is pretty simple. You only need to:
- Open an account on the exchange you want to trade from
- Authenticate your identity
- Put your deposit on your account
- Unlatch your position on the exchange (either short sell or buy)
