Engaging in the art of trading Bitcoin requires a very unique mindset. Unfortunately, it is rather common to see so many people fall for the obvious pitfalls. There are ways to prepare oneself without putting everything on the line.
Trading Bitcoin on Paper is key
It takes a while to get used to trading Bitcoin and other cryptocurrencies. These markets do not behave like stocks or precious metals, even though the core concepts are the exact same. Bitcoin and altcoins are a lot more volatile, leading to many more price swings. It is not uncommon to see a drop of $500 in a day, or even four digits if things get really wild.
Even for those who feel comfortable trading other assets, trading Bitcoin isn’t for the faint of heart. It is advised to begin trading on paper to get a feel for the market. Not having to put money on the line from day one is always advised. Paper trading is a method that can be overlooked by most, but the concept has tremendous potential.
Logging Your Trading Journey
It may seem odd at first to keep a diary of trading activities. When cryptocurrencies are involved, this is not an unnecessary luxury. The values for trading Bitcoin and altcoins can be very different compared to traditional markets. As such, making notes and documenting successful – and unsuccessful – trades can help build a much stronger portfolio over time.
Not only will this serve an educational purpose, it is also a good reminder of what not to do when trading Bitcoin. It is crucial to learn from one’s mistakes at all times. Recording one’s thoughts, analysis, and behavioral patterns can make a big difference further down the line.
Educate Yourself Before Trading Bitcoin
Most educated traders often rely on patterns and indicators. Social media is a great source for a lot of different and unique patterns. Understanding this information is an entirely different ordeal, though. Patterns and indicators may not always make sense when trading Bitcoin, especially in the beginning.
Depending on one’s risk appetite, different patterns will become of greater value. It is important to test the waters, and even log patterns one can easily identify in the trading journal mentioned above. There is a steep learning curve where trading Bitcoin is concerned, and one that shouldn’t be taken lightly.
Follow Your own Path
It is very easy to follow someone else’s advice when dealing with financial markets. Bitcoin and other cryptocurrencies are no different in this regard. It is pertinent for any trader, both novice or experienced, to not only form their own opinion, but stick to it at all times.
That doesn’t mean one can’t adjust the methods used. However, following advice to buy or sell because someone on social media said so – even if they use the same patterns and indicators – is never advised. Do your own research, at all times. Sharing ideas is great, but never binding advice for making profit.