Since trading bitcoin is still at its early stages, it’s not easy to know the this and that of the system. Therefore, everybody needs a heads up. Following some tips about such activities won’t hurt.
In this article, we will give you some of the most useful tips for new investors in the industry of bitcoin trading.
Use an Exchange
Instead of just using a broker, you ought to use an exchange. You’ll save more money in terms of the fees that you would have to shoulder.
Use Limit Orders
Instead of using market orders, try using limit orders. On some exchanges, limit orders have lower fees than market orders. Limit orders are free provided that they don’t fill right off the bat. On the other hand, market orders usually result in a higher fee, which is not especially good when you’re day trading. If the exchange you’re using rewards you for the usage of some types of orders, use them as much as possible.
Decided whether you want to go long or short
Ask yourself whether you want to go short with every penny you have or go long on some and short on some. Long-term investors will pay a lower tax rate if they can hold it for longer than 12 months. However, as a tradeoff, they usually have to sit through various corrections.
Short term investors can sidestep corrections if they are nimble, but they will have to incur taxes on profits that they get from trades in the process.
Consider building an average position
If you really want to avoid making a poorly timed trade, you should buy incrementally rather than just buying all at once. That means you’ll buy an asset at its “average” over time. If you don’t have a really solid grasp of technical indicators. And taking into consideration the way the volatile crypto markets work, you may want to average out of positions as well.
Further, averaging isn’t just financially cost-effective, it’s also important with psychology. Taking such big positions at once can be emotionally tough to deal with, which can lead to bad decisions, if you look at the historic volatility of the crypto market.
Sometimes silly stuff happens. For instance, you move into Ethereum and miss the spike in bitcoin prices. Then, you move back to bitcoin and then miss the spike in Ethereum. If you have some of your funds in all the coins you trade, you can avoid missing out on a giant spike in the prices.
If you diversify, particularly when the prices are low across the board, you’ll avoid some of the urge to jump into one coin mid or late into a run and out of a coin just prior to its run.
In other words, even if it isn’t the most profitable technique, diversification is good for one’s trades in a number of important reasons.
Study Technical Analysis
Technical analysis is the analysis of price and volume data. When you’re doing this, you’re predicting futures trends based on that. If you understand how to read a chart, you’ll be better able to know how things like candles, moving averages, RSI, and the order book can give you hints about good spots to buy and sell.