by Alex Truman
Bitcoin presents a new investment class. That means there’s little data on which to base performance and fundamental analysis. Nevertheless, people that have made significant profits from Bitcoin trading suggest following these rules.
Prepare for Bitcoin’s Extreme Volatility
Trading Bitcoin is the surest way to learn about it. However, Bitcoin trading is a high-risk, high-reward game that requires high tolerance for its volatility. Even when the price of this digital asset reaches its peak, an overnight fall could be imminent. For instance, Bitcoin dropped by almost 48% from its peak in April 2021. Therefore, always prepare for high volatility when trading Bitcoin. Also, understand the implications of this volatility to your investment.
Avoid Large Bets
Some cryptos have given investors phenomenal returns over the last years. However, these numbers should not carry you away. Only invest an amount you’re ready to lose if things don’t work out according to plan. Even with a high-risk appetite, don’t start with a large amount. Instead, invest less than 2% of the overall portfolio in Bitcoin. Once you’ve familiarised yourself with Bitcoin trading, you can decide on the right amount to use when trading Bitcoin.
Trade on a Trustworthy Platform
The crypto trading sector is largely unregulated, with new platforms emerging every day. Therefore, take your time to identify a trading platform you can comfortably use and withdraw your profits plus capital at any time. Also, read the terms and conditions of a Bitcoin exchange before registering to start trading. Platforms like BitIQ provide detailed information about their operations. Also, read reviews from other users before signing up.
Essentially, trade Bitcoin via a trustworthy and established platform. That way, you won’t lose your money if the firm goes under or experiences regulatory setbacks. Also, using an overseas crypto exchange could require more compliance on your tax fronts.
Verify the Tips You Implement
Maybe you’ve come across many tips for Bitcoin trading. However, much of the information about Bitcoin trading lacks credibility. Thus, acting on it without verification could lead to significant losses. Essentially, don’t depend on unverified information that you find on social media. That’s because some gullible investors could purport to be Bitcoin trading analysts and charge you a fee for what they claim to be practical tips.
Therefore, please verify any information you find online before using it as your basis for trading Bitcoin. Also, check the market’s trading volumes and caps. Significant trading volumes and a low market cap are mostly red flags.
Learn to Manage Your Money
A proper money management strategy could differentiate a failure and a successful Bitcoin trader. Every Bitcoin trader wants to purchase this virtual currency at a low price and sell it when the value increases. However, this isn’t always that easy. A significant percentage of traders lose their money due to their inability to control emotion and manage funds.
A critical rule is to avoid trading more than 5% of your capital in a single trade. Instead, place several orders without buying all at once. Also, place limit orders at 10%, 5%, and 3% below the current Bitcoin price. Additionally, note the entry and sell prices and take note with every trade. That way, you can learn from mistakes and improve your crypto trading skills.
In addition to these rules, perform technical and chart analysis. That way, you can know the right time to purchase or sell your assets.
