Would-be investors and traders find Bitcoin interesting. However, it’s crucial to understand the opportunities and risks before trading Bitcoin. Bitcoin is undoubtedly a highly volatile crypto asset. This digital currency doesn’t have a government or a central authority to control or regulate it. Instead, a computerized database the strong cryptography secures with blockchain technology holds a record of Bitcoin owners.
While people can use Bitcoin to purchase everyday items in specific stores that accept cryptocurrency, most people trade it as a digital asset. Thus, people speculate about Bitcoin prices on platforms like bitcoineras.com/ to make profits. And some people have made impressive profits from purchasing and selling this cryptocurrency on such crypto exchanges.
However, Bitcoin prices are very volatile, meaning traders can also lose significant portions of their money. Crypto plummeting has seen some individuals end up with hefty losses. This article highlights tips to help you start trading Bitcoin on the right foot and avoid losses.
Use the Necessary Indicators for Market Analysis
The crypto market has many technical indicators, such as the moving average, directional movement index, the relative strength index, Bollinger Bands, Fibonacci retracement levels, the parabolic SAR, and the Ichimoku Cloud. These technical indicators have several setups, meaning you have endless possibilities when tracking them.
An experienced Bitcoin trader knows that correct market reading is more vital than choosing the best indicator. A trader can track Bitcoin’s correlation to traditional markets. Another one can focus on crypto price charts. Ideally, there’s no single wrong or right approach here. But tracking five indicators may not provide the best insights. Remember, the crypto market is dynamic, and things can change quickly.
Don’t Rush to Withdraw Your Money
Maybe you planned to trade $5,000. However, you realize that you might require at least $2,000 of the same amount in 12 months for car maintenance or travel expenses. That means allocating 100% of your money in Bitcoin trading is not wise because you will have to sell some of your positions at the wrong time to cater to such expenses.
Even when spending your proceeds in a decentralized finance pool, you will face the impairment losses risk or hacks that may compromise your funds’ access. Perhaps, the best approach is to allow your funds a two-year vesting period when trading Bitcoin.
Try Dollar Cost Averaging
The fear of missing out can sweep even the most competent Bitcoin trader. Most people cede to the urgency of building a position as fast as possible. However, everyone gets 50% or more returns consistently. When some people realize that even meme coins post stellar returns, they fear standing aside watching.
Dollar-cost averaging is a trading strategy that entails purchasing Bitcoin worth the same amount of dollars every month, week, or year, regardless of the market’s direction. For instance, you can opt to purchase Bitcoins worth $200 every Friday afternoon for one year. That way, you avoid the pressure and anxiety of the constant desire to decide when to add a position. Nevertheless, don’t purchase all trading positions within four weeks since Bitcoin adoption is still low.
Decide When to Stop
You will undoubtedly get things wrong at some point. However, you don’t have to compensate for this by increasing your trade amount to recoup your losses. Instead, do the opposite by taking a break for some days.
Losses can have a significant psychological impact on you. And this heavy burden can affect your thinking capacity significantly. Even when you notice an opportunity during the break, you could let it slide. Try to spend the break days organizing your life but not trading.
Trading Bitcoin requires caution due to the volatility of this crypto asset. Try these tips to start trading Bitcoin on the right foot.
