Crypto Trading – Bitcoin Trader Tips

bitcoin trading

Cryptocurrency or digital currency is an internet-based medium of exchange which uses cryptographic functions to facilitate financial dealings. Bitcoin is presumed to be the first cryptocurrency ever to be created. After creation, the digital currency can be transferred between parties through the use of public and private keys. Typically when transfers are done between parties, they are usually accompanied by minimal processing fees, which are far better than those charged by traditional financial institutions.

Crypto Trading Tips

Trading in cryptocurrency or fiat currency is all the same. The only difference is that instead of you buying fiat currency like US dollars or euros, you decide to buy or trade Bitcoin or Ethereum. For example, after your market analysis, you find out that Bitcoin (BTC/USD) will inCryptocrease in value against the US dollars; you will then “go long.” Conversely, if the reverse is the case, you will have to “go short.” Remember that we are not buying the cryptocurrency physically but placing orders in the market. Meanwhile, the following are the trading tips:

  • Cryptocurrency Volatility
  • Limitation of your exposure
  • Cryptocurrency Leverage
  • Ability to cash out
  • Trading patterns

Cryptocurrency Volatility

As a trader, you have to know that cryptocurrencies are incredibly volatile. A typical example is the trading strategy used in forex trading. In Forex trading, these strategies take several weeks before it becomes realizable. However, in cryptocurrency trading, these techniques become achievable in a matter of days or hours. These techniques will work for you in cryptocurrency trading.
Conversely, it will have adverse effects when there is volatility. It’s been reported that Litecoin value fell by 50% within two weeks in 2017. However, the recovery took about two months.
Limitation of Exposure
Your investment must be within what you can afford to lose. Borrowed funds are not supposed to be used for cryptocurrency trading. You should consider your investment as being lost in trading even though you may still have access to it. When you have this notion, and you are comfortable, then you will not be under stress to trade. This is the key to success.

Cryptocurrency Leverage

As a newbie trader subscribing for leverage is not necessary. Leverage is a borrowed fund from the broker to increase your capital for trading. Leverage can help you to magnify your profits when the market is in your favor. On the other hand, it can magnify your losses when the market is against you. Assuming you have $1,000 US dollars in your trading account and you traded BTC/USD without leverage.

You place a long trade because you know that Bitcoin will increase in value. At the end of the trading session, if your capital is increased to $1100, then you have made 10% profits less trading fees. However, if you are trading with leverage, say 10:1. Your profits will multiply by 10 times after trading fees have been deducted. Nonetheless, if the market is against you, leverage will slice away from your deposit, 10 times your losses.

Ability to Cash out

A critical aspect of trading is the ability to exit the cryptocurrency market at the right time with a profit. This is an essential aspect of trading, although your entries are also crucial after thorough market analysis. In trading, you make profits when the market goes up or when it falls. In reality, the market moves down, than it moves up. Please advise that losses could also occur, thats the nature with trading.

You close your winning trades on time because it might turn negative. Targets (take profits) can be set at the critical levels of the markets. Stop-loss orders are another method of exit the cut down on losing trades. When you set your parameters, the platform automatically liquidates your position at the predefined prices.

Trading Patterns

Early days in Forex trading, you must have heard about chart patterns, maybe in market trading books and guides. The market does follow these chart patterns like the Head and Shoulders, Double Top, and Rising Wedge. Professionals use these patterns to predict the market. As a trader, you must limit your exposure to the patterns; the outcome of these patterns is not definite. You can lose your money on some of these patterns does not exist.

What are Cryptocurrencies?     

A cryptocurrency is a digital coin which is an internet-based medium of exchange between persons in virtual transactions. These are not fiat currency that you can hold, but they only exist as data. They are entries in a database that cannot be modified without fulfilling specific conditions. The following are some of the features of a cryptocurrency:

  • Digital
  • Decentralized
  • Peer-to-Peer
  • Pseudonymous
  • Trustless
  • Encrypted
  • Global

Digital

Cryptocurrency is called digital because they only exist on computers. Unlike our fiat currency, which exists in the form of coins or paper notes. Fiat currency has reserves in all Central Banks. Cryptocurrency does not have reserves.

Decentralized

As the digital currency exists only in computers, they are distributed across a network of thousands of computers. The cryptocurrencies are not confined to one central computer or server. It is a network without a central server. Every single entity of the network will do this job. Every peer in the network should have an inventory to check if the transactions are valid.

Peer-to-Peer

In any transaction, digital currencies are passed from one person to another. All users of cryptocurrencies deal directly with one another. In cryptocurrency, third parties are not involved and also banks or PayPal.

Pseudonymous

This feature implies that the personal information of a user is not a condition before he or she can use or own cryptocurrency. There are no rules or regulations before owning a cryptocurrency. The users receive Bitcoin on an address that comes with a chain of 30 characters. Under this feature, you can examine all the transaction flow, but it is not necessary to reconcile the real identity of users of those addresses. 

Trustless

Users of cryptocurrencies are in complete control of their money and information. They don’t have to trust the system for it to work. In digital currency, there is no trusted third party. By the word “trusted third party”, it means that users or owners have to trust them with their personal information before using their services.

Encrypted

The word “encrypted” means that information is hidden with cryptography. In digital currency, every user has special codes that prevent their information from being accessed by other users. Therefore, a cryptographer is a process where personal information of one user is not accessed or hacked by the other. The word “crypto” means hidden.

Global

Globally, cryptocurrencies can be sent all over the world since digital currencies exist in computers. Unlike fiat currency, it is difficult to send to every part of the world. The fiat currency is confined to their country of origin.

What cryptocurrency miners do?

bitcoin miningCryptocurrency mining is like an accounting function where crypto transactions are verified. On a daily bases, people will transfer e-coin from wallet to wallet, while miners use computer processing power to maintain the blockchain and verify these transactions. Miners are also called nodes that execute a particular task that makes the transaction possible. The following is an example of what miners do. Assuming Solomon owes Sunday 100 BTC. The first step is to announce that Solomon is sending 100 BTC to Sunday to the Bitcoin network. 

Secondly, miners take this information, add other transaction information, and encrypt it. This method is called hashing. The addition will continue until a block is formed. Thirdly, the miners will now compete among themselves to guess the correct encrypted code or block hash. The lucky miner who guesses the right code gets to add to the new blockchain. Fourthly, other nodes will verify the transaction information on the new block. They will also check the whole blockchain and ensure that the new information matches. When the information is correctly checked, the winning miner will add a new block to the blockchain. The fourth step is called confirmation. Lastly, Sunday will now receive 100 BTC from Solomon.

Blockchain – The Technology behind Cryptocurrencies

A blockchain is a collection of data or a distributed ledger. The ledger is a spreadsheet across the network. It works with blocks while the spreadsheet works with row and columns. In cryptocurrency, when a person pays e-coin, this transaction is recorded in a digital ledger called the blockchain. The whole network will know about this transaction. Miners will confirm this transaction by stamping it as legit and spread them to the network. Every node will add it to its database, and it becomes part of the blockchain. 

What is Blockchain?

Blockchain technologyA blockchain is a collection of transaction records called blocks which are encrypted and then linked to each other. In this blockchain, you will have the records of the sender and receiver and the amount of the e-coins that was sent. On a daily bases, the blockchain is being grown up. New blocks, when created, will be seen by all users in the network, and after verification, it will be added to the blockchain.

What is Tangle?

A Tangle is a blockchain without a block and no chains. An example is the IOTA (Internet of Thigs Application), a cryptocurrency that was created in 2016. It was created because of the problem of blockchain. IOTA cryptocurrency was created to battle increasing transaction fees and network scalability. In a Tangle, the users are accountable for validating transactions. Users usually benefit from a fee-free transaction and increased process rapidity. In others, there will be no need to get approval from the miners. In the blockchain, miners are accountable for verifying transactions before adding to the blockchain.

What is a cryptocurrency wallet?

A cryptocurrency wallet is storage software where you can keep and exchange your cryptocurrencies. These cryptocurrency wallets are encrypted and exceptional. That means when you are sending messages from your wallet you are sending encrypted messages to the receiver. In this case, only the recipient cryptocurrency wallet can be able to decrypt the messages into its cryptocurrency wallet. There are advantages a hardware cryptocurrency wallet has over a software wallet. A hardware cryptocurrency wallet is immune to viruses or malware. It is more secure and interactive. The personal keys are not exposed to the computer. The hardware can accommodate multiple crypto currencies.

Why Trade Crypto CFDs?

The acronym ‘CFDs’ means’ contract for difference.’ CFD trading is the buying and selling of CFDs. CFDs are derivative products. They enable you to speculate on the global financial markets such as share, forex, indices, commodities, and treasuries without taking ownership of the underlying assets. It is usually a contract between the broker and the traders to pay the difference in price. That is to pay the strike price and the closing price of the trade of underlying assets. Remember that a trader does not take ownership of the underlying assets.

Here are Today’s Most Popular Cryptocurrencies:

  • Bitcoin
  • Bitcoin Cash
  • Bitcoin Gold

Bitcoin

BitcoionBitcoin was created in 2008 by Satoshi Nakamoto and started in 2009. It was created as a reward for a process called mining. It is agreed to no extra Bitcoin is produced as a maximum of 21 million Bitcoin units was earlier earmarked. Usually, it can be exchanged for other cryptocurrencies, products, and services. It is the leading cryptocurrency in the world with a market capitalization of $143,576,974,924 and transaction volume of $24,846,179,251. Bitcoin has earlier served as a digital gold in the cryptocurrency industry. The digital gold was used as a means of payment and de-facto currency of cyber-crime like the darknet.

Bitcoin Cash (BCH) 

bitcoin-cashBitcoin Cash was an upgraded version of Bitcoin’s core software. It was named by mining pool Via BTC. On August 1, 2017, it was created by the Bitcoin hard fork, which resulted in a new version of the blockchain with different rules. The shift from Bitcoin blockchain to the new version has created more capacity for a more significant number of transactions.

Bitcoin Gold (BTG) 

bitcoin gold

Bitcoin Gold is the second version to come from the Bitcoin source code. BTG retains Bitcoin transaction history. This implies that if you are a Bitcoin holder before the fork, you can own an equal amount in Bitcoin Gold. This cryptocurrency creation was aim at bringing about an alternative mining algorithm that is less susceptible to ASIC-based optimization enabling users to earn more with computer cycles.

Popular Alt-Coins

The term “Altcoins” refers to cryptocurrencies other than Bitcoin. At the moment, over 1000 cryptocurrencies have been launched. Most of these cryptocurrencies were launched following an ICO (Initial Coin offering) in which developers offer a limited number of initial coins to finance technological development. Today, we have many of these coins like Namecoin, Peercoin, Bytecoin, Deutsche eMark, Novacoin, Cryptogenic Bullion, Quark, DarkCoin and Mangocoinz.

Ethereum (ETH)

Ethereum is next to Bitcoin as the most popular cryptocurrency. It was built with a completely different motive as Bitcoin transformed the payment industry. ETH was proposed by Vitalik Buterin, a cryptocurrency researcher and programmer in 2013. Ethereum is like a giant computer accommodating other computers. Ethereum can store revolutionary computer programs like smart contracts. This gives Ethereum an edge over Bitcoin. It has been attracted by banks all over the world. Meanwhile, Ethereum has been split into two separate Blockchains namely Ethereum (ETH) and Ethereum Classic (ETC)

Litecoin (LTC) 

Litecoin is regarded as a peer-peer cryptocurrency created by Charlie Lee. It has some similarities with Bitcoin but differs in terms of the hashing algorithm used. Two of the differences between Litecoin and Bitcoin are speed and amount. It will take 10 minutes to create a Bitcoin Block. While it takes Litecoin 2.5 minutes to create a block. It means that Litecoin is faster than Bitcoin. Litecoin attracts more users as it produces four times the quantity of Bitcoin.

Ripple (XRP) 

Ripple was conceived by McCaled but built by Arthur Britto and David Schwartz. The cryptocurrency commenced operation in 2017 with a price level of $0.0063 to $1. The cryptocurrency is regarded as the next generation of the payment network. Ripple allows financial transactions of different currencies most easily. Ripple helps in transferring the amount quickly. It handles crypto to crypto and fiat to fiat currency transfer. All the classes can be transferred, whether they are mixed up.

EOS

EOS and Ethereum seem to have similar functions in the blockchain industry. It is one of the newest cryptocurrency in the market. It is regarded as the biggest competitor to Ethereum. It is a network capable of processing millions of transactions per second. EOS is similar to the Ethereum blockchain but faster, more scalable, and allows users to build decentralized applications more proficiently. 

What Makes Cryptos Ideal for Trading

Cryptocurrencies trading enables traders to diversify their portfolios. The following include why cryptocurrency trading is very important:

  • Cryptocurrency Volatility
  • Cryptocurrency Market Hours
  • Improved Liquidity
  • Ability to go long or short

 

Cryptocurrency Volatility

The volatility of the cryptocurrency market is what makes trading exciting. There will be a rapid intraday movement that creates an opportunity to buy and sell. If you have done your market analysis, you must come with your risk management.

Cryptocurrency Market Hours

Cryptocurrency Market Hours

The cryptocurrency market is usually available 24 hours a day. It has no central authority in the market. Cryptocurrency dealings take place directly between individuals, on cryptocurrency exchanges all over the world. You can trade crypto to crypto or fiat to crypto.

Improved Liquidity

Liquidity brings about a faster transaction, better pricing, and increased accuracy for technical analysis. Liquidity brings about how easily a cryptocurrency can be converted into cash. On a broader view, the cryptocurrency market is considered illiquid because the transactions are isolated across multiple exchanges.

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