What is Bitcoin Trading?
Bitcoin trading means how you can guess the movements in the digital currency value. While this traditionally involves buying bitcoins from or through an exchange, hoping that the price will go up, crypto investors increasingly use derivatives to speculate both falling and rising values. It increases the bitcoin’s volatility.
Having IG in place, it is easy to take a stand on the bitcoin price through financial derivatives, such as CFDs. It allows you to track the price movements in both directions without owning the underlying coins. In addition, it means you aren’t responsible for the bitcoin tokens’ security.
Know What Impacts the Bitcoin Price
Before you consider trading bitcoin, it is critical to understand the factors that can impact the value of bitcoin’s price. Some crucial factors that influence significantly on the bitcoin price include:
By writing this, the supply of bitcoin is capped at 21 million and more likely expected to exhaust by 2140. A finite supply of bitcoin means it will increase the coin’s price as the demand rise in the future.
Any news related to bitcoin’s value, security, and longevity will severely affect the coin’s overall market value.
The public profile of bitcoin hugely depends on the integration of banking frameworks and new payment systems. If you carried it out successfully, the demand for the currency would go up, having a positive impact on bitcoin’s overall value.
Security breaches, regulation changes, and macroeconomic bitcoin-related announcements are other factors that can affect the price. Any new agreement between bitcoin users on speeding up the network could reach skyward the bitcoin price.
How to Trade Bitcoin?
Here is how you can start bitcoin trading:
Pick a Trading Style and Strategy
When you start bitcoin trading, you can choose either day trading or trend trading style. Let’s briefly discuss day trading first.
Day Trading: Day trading means you will open and close a position within a single day of trading. It essentially means you won’t get any bitcoin market exposure overnight and also means there will be no overnight charges on your position. It is perfect for those looking to earn profit from bitcoin’s short-term price movements.
Trend Trading: Trend trading allows you to take a position that matches the current trend. For instance, if the bitcoin market is in a bullish trend, you’d go long. Similarly, if the trend is bearish, you’d go short.
Bitcoin Hedging Strategy: bitcoin hedging strategy allows you to reduce your exposure to risk by obtaining an opposing position. You can do this if you have concerns about the bitcoin market moves against you. For instance, if you own some bitcoins but are worried about a short-term decrease in their value, you can launch a short position with CFDs.
HODL Bitcoin Strategy: This bitcoin strategy incorporates buying and holding bitcoins. You should purchase and have coins if you speculate a positive short-term outlook on its price. However, if your trading plan indicates that you should sell your holding position to take profit, you should.
Choose a Strategy to Get Exposure to Bitcoin
There are various ways that you can choose to get exposure to bitcoin. First, you can choose trading bitcoin derivatives, which will allow you to speculate on its price with CFDs without owning the coins. The second option is to buy bitcoins through an exchange. This strategy is for those who prefer using a buy-and-hold technique.
The third strategy to get exposure to bitcoin is the Crypto 10 index. It allows you to gain exposure to ten major cryptos in a single trade.
Long or Short, Decide Whether to Go
Financial trading derivatives allow you to decide whether you want to go long or short, depending on the market sentiment. If you choose to go long, it means you are expecting bitcoins price to go skyward. And, going short means you are expecting the price to decrease.
Set Stops and Limits
Setting up your stops and limits is crucial. It includes normal stops, trailing stops, and guaranteed stops. Normal stops help you close out your position at a preset level. Trailing stops go for favorable movements of the market to capture profits. Like normal stops, guaranteed stops will close the situation at a set level, but there will be no risk of slippage.