Bitcoin is still a relatively new asset for many investors from all over the world, in spite of the fact that it has been around for more than a decade and proved beyond any shadow of doubt that it can be used as a store of value. BTC’s original purpose, as outlined by its creators, was for it to act the same way as any fiat currency, but this couldn’t become a reality due to the fact that the trading ecosystem is still subjected to heavy volatility and price fluctuations. Instead, it has found a home among those looking to diversify their portfolios and build wealth.
If you’re new to Bitcoin, there are several things you should be aware of before entering this trading ecosystem. Being aware of these characteristics can help you make more objective decisions when it comes to trading, increasing your likelihood of recording successful outcomes and growing your portfolio.
Trading Hours
Most trading markets operate between 9:30 am and 4 pm and only between Monday and Friday. Outside of these hours, you cannot buy, sell, or trade assets and holdings. Things are entirely different in the crypto market, which is open 24/7, including on weekends and holidays. This makes the blockchain ecosystem way more fast-paced than traditional markets, giving investors more room for movement. If you don’t have the time or energy to perform transactions on weekdays, you can focus on this activity over the weekend.
However, the fast-paced markets come with the potential to become exhausting and causing FOMO. Unfortunately, the fear of missing out is common in the crypto environment, particularly among emotional traders. This cohort is more likely than not to go with their gut feeling and emotions rather than logic and analysis when performing a trade. Since the market is always available, you must make peace with the fact that you won’t be able to track it all the time and that some trades might pass you by. Others might just seem great in theory but could be nothing more than smoke and mirrors.
If you’re a new trader, you must learn when it’s best to step away so that you don’t impact your finances and personal life in a negative way.
Stop Loss
Since price fluctuations are commonplace in the Bitcoin world, you want a strategy that can protect you from incurring massive losses. The first thing you should keep in mind is that you must only use money you already own and could afford to lose. Don’t use money reserved for rent or utilities, and definitely don’t go into debt for your trades. When it comes to buying or selling, the general consensus is that you should sell low and buy high to maintain profitability.
One of the ways to protect your portfolio is to set up a stop-loss. This procedure refers to creating a conditional trade order that can be used to enter or exit a position to set a limit on the downside. This condition naturally refers to Bitcoin’s price level, and you can specify the lowest point at which your exchange should activate the buy or sell order. Doing this means that you don’t have to manage your trades through a painstaking process anymore, something that allows you to be more detached and reduces the risk of FOMO even more.
A stop-loss allows you to navigate risks more efficiently, too, since you’re less likely to act rashly with such a tool in place.
Leveraged Trading
The concept of leveraged trading refers to the use of smaller units of capital that allow traders to gain exposure to much larger positions. It is a widespread thing among beginners, but the truth is that this type of trading can be quite complex, and it would probably be best if a more experienced investor was dealing with it. When you’ve succeeded in building up your profitability, you are definitely better equipped to handle leveraged trading. There are no entrance barriers in cryptocurrencies, which is why having the necessary experience is essential. Otherwise, you risk having your wealth transferred into the funds of the exchange itself so that your chances of losing absolutely everything you’ve worked for are pretty elevated.
Slow and Steady Approach
Since the cryptocurrency market changes so quickly and trends are fast-paced, most people believe that the possibility of becoming rich when you’re a trader is somewhat similar. Nobody expects to get rich quickly in well-established markets, but Bitcoin’s newer status leads people to assume that this is much more likely, if not inevitable, when dealing with cryptocurrencies. There are some who swear by this possibility as well, with people on social media flashing their wealth to show exactly how much they’ve earned.
However, those who claim to have become immensely rich seemingly overnight by trading crypto are either exaggerating or were simply lucky. There’s also a difference between being wealthy on paper and in real life, with the former melting away rather quickly in the case of improper management. The best strategy you can employ is to focus on holding on to your assets for a long time and allow them to become more valuable. This doesn’t happen overnight; in fact, it can take several years to yield results. But many of those who invested in Bitcoin during its earliest days have now seen returns amounting to hundreds of thousands, if not even millions, worth in crypto.
Risk Management
You must be aware of the risks of trading before you begin working on your portfolio. While most holdings carry a certain degree of risk, there are some that are slightly more perilous than others. Bitcoin is one of them as a result of its decentralized nature and the fact that the prices can fluctuate a lot, even in the span of twenty-four hours. You must establish just how much risk you’re comfortable with when you become a trader, as well as how much risk you should take when aiming to complete a trade. Understanding the risks will help you become more objective and, therefore, more successful as well.
The Bitcoin market is still relatively new, and its specific characteristics have caused some investors to stay away from it, afraid of losing capital. If you want to become an investor, you must remember the importance of having a solid but flexible strategy that will enable your portfolio to thrive.
