Bitcoin is now one of the most popular forms of investment worldwide. Due to constant availability and easy access, digital gold provides the best conditions for investors.
A number of reputable providers have proved to be the best ones on the market since BTC creation in 2009. A number of well-known investors and institutions have also spoken in favor of Bitcoin and cryptocurrencies. The prejudice that Bitcoin is only a tool for criminals can be finally disproved.
However, there are still mistakes that newbies like to make when investing in Bitcoin. If you want to do bitcoin trading successfully, you should follow a few basic rules.
Risk Management in Bitcoin Trading
The most important rule in Bitcoin trading is risk management. The focus shouldn’t only be on profit, but primarily on avoiding losses. Some options have already proven themselves.
Since no one can predict Bitcoin’s price history, there is no certainty and every position opens with a risk of loss. For this reason, traders should never build their entire portfolio in a single position. If a rate decreases after opening a position, you can do nothing with it but only to hope that the rate will change soon.
Rather, positions should be opened in stages. This results in lower risk and you benefit from an average cost effect. It’s also a good idea to trade Bitcoin in a form of a regulated savings plan. Bitpanda exchange is a popular provider.
Down-to-Earthness
If a strategy has proven itself and first profits are made, the very first step is to secure the capital gained. Even if your confidence in your own abilities increases, you shouldn’t get overly assertive and thereby increase your risk.
The primary goal of Bitcoin trading should be to steadily expand the portfolio. Bitcoin is a very volatile currency and therefore often difficult to analyze. Even if a position is considered safe at first and could generate high profits, this starting situation can change within minutes. For this reason, stakes that are too high (as a percentage of the entire portfolio) should never be chosen.
Anyone who runs a position for too long and hopes for a higher return is risking everything. The price may change and the position will become unprofitable, or even loss-making. The smaller the target income, the higher the possibility of successful trading. It’s also advisable to work with a trailing stop to automatically close a position in the event of a trend reversal.
Bitcoin Trading & Scams
The bitcoin market has become a popular meeting place for scammers. Today, there are numerous obvious and hidden tricks which help scammers to get money from unsuspecting victims. For this reason, a detailed research of a product is a necessary step before each investment.
Bitcoin trading groups on Telegram, WhatsApp, and social media are a very popular trick. Self-proclaimed professionals share their experiences and positions and thus attract curious users there. In this case, the product is usually a paid VIP group, which provides exclusive access to the best signals.
Another popular method is trading bots, i.e. automated software for trading Bitcoin. These are intended to allow a buyer to make regular profits without doing anything on their own, thereby saving time and effort. However, these are primarily designed to generate a profit for a seller.
‘If it sounds too good to be true, it’s probably not true.’
Of course, not all products related to Bitcoin trading are a scam, but it’s always important to do your own research in advance. Once there is a place for unrealistic promises and high profits, it could be a scam.
So far, your own education has always proven to be the best way to secure yourself. To be able to trade Bitcoin really successfully, you need experience. This gives you control over your finances and allows to better assess the market.
Do Your Own Research
In order not to become a victim of a scam, it’s necessary to do your own research. Since Bitcoin is a fast-growing market, many qualified sources of information have already emerged. However, it’s important never to act blindly according to the guidelines of others.
Your own research should include basic knowledge in chart analysis and asset valuation. In addition, events on the market should be observed and news often have a direct influence on a development of a rate. It’s also necessary to understand the principle of blockchain and the technology associated with it.
Avoid Strong Emotions
Even if a gut feeling appears useful and necessary in many situations, it should be ignored as much as possible when trading Bitcoin. Those who act according to their emotions may lose sight of essential factors.
An exchange in social media in particular leads investors to a FOMO effect. This largely eliminates their own opinions and is based on the positive news of media. However, this euphoria can only be based on emotions and have no fundamental background.
Likewise, feelings shouldn’t prevail in the event of loss or gain. If you want to compensate for losses via higher stakes, you also increase the risk of achieving even higher losses. For this reason, failures should be accepted as such and have no influence on further actions. Successful trades should also be treated according to this principle.
What other common trading mistakes do you know? Just share your opinion in the comments!
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