5 key tips for trading Bitcoin And An Additional Tip For Those Who Don't Have Any Knowledge of Trading CFD's
Undoubtedly, 2017 has been the year of bitcoin. Its explosion in popularity has created a global buzz among consumers, merchants and investors. The speed of the transaction, low rates, increases in value and other factors have convinced people around the world to make Bitcoin one of its main modes of exchange.
As a result, large groups of traders have capitalized on the boom in bitcoin trading in the spot, CFD and futures markets. In an environment that is best described as "turbulent", discipline and dedication are two indispensable prerequisites for success.
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Here are five tips to change the inherent volatility of Bitcoin operations in your favor:
Become fluent in technical analysis
Adopt a sustainable rhythm
Stay on top of the news
Implement loss stops
Use prudent leverage
Let's look at each of these in more detail.
No. 1: be competent in technical analysis
The nature of Bitcoin makes it an outlier compared to other asset classes or currencies. There is no central bank or government agency that can influence its valuation. News events can have unpredictable impacts, and other financial instruments show sporadic correlations. In fact, Bitcoin's pricing models are largely speculative, ignoring a large part of traditional financial theory.
Understanding the basic concepts of technical analysis is an absolute necessity before entering the Bitcoin markets. In many ways, the price itself provides the only reliable clues related to the future value of Bitcoin. The lack of relevant market fundamentals drives the analysis of price graphs, the application of indicators and the reading of the price action.
No. 2: Adopt a sustainable rhythm
Trade is a marathon, not a sprint. One of the most important tasks faced by Bitcoin market participants is to establish a sustainable long-term schedule. Putting extraordinarily long hours on a daily basis leads to exhaustion and inferior performance.
The market hours for Bitcoin are long:
Commercial hours of the place
Cash market 24 hours a day, 7 days a week
CFD 24 hours a day, 5 days a week
Futures 23 hours a day, 5 days a week
Nobody can trade effectively 24/7. The best practice is to adopt a manageable calendar by delineating optimal trading times and focusing exclusively on those periods.
Get more information about Bitcoin futures options here.
Bitcoin Trading Tip No. 3: Stay informed of news articles
Bitcoin is unique in the sense that typical news does not have a predictable impact on markets. There are no scheduled releases of GDP, WASDE inventory reports or EIA to boost participation and biased prices.
If you are going to start trading with Bitcoin, it is a good idea to have access to a live news service and monitor it.
No. 4: Implement Stop Losses
Consistent volatility is an attribute of the Bitcoin markets that is particularly attractive to active traders and investors. Valuations fluctuate regularly between 5 and 10 percent daily, creating opportunities for traders with a risk appetite.
It does not matter if a trader is participating in the futures markets of cash, CFD or Bitcoin, the use of stop loss is essential when operating with Bitcoin. The big price swings are certainly ready to make a profit, but there is the possibility of a catastrophe.
It is absolutely imperative that you use a stop loss somewhere in the market, the exact location will vary, to protect any open position.
No. 5: Use prudent leverage
It's a cliché, but leverage is truly a double-edged sword: it increases profits but increases losses. Too much leverage promotes the management of reckless money and will lead to the exploitation of your trading account. Too little can hinder performance because premium operations may not work according to their capabilities. Ultimately, effective leverage management is an act of balance that a Bitcoin trader must perform.
Bitcoin futures products can help you manage leverage because they place an additional emphasis on adequate leverage. Offers from CME Group and the Chicago Futures Exchange (CFE) are priced at $ 25 and $ 10 per tick, respectively. To say the least, it can be capital intensive to take positions of multiple excerpts.
A simple way to define the size of the position is the 3 percent rule. Under its parameters, a maximum of 3 percent of the commercial account can be assigned to a single operation. This ensures the proper alignment of the risk to the reward with respect to the size of the position and the location of the stop loss.
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