Investors from all over the world are trying to take advantage of the volatile forex market, by trading with the cryptocurrency, Bitcoin. Well, it is very easy to get started in online trading, but it is important for you to know that there are risks that you cannot overlook.
As with any of the speculative or exchange markets, Bitcoin trading is also a shady venture, which can cost you a lot of money, especially if you don’t get it right. Therefore, it is essential that you know the risks involved, before you decide to start them.
If you are a beginner and interested in trading with Bitcoin, you will first need to understand the basics of trading and investing.
Avoid common mistakes that new traders usually make
Any type of financial investment can bring losses instead of profits. Likewise, with the very unstable bitcoin market, you can expect profits and losses. It’s all about making the right decisions at the right time.
Most beginners tend to lose money by making 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, this approach helps you to mentally come to terms with the worst case scenario.
First, successful traders diversify their investment portfolios. Exposure to risk increases if most of your funds are allocated to a single asset. It becomes difficult for you to cover losses from other assets. You cannot afford to lose more money than you invested, so avoid putting more money on limited assets. It will help you keep the negative trades to some extent.
Second, putting in more money than you can afford, will also affect your abilities to make the right decision. In most cases, you will have to choose a “desperate sell” when the market is down a bit. Instead of holding on to a lower market, an investor who has over-invested in a trade is bound to panic. A person will feel the need to sell the possession at a low price, in an effort to reduce losses.
You will also lose more money when the market recovers. This is because you will have to buy the same dip, but at a higher price.
Set goals – feelings make you blind
Setting a target for each transaction is vital when trading Bitcoin. It helps you stay level even in the most volatile conditions. Therefore, you will first need to 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 decisions from being made based on feelings.
Instead, you should work on improving your skills in reading charts and doing market analysis. New traders are also advised to close out their losing positions within 24 hours, in order to avoid recurring interest payments.