Cryptocurrencies have derived investors and traders crazy with their fast ROI and futuristic decentralized application. Platforms like https://thequantumai.app/ are offering the best features to a trader like a live customer, training to newbie traders and accurate trading calls.
Digital currencies seem to be the primary reason for the fast-paced growth of the decentralized finance industry.
One legendary cryptocurrency that started it all is BTC. If bitcoin had not existed, the cryptocurrency market would not have evolved in such a manner. Undeniably digital currencies seem a piece of cake, but the main compilation comes into action when you have to manage the cryptocurrencies properly. Here is a subtle guide to bitcoin trading.
Understanding cryptocurrency trading
Many people will say that bitcoin is quite a complex concept and hard to understand. However, the same applies to most trading instruments. The most challenging part of cryptocurrency trading happens due to its non-liquidity and far-fetched nature compared to other financial instruments. This characteristic puts cryptocurrencies in a league of their own.
Most investors are so enthusiastic about trading cryptocurrencies that they generally choose this over other traditional investing methods like Forex. The primary advantage associated with digital trading currencies is their volatile nature, making them very speculative for those who trade on a short-term basis.
Primary differences between investing and trading in bitcoin
Bitcoin trading is entirely dissimilar to bitcoin investing. For instance, one might buy a few bitcoins for long-term investment, but he can also trade bitcoin and earn massive returns in just a matter of hours. However, because pricing patterns have been erratic, many investors have opted to trade cryptocurrencies rather than investing them.
Why is bitcoin considered a great investment option?
Bitcoin has been considered a highly profitable investment option since it was first introduced in 2009. It is because the bitcoin price keeps surging exponentially every year by thousands of dollars and shows no signs of decay.
Understand the structure of bitcoin trading
Bitcoin trading is quite different from the conventional forms of stock trading. Bitcoin trading is not at all regulated in most countries, except for a few. The infrastructure behind the bitcoin and altcoin market is not as sound as stock exchanges; hence, many risks are involved.
The prime challenge for bitcoin traders was the security and liquidity issues that people faced earlier in 2018. Still, with the recent surge in prices, cryptocurrency exchanges have become more and more solid than ever before.
Perhaps the bitcoin market structure is best described by comparing it to other forms of trading such as the Forex market or stocks exchange; it is almost similar to Forex but a much-altered version of the stock market.
Once you get into this cycle of an unsustainable bitcoin price rally, there is a chance that you might fall into the FOMO (Fear of Missing Out) trap. It makes you not care about the risks involved while being pushed to buy more bitcoins due to price run-up. Once your risk takes a sudden turn, you fail to set proper stop loss limits, which could potentially cause you to lose thousands of dollars.
Cryptocurrencies are traded against fiat currencies like USD or EUR in most exchanges. But from bitcoin exchanges, people can purchase other cryptocurrencies like Ethereum and Litecoin by using fiat currencies.
Pick up the appropriate trading strategy
There are several trading strategies that one can use for bitcoin trading. The most common strategy is known as a breakout and the second one is swing trading.
Suppose you have not enough knowledge about the cryptocurrency market and have obtained sufficient knowledge about the related trading strategies. In that case, one should avoid using these two strategies at the beginning of their bitcoin trading career.
Most of bitcoin traders stick to a simple system called breakouts that one can implement in two forms:
- The first form of breakout strategy is known as the “Day Trader” Strategy, with which traders make trades when price moves above or below a certain level by establishing prices too close to each other.
- The second form of breakout strategy is known as the “Position Trader” Strategy, which involves opening and closing positions over a particular period.
Bitcoin trading is completely decentralized, and there have been no recommendations from any regulatory bodies to implement rules and regulations for bitcoin trading.
Best Cryptocurrency Exchange
A cryptocurrency exchange is considered the best platform to trade bitcoin and altcoins. Cryptocurrency trading has extensively grown exponentially during 2017, and many people have made massive profits. Numerous crypto exchanges available these days offer a plethora of services.
Bitfinex, Coinbase and Binance are one of the most renowned cryptocurrency platforms for trading cryptocurrencies through fiat currencies. Former bankers have founded it as a peer-to-peer Bitcoin exchange which facilitates margin trading with leverage up to 3.3x.