So, you want to start trading Bitcoins; are you ready for it? There is no sense in diving into the deep side of the pool unless you know how to stay afloat. The same is true of Bitcoin trading too; you must know certain things before you begin trading. Since prices are volatile Bitcoin is unarguably a risky investment. The reason why traders are attracted to it is because of price fluctuations; this offers them great chances to make successful trades and gain quickly on their portfolios.
5 Things You Need To Know Before Starting To Trade Bitcoins:
- Market cap: You will find almost 500 cryptocurrencies enlisted in cryptocurrency exchanges today. Only the biggest crypto coins in terms of market cap are covered by the media and these are the ones that all seasoned investors and traders are familiar with. Market cap tells you the size or strength of any brand and in this case it tells you how much risk the investment stands for. So, you must remember to check for an asset’s market cap always before you buy it. Tokens that have higher market cap will be less susceptible to manipulations or dramatic volatility.
- Trade volumes: When you must make a purchase you should look at the trading volume. When there is high trade volume it is easier for you to buy or sell Bitcoins but low trade volume indicates lack of liquidity. When a digital currency is associated with significantly low trade volumes it could mean that the project is ailing. Check https://bitcoinupapp.com/ to learn about automated trading applications that help you save your efforts and time put on manual trading.
- Wallet: You have to download a digital wallet before you can think of trading Bitcoins. This requires you to make an account on a reputed cryptocurrency exchange. According to the exchange, you can either link your bank accounts or credit card to this wallet. The wallet will keep your Bitcoins secure; keeping them on exchanges makes them vulnerable to thefts. You must only have funds on exchanges that you are prepared to lose. This is why investors prefer hardware wallets for storing crypto assets. These have private keys that ensure that only the rightful owner can access the wallet and no one else.
- Stop-loss orders: You need to have a trading plan and trade strategies in place before you start trading Bitcoins. Your job is to figure out the reason for trades and when you enter one; there has to be a stop-loss order in place. This plan will state your entry prices, the targeted price, and the stop-loss level. This tool helps to mitigate risks when you run a sell order. It will mark the amount below your original buy-in price so that you know when to exit a trade. This tool helps in preventing losses in your portfolio.
- Stay updated: To perform successful trades you have to stay in tune with everything that is happening in the crypto world. Platforms like Reddit or Twitter can keep you informed about crypto news and help you explore future investment options. You may pick up useful tips and techniques from successful traders online.