Investors all over the world are trying to cash on the volatile Forex market, by trading with the crypto-currency, Bitcoin. Well, it is quite easy to get started with online trading, but it is important to know that there are risks involved that you cannot afford to oversee.
As with any of the speculative or exchange markets, Bitcoin trading is also a risky venture, which can possibly cost you a lot of money, especially if you don’t get it right. Therefore, it is essential for you to know about the risks involved, before deciding to get started with it.
If you are a newbie, who is interested in trading with Bitcoin, then you will need to first understand the basics of trading investment.
Avoiding these common errors that new traders generally tend to make.
Any kind of financial investment can bring losses, instead of profits. Likewise, with the unbalance of Bitcoin market, one can expect both, profits and losses. It is all about making the right decisions at the right time.
Most of the newbies tend to lose money by making the wrong decisions that are generally driven by greed and poor analytical skills. Experts say that you should not venture into trading if you are not ready to lose money. Basically, such an approach helps you in coping up mentally for the worst possibilities.
Diversify the portfolio
First, successful traders diversify their portfolios. Risk exposure increases if most of your funds are allocated to a single asset. It becomes harder for you to cover the losses from other assets. You cannot afford to lose more money than you invested, so avoid placing more funds on limited assets. It will help you sustain the negative trades to quite an extent.
Secondly, putting in more cash than you can afford, will also cloud your sound decision-making abilities. In most cases, you will be compelled to opt for ‘desperate selling’ when the market declines a little. Rather than holding through the market dip, the investor who has over-invested in the trade is bound to panic. The person will feel the urge to sell off the holding for a low price, in an attempt to lessen the losses.
You will also be losing more cash when the market recovers. It is because you will have to buy the same holding back, but at a higher price.
Set goals – Emotions make you blind
Setting goals for every transaction are important when you trade Bitcoin. It helps you stay level-headed, even in the extremely volatile conditions. Therefore, you will need to first determine the price to stop your losses.
The same rule also applies to profits, especially if you let your greed take over. The benefit of setting goals is that you can easily prevent making the decisions based on emotions.
Instead, you should work towards improving your skills in reading the charts and conducting the market analysis. It is also worthwhile for beginners to close their losing positions in 24 hours, so as to avoid paying interest.
Reasons to Use Crypto-Currency
Quick payments – When payments are made by using banks, the transaction takes some days, similarly wire transfers also take a long time. On the other hand, virtual currency Bitcoin transactions are generally more rapid.
“Zero-confirmation” transactions are instantaneous, where the merchant accepts the risk, which is still not approved by the Bitcoin block-chain. If the merchant needs an approval, then the transaction takes 10 minutes. This is much quicker than any inter-banking transfer.
Inexpensive – Credit or debit card transactions are instant, but you are charged a fee for using this privilege. In the Bitcoin transactions, the fees are usually low, and in some cases, it is free.
No one can take it away – Bitcoin is decentralized, so no central authority can take away a percentage of your deposits.
No charge-back – Once you trade Bitcoins, they are gone. You cannot reclaim them without the recipient’s consent. Thus, it becomes difficult to commit the charge-back fraud, which is often experienced by people with credit cards.
Safe personal details – Credit card numbers, get stolen during online payments. A Bitcoin transaction does not need any personal details. You will need to combine your private key and the Bitcoin key together to do a transaction.
It is not inflationary – Federal Reserve prints more dollars, whenever the economy is sputtering. Government injects the newly created money into the economy causing a decrease in currency value, thereby triggering inflation. Inflation decreases people’s power to buy things because prices of goods increase.
Bitcoins are getting legitimate – Major institutions like the Bank of England and Fed have decided to take Bitcoins for trading. More channels like Reddit, Pizza chains, WordPress, Baidu, and many other small businesses are now accepting Bitcoin as a mode of payment. Many binary trading and Forex brokers also allow you to trade with the Bitcoins.
Bitcoin is the pioneer of the new crypto-currency era, the technology that offers you a peek into future currency.