How do you make money from bitcoin trading?
Even those people who have no idea about how Bitcoin works and what it is, know that it’s possible to make good money with it. Indeed, there are numerous ways to earn with Bitcoin, including long-term investments and holding, mining, lending, and so on. But today, we will review one of the most accessible methods, which doesn’t require special equipment or technical skills but does require some knowledge of the crypto market – Bitcoin trading. Let’s explore how do you trade or buy Bitcoin.
The difference between bitcoin and other financial products
You can trade currency pairs, stocks of the biggest corporations, and even raw materials. However, Bitcoin is a unique asset that differs from all the mentioned asset classes.
Firstly, bitcoin is a cryptocurrency, meaning it has much more significant volatility than traditional market securities. You must have heard numerous stories about how the changing price of Bitcoin made someone rich overnight. Since Bitcoin is the most expensive cryptocurrency, it can gain thousands of dollars in value in the shortest terms. At the same time, high volatility means that nobody is protected against financial losses. This is the reason why many world-known investors like Warren Buffett are skeptical about Bitcoin and the crypto market in general.
Secondly, Bitcoin is technically different from traditional financial products. It’s issued within a digital decentralized ecosystem. You cannot buy it in a physical form or in any paper because Bitcoin is a 100% virtual asset. Besides, the fundamentals of Bitcoin are more sensitive to the influence of opinion makers and the presence is social media.
However, there is one thing common between Bitcoin and traditional financial securities. You can trade it online and use the same technical tools to analyze its performance. That’s why if you have experience in online trading, learning Bitcoin trading shouldn’t be a big challenge for you.
Bitcoin trading types
The simplest way to benefit from Bitcoin price changes is arbitrage. This type of trading requires you to buy Bitcoin on one exchange, transfer it to your crypto wallet, and sell it on another exchange or trading platform at a higher price.
Day trading requires more knowledge and skills than just reselling your bitcoin holdings. You should be involved in the process and make quick trades in very short terms. When day trading, profits aren’t as significant as you could get from long-term investing. However, day trading can potentially be more profitable because you earn small amounts very quickly in short time frames.
Swing trading isn’t as fast as day trading but isn’t as long as long-term investing as well. Swing traders wait some time unless the prices of their Bitcoin holdings grow to the proper level. Anyway, the purpose of bitcoin swing trading is the same as of other types: to buy at a low price and sell higher.
Tips for Bitcoin trading
Bitcoin trading isn’t the easiest way to earn money from this cryptocurrency. You should gain experience and obtain some critical skills. To simplify the process of learning, we would like to provide you with some valuable Bitcoin trading tips.
1. Manage your capital wisely
Our first recommendation on bitcoin trading is that you shouldn’t step into this process with too big capital. We understand that the rewards can be extremely lucrative and you have a strong desire to make a big investment and multiple potential profits. However, remember that volatility works against your favor as well. You face huge risks when you start trading Bitcoin. That’s why we suggest that you should avoid this temptation and start with small investments in Bitcoin.
2. Learn more about the crypto market
If you want to become a successful bitcoin trader, you should work hard to learn more about the cryptocurrency market. Bitcoin trading requires knowledge and skills about how the market works and how different events affect the Bitcoin price. Your homework is to learn how to evaluate those events and understand how this newly gained knowledge can be applied when trading Bitcoin.
You should pay special attention to technical analysis because this is one of the vital skills for a bitcoin trader. You will make money from it only if you learn how to use different technical tools to identify patterns.
3. Consider trading other cryptocurrencies
If you want to become a successful trader, you should understand that trading Bitcoin alone isn’t the way you should move on. The cryptocurrency market is full of other promising coins that might potentially bring great profits both from the short-term and long-term perspective. That’s why we suggest that you shouldn’t get obsessed with Bitcoin and ignore other trends in the cryptocurrency market.
This approach is called diversification. Except for getting more exposure to the crypto market and learning more about its general tendencies, diversification provides you with the possibility to mitigate the risk. This is essential in the volatile cryptocurrency market.
The Bottom line
Bitcoin trading is a very interesting process not only for crypto enthusiasts but for everyone who earns from the world of finances. However, bear in mind that Bitcoin is riskier than dealing with any other financial asset. No one guarantees that you will gain profits. So, to sum it up, be serious and attentive when you start trading the biggest cryptocurrency in history.