If you’ve landed on this article, you may have dreams of becoming a Bitcoin trader. This may or may not be the right path for you, depending on your current skill level and how fast you learn.
In order to figure out whether it’s the right skill to pursue, you will need to understand the basics first.
TRADING VS. INVESTING
We must first cover what trading even is. Essentially, buying an asset (whether stocks or crypto) and selling it shortly after is the heart of trading. Ideally, you buy low and sell high to make a profit.
With investing, you buy the asset and hold it for the long run, hoping that the value goes up and up. Usually, people invest in Bitcoin because of their belief in the technology or the team behind the currency.
TYPES OF TRADING
All traders try to accomplish the same goal (earning a profit) but the methods to achieve this vary.
Withday trading, multiple trades are conducted throughout the day, with the purpose of profiting from short-term movements in the price.
Scalpingis a form of day trading that has become quite popular lately. Scalping is to day trading as day trading is to investing. Much tinier movements in the price are observed before each trade is executed. The fundamental idea behind scalping is that small profits limit risks.
Finally,swing tradingis somewhere between investing (long-term) and day trading (short-term). In swing trading, the trader observes natural “swings” in the price cycles, which can occur over days, weeks, even months. Bitcoin is held until movement dies out, then a profit is made.
WHICH METHOD IS OPTIMAL?
Now that you understand the different types of trading strategies, it’s up to you to choose which you’re most comfortable with. If you have a lower tolerance for risk but plenty of time to spend in front of a computer, then day trading may be for you. If you have less time to spend, then swing trading may be optimal (since you can just check on the general cycles from a smartphone). It may be wise to start with small allotment of funds (something you can afford to lose) and dabble with each method until you find the one that’s perfect for you.