Can I Make Money Trading Bitcoin?

cryptocurrencies trading

Those who have some experience and expertise in foreign exchange would certainly have reasons to find this article interesting and informative. We have, all through understood that foreign exchange is all about trading in different form of currencies like U.S Dollar, GBP, Yen, Euro and a few other major ones. However, the concept of forex buying and selling has been literally turned on its head over the past seven or eight years.

The world of cryptocurrencies might have finally arrived. Though there are thousands of cryptocurrencies in the market today, there is one name which stands out. It is Bitcoin and it could be defined as the trendsetter for modern day cryptocurrencies. It is the cryptocurrency which acts as the benchmark when evaluating the market as a whole. Hence, it is quite obvious that there is a big demand for bitcoin. It is one of the most traded cryptocurrencies in the market today and demand outstrips supply quite heavily. Therefore if you want to trade bitcoin and make money from it, you have to understand the finer points.

It Is Unique And Different

stack of cryptocurrencies smallWhile there are avenues to make money trading in bitcoins, you must understand that it is unlike the conventional forex buying and selling. It does offer to fantastic trading opportunities which may not be there in traditional forex currencies. There are some research studies to prove that while bitcoin does offer honest money making opportunities it is totally different from what you might have been used to.

It Is Highly Volatile

High volatility is the hallmark of any cryptocurrency and bitcoin is also not an exception. In fact those who understand bitcoin use this high volatility to their advantage. It offers greater elbow space and variability when it comes to trading. However, it is not possible to just follow the pair-based currency trading that is prevalent in normal forex trading and expect to make money. The trade has to be leveraged and moved up quite substantially. This does come with an increased interest cost. The maximum leverage ratio for forex is now around 50:1. When one compares the same with bitcoin the ratio is much higher. You may have to increase the ratio by anything between seven to eighteen times. This certainly is huge and you must know when to leverage up and leverage down.

bitcoin chart analysis

It Offers Good Arbitrage Opportunities

There is one more reason why bitcoin could provide be one of the best forex trading options. The bitcoin market is still evolving and it is not as efficient as the forex market that we are used to. This in itself does provide a good opportunity. Therefore if you look around and then decide you will have some great arbitrage opportunities coming your way. You can easily come across avenues to trade between exchanges, between various currency pairs based on which you can trade quite profitably.

It Is Independent Of Other Assets

If you are looking to diversify your forex portfolio, then you can be sure that bitcoin will add to your list. You will have one more product. It does not have any correlation between its price and other currencies like USD or Euro. In the same light researchers have studies to prove that it also has no correlation to gold and other commodities which are also traded extensively in the global markets.

Price Is Determined Purely On Demand/Supply Equation

As is the case with all products and services, the price of bitcoin is also determined by demand/supply equation. When you see the number of transactions increasing in bitcoin, the demand obviously will go up. If you can get into it during such periods of demand upsurge, you certainly stand a good chance of making money. However, you must be careful and look at the history of bitcoin price movements. As is the case with all forex transactions, looking at it from the long term perspective would always be a better option. If you are able to integrate your long or short trades with the historical movement of the price of bitcoins you have a much higher chance of making big money.

Do Not Incur Losses

Though trading on bitcoins is very easy, the secret lies in not investing in any money which you believe might be a loss making proposition. When you short sell you will certainly be making a loss, but such short selling may not be restricted to you alone. It could set off a ripple market effect and you could end up depressing the market of bitcoins as a whole and pulling it down. If this becomes a habit with you and many others, you could be running the risk of pulling down the bitcoin demand quite significantly. This will not augur well for the bitcoin market as a whole.

Find A Safe Place To Store Your Bitcoins

Bitcoins are digital currencies and in fact just movement of data across a network of traders. Hence, you must find out ways and means to store your bitcoins safely and securely. You can do this by identifying a reliable bitcoin client. However, before doing so you must he sure that the storage facility is well protected and secure. It should have the best of firewalls and other features to prevent phishing and other threats. You must ensure that the safety and security features are reviewed constantly and upgraded as and when necessary. It should also be available readily when you are trading in it.

Select The Right Trading Strategy

You have the option to choose many avenues for trading in bitcoins. You could either become a swing trader, day trader or you could play safe and wait till the market stabilizes a bit. You must ensure that you choose the right strategy which could help maximize your profits. It is all about trial and error and you cannot have a straight jacket rule for it.

Choose Other Cryptocurrencies For Trading Too

Finally bitcoin trading is also possible using other cryptocurrencies. If you look up the major online exchanges, you will at any given point of time come across 40 digital currencies. You can use any of these cryptocurrencies to make sales and purchases of bitcoins. At the end of it all your objective should be to make profit.