Bitcoin Trading Guide

To the uninitiated, Bitcoin trading probably sounds like this:

A dream job, reserved for the fortunate few who trade Bitcoin from home, set their own hours and perform nothing more strenuous than clicking a mouse or watching a screen.

The harsh reality?

The overwhelming majority of new traders lose money and quit within a year. All those washouts likely thought themselves future members of that exceptional minority of traders who achieve consistent profitability.

Why is trading such a difficult endeavour?

Firstly:

Due to the intrinsic unpredictability of markets.

The human mind, which excels at pattern recognition, struggles with random outcomes.

Secondly:

Trading is emotionally-taxing, involving long hours of boredom interspersed with periods of intense stress.

Finally, as traders risk their own capital in an endless zero-sum game, trading is an occupation which bears close resemblance to professional gambling.

Even successful traders frequently succumb to burn-out due to the pressures involved.

Except in the marketing of trading courses, products or services, trading Bitcoin is no glamorous road to easy riches. Rather it is an activity demanding great patience, control and discipline. New traders are likely to lose money as they develop their skills and achieving consistent profitability is never guaranteed, even for the most experienced Bitcoin trader.

Trading Bitcoin vs. Bitcoin Investing

This article discusses the active trading of Bitcoin as an (additional) occupation or supplementary income source. Trading Bitcoin is similar but distinct from investing in Bitcoin.

An investment in Bitcoin is a long-term undertaking, often with multiple goals such as portfolio diversification, fiat risk hedging, business or ideological objectives, etc. Bitcoin investors are generally insensitive to price volatility and unlikely to exit their positions, barring some dire eventuality.

By contrast, most Bitcoin traders maintain only short-term positions, staying in a trade for a maximum of a few months – but often for no more than a few hours. Bitcoin traders are also extremely price-sensitive, striving for perfect entry and exit prices and abandoning their positions immediately if they prove unprofitable.

Bitcoin Trading Advantages

For trading purposes, Bitcoin is superior to other instruments, such as stocks, commodities or Forex, for at least 3 reasons:

1) Bitcoin’s exceptional volatility allows for high percentage profits without leveraging.

Large price moves, the average trader’s bread and butter, are far more common in Bitcoin than almost any other instrument. Therefore, Bitcoin traders may eschew the increased risk and expense of leverage strategies designed to extract high profits from small moves.

2) Bitcoin trades non-stop; 24 hours a day, 7 days a week.

By contrast, stocks and commodities only trade during business hours and Forex markets shut over the weekend. Trade in Bitcoin remains active around the clock as volume is distributed primarily across American, European and Asian sessions.

3) Bitcoin is probably the cheapest, quickest and most convenient instrument to trade.

Bitcoin exchange fees are minimal compared to traditional exchanges and Bitcoin deposits or withdrawals are accomplished within hours from anywhere in the world. Less stringent requirements for personal information are the norm for Bitcoin exchanges, particularly if deposits and withdrawals are handled exclusively in Bitcoin.