Want to be a better Bitcoin Trader?
Easy bitcoin trading hacks to help you profit more!
Bitcoin is the most well known of cryptocurrencies in the world. It is the most traded coin, comprising over 50% of all global trades – closely followed by the coins of Ethereum and Ripple at 30% and 25% respectively.
Although cryptocurrencies are relatively new when compared to fiat currencies, the number of traders is increasing exponentially and will soon be on par (or even exceed!) those of traditional fiat forex traders.
Naturally, there is a lot of money to be made with trading Bitcoin, hence the attraction! Some early long term traders have been able to successfully buy and sell at 20 x profit, while there are day traders who have developed strategies to buy low and sell high during short term volatility, also making a handsome profit.
While this is all very exciting, there have also been traders who have lost money. Often there are plenty of stories about the winnings, but very little about those who have lost. Bitcoin trading is not for the faint hearted, and it is especially riskier for those who are new to the world of cryptocurrencies. Often they think that it is easy to make a quick buck. If you are new or even a seasoned Bitcoin trader, there are some simple bitcoin hacks that you should be aware of.
If bitcoin trading is important to your investment strategy, then please read on.
Table of Contents
Tip 1. Charting and graphs DO NOT predict market movements
Just like Fiat currencies, the appreciation and depreciation of Bitcoin is completely random. This means, you will not be able to predict when to buy and when to sell.
The forces that either appreciate or depreciate bitcoin cannot be predicted, or even understood at times. The fluctuation of bitcoins value, is influenced by many factors. To a large degree, these factors include: market sentiment, user uptake adjusting supply and demand, and government regulation.
Charting the ups and downs is important in understanding what factors may play a role with moving the value of bitcoin. Of course, it may not be obvious nor able to be 100% relied upon, but it is still helpful for a bitcoin trader to make these deductions.
However charting, plotting and graphing the movement of bitcoin does not predict the future. The movement of bitcoin is completely random in nature. Some will disagree, and suggest that “momentum” can be an indicator of the rise and fall of bitcoin. But what really defines momentum? And can anyone predict when the momentum starts or when it will dissipate?
It’s a fallacy to think that the timing of a bitcoin movement can be predicted. Therefore spend time with charting the movement of bitcoin, but don’t believe that it can tell you with 100% assurance of when to buy and sell bitcoin.
Tip 2. Be careful of margin lending to buy and sell bitcoin
Margin lending is a financing activity which allows a bitcoin trader to amplify the profits or losses. In essence, the bitcoin trader is lent money to buy bitcoin. With borrowed money, the bitcoin trader is permitted to buy a significant amount of bitcoins to take advantage of any small rise. For example, a bitcoin trader could borrow $10,000 and buy one bitcoin. If the value of bitcoin rises to $11,000, the trader can sell the bitcoin and repay the loan, thus making a profit of $1,000. In this example, the bitcoin trader, didn’t use any of his own capital, and yet earned $1,000!
This sounds really exciting! And it is, because as a bitcoin trader the profits can be magnified. But be aware that the losses will also be magnified. If the bitcoin trader borrowed $10,000, bought one bitcoin and it fell in price to $9,000. The bitcoin trader must still pay back the load of $10,000, thus losing $1,000.
Margin lending is a great way to take advantage of bitcoin prices movements, especially if you have limited capital. But be careful. Big profits can be made, but also big losses. Therefore trade small. Do NOT invest big with margin lending, because you could get burnt.
Tip 3. Don’t chase your losses
In the world of investments and to a lesser degree gambling, a common strategy often used is call the Martingale strategy. This strategy requires a trader to double up on their losses. If a loss is experienced again, then the trader to required to double up again. Doubling up continues until a profit is made. The reason for the continuing of double up, is that it is inevitable that a trader will get it right. And when they pick it right, and have continued to double up, the profits will cover the past losses.
I call this strategy, chasing your losses. The investments continually grow, in the hope that one day, a big win will happen.
There is a flaw in the concept of continuing to double up. First, no one has sufficient capital to maintain doubling up indefinitely. Yes, it is inevitable that you will get it right sooner of later. I.e. there is bound to be a time when you pick the price of bitcoin to rise, and you will profit on it. But, that’s not to say it may take several attempts to pick it right. It may take only a few attempts, or it may take more than ten attempts. Who knows? But will you be able to last if it really took more than ten attempts to pick the rise of bitcoin?
Granted, the Martingale strategy has worked in other investment scenarios, however it is extremely risky when trading with bitcoin.
I strongly advise against chasing your losses. Do not continuously double up in purchasing and selling bitcoin to make a profit. You will burn through your capital!
Tip 4. Don’t go All In
Following from Don’t Chase Your Losses – Don’t go all in. With all forms of investment, whether it be with share trading, real estate, getting involved with a start-up, whatever it may be, don’t go all in. Do NOT put all your eggs into one basket. This philosophy also applies to trading with bitcoin. Use money that you can afford to lose, don’t use it all on your first purchase. Spread it out. Pace yourself. Trading bitcoin is a long term game. Play it that way to give yourself a good chance of succeeding.
Tip 5. Manage your capital wisely
Some traders will have more capital to use than others. For bitcoin traders with little capital, the best method of trading bitcoin is to use margin lending. It’s the only way to buy and sell bitcoin to not let the administration fees and exchange rate spreads burn through your capital. Again, when using margin lending be very careful with exposing yourself to large losses. Keep exposures small, but not too small that the gains will be eaten away by fees.
If you have sufficient capital, dispense with margin lending. Margin lending is a very high risk strategy especially for the majority of investors (who are non corporate and individuals looking for long term sustainable gains). Use your capital to play the long game. It is much safer, and you will be able to profit from trading if you buy and sell wisely.
Tip 6. Avoid bitcoin exchanges that too good to be true marketing campaigns
There are new bitcoin exchanges that are popping up left right and center. They are everywhere, and they come with special rewards such as receiving free “shares”, entitlement to coins which you can supposedly sell instantly for a profit. This is baloney. A load of rubbish. A scam!
Stick to the exchanges that are regulated and licensed, and stay with those which are well established. More often than not, the legitimate exchanges do NOT need to rely on gimmicky advertising. On the other hand, new bitcoin exchanges may sound reliable and trustworthy, but don’t be the first to use them. Wait several months for “real” reviews to come through before making a decision to use them.
Tip 7. Don’t always choose the exchange with the lowest fees
Some exchanges will tout that their fees are the cheapest. This may be true, but cheapest is not always the best. Often the cheapest bitcoin exchange can turn out to be a Ponzi scheme or scam. So, while you may have saved a lot of money on buying and selling bitcoin, your may find that the exchange becomes bankrupt and they cannot honor your bitcoin or deposit. Or even worse, the exchange is a scam, has lack of protection and coins are stolen.
Don’t always go with the exchange that has the lowest transaction fees.
Trading bitcoin is becoming popular. It may seem easy to make money, but I can assure you that there are plenty of traders who have also lost money. Try and avoid using margin lending to trade with bitcoin, exposing yourself to great swings of bitcoin can quickly reduce your capital. Having said that, if you have insufficient capital, and you do need to margin lend, keep your investments small.
Stick to cryptocurrency exchanges that are tried and trusted. There are countless of new bitcoin exchanges are being launched all the time. Be careful when trying them. Don’t use a strategy (such as the Martingale strategy) that increases your exposure whenever a loss is incurred. No one has everlasting capital.
Lastly, don’t fall for the gimmicks of new cryptocurrency exchange. If it is too good to be true, there it most likely is. Avoid these exchanges, because it may end with theft.
Keep with these easy 7 tips for bitcoin trading. And good luck!