(Newswire.net — April 22, 2021) — Are you interested in trading Bitcoin but aren’t sure how to get started?
Trading Bitcoin can be very lucrative. But, if you don’t know what you’re doing, this lucrative opportunity may quickly turn into a substantial loss. While there is plenty of advice out there regarding how to make money from Bitcoin, what you first need to know is how to avoid losing money.
What are the most common trading mistakes that trip up novice traders? Read on to learn about the most common Bitcoin trading mistakes and how to avoid them.
1. Not Understanding the Different Types of Bitcoin Trading
Many people jump into Bitcoin trading without an understanding of the different types of trading strategies. Before you get started, it’s important to familiarize yourself with the different strategies and choose the one that best fits you.
Here are the main Bitcoin trading strategies you have to choose from:
Day Trading
Bitcoin day traders aim to capitalize on price movements that occur within the same day. The term day trading stems from traditional stock markets, where the trading market is only open during certain hours of the day.
However, the digital currency market is open 24 hours per day, 365 days a year. Therefore, the term day trading is used in a slightly different context when speaking about cryptocurrency.
Bitcoin day traders typically employ technical analysis and price action to formulate their trading strategies. While day trading can be highly profitable, it also comes with a lot of risk, stress, and demand. Therefore, it’s only recommended to follow this strategy if you have advanced trading knowledge.
Swing Trading
Swing trading is another popular Bitcoin trading strategy. It involves holding Bitcoin for longer than a day but typically no longer than a few weeks or a month.
Often, Bitcoin volatility waves take several days or more to play out, and swing trading takes advantage of this. Swing traders tend to use a combination of fundamental and technical factors to put together their trade ideas. Because fundamental changes take longer to play out, a lot of fundamental analysis comes into play.
Because swing trading takes place over a longer time period, traders have more time to consider their decisions. This makes it a great strategy for beginners.
Scalping
Scalping is a small-scale trading strategy that involves taking advantage of minor moves in the market. Scalp traders may exploit things such as gaps in liquidity, bid-ask spreads, and other market inefficiencies.
Scalpers don’t try to hold their position for a long time. Instead, they aim to open and close positions in a matter of seconds. If you notice market inefficiencies that happen over and over again, scalping can be a very lucrative strategy.
2. Storing Bitcoin in an Unreliable Digital Wallet
Storing your crypto funds in an unreliable digital wallet is another major mistake that novice traders make.
There are two main types of wallets to choose from: hot wallets and cold wallets. Hot wallets include mobile, web, and desktop wallets, while cold wallets refer to encrypted, portable devices that let you download and carry your Bitcoins.
Here are some things to consider when choosing a Bitcoin wallet:
- Does the wallet allow you to hold other forms of cryptocurrency?
- Does the wallet come with a multi-signature feature in the event you want to use the wallet with multiple owners?
- If it’s a web wallet, does it have an HTTPS address for added security?
- Is the wallet easy to use?
- Is it possible to back up the wallet?
- Is the wallet compatible with different operating systems?
- Does the wallet provide an easy-to-use interface?
- Can you store other blockchain assets in the wallet?
- Does the wallet have an active development community that provides maintenance?
- Does the wallet allow you to own and control your own keys?
We suggest doing some Googling to learn about the most popular Bitcoin wallets out there to help inform your decision. You can also click here to learn more about Bitcon and digital wallets.
3. Trading Based On Your Emotions
If you let your emotions get in the way of your trading strategy, you’re not going to be successful. Many traders buy Bitcoin when there’s a price dip due to a fear of missing out.
Others jump to selling their Bitcoin when there’s a small pricing surge, hoping to earn quickly from higher rights. However, if the prices drop all of a sudden, you’ll be left feeling frustrated and full of regret.
This is why it’s important to ignore the emotional hype when trading. Instead, pay attention to the numbers and your trading analysis.
4. Choosing the Wrong Bitcoin Exchange Platform
Another thing you need to be wary of is choosing the wrong Bitcoin exchange platform. Choosing the wrong Bitcoin exchange could lead to wasted time and money. Here are some tips for choosing the right exchange platform:
- Research the Bitcoin exchange’s security and authenticity
- Compare the fee structures (exchanges come with different transaction fees)
- Understand the different purchase methods (i.e., do you need to use debit cards, credit cards, bank transfers, or Paypal?)
- Look for an exchange with good user experience and functionality
You also need to understand the different kinds of cryptocurrency exchanges. The three main types of cryptocurrency exchanges include brokers, peer-to-peer exchanges, and trading platforms.
Most investors use trading platforms, which involve direct interaction with the platform as opposed to interaction with the buyer/seller. We suggest learning the basics of each before you make your decision.
Bitcoin Trading Mistakes: Time to Start Your Trading Journey
Now that you know the top Bitcoin trading mistakes, it’s time to begin your Bitcoin trading journey. With the above tips and some patience, you should be able to find success as a Bitcoin trader.
For more cryptocurrency tips and news, check back in with our blog.