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CRYPTOCURRENCIES:TIPS ON TRADING BITCOIN

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1 OF BITCOINHISTORYBitcoin was the first cryptocurrency established, and made publicly available in 2009. Before this there had been previous attempts of the creation of an online currency and online ledgers secured through encryption. These attempts were formulated, but never fully developed.It was created by Satoshi Nakamoto, whose identity to this day remains a mystery. When bitcoin and bitcoin mining (the method in which one creates bitcoins) was made available to the public, their transactions were recorded and verified on the ‘blockchain’. Bitcoin had only been mined by this point, and it was impossible the assign monetary value to its units. In 2010, someone decided to sell their bitcoin for the first time: They swapped 10,000 bitcoins for two pizzas. By 2011, bitcoin began rising in popularity, and with this emerged a string of other alternative cryptocurrencies. These are sometimes referred to as ‘altcoin’ and were created in an attempt to improve on the original design and code. Among the first to follow bitcoin was litecoin. Now, there’s over 1,000 different altcoin in circulation.

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Although fundamental analysis can be especially useful when trading cryptocurrencies like Bitcoin, you should remember that it can also prove ineffective in some cases. This is because, compared to other trading products, Bitcoin and other cryptocurrencies lacks historical information.Because of this, studying reliable Bitcoin news is essential to trading it. Some incidents directly linked to Bitcoin can be the more unpredictable, and can trigger volatile market moves. For example, the hacking of a major exchange.

The blockchain is one of the key features of all cryptocurrencies. It has the potential to re-define the transaction process. The blockchain is essentially a digital ledger, where transactions using cryptocurrencies are recorded chronologically and publicly. It cannot be controlled by any single entity - it was created to decentralise the transaction process.

Bitcoin was intended to be an alternative to our more traditional currencies like GBP or USD. The differences between these are what define Bitcoin. Understanding the need for these differences will bring you up-to-speed.

LACK OF TRADING HISTORY

THE BLOCKCHAIN

COMPARE IT TO THE FAMILIAR

2 PRODUCTKNOW YOURBitcoin is fairly new to the world of trading, which means information surrounding it is continuously updated. Understanding Bitcoin, how it came to be and what it’s used for can help you to build your knowledge surrounding it.

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Cryptocurrencies are renown for their levels of volatility, which is often much higher than that of other products such as indices, commodities and currency pairs. This volatile nature is driven by a number of contributing factors, for example a single person could hold a large proportion of the total outstanding float, what they do with this can impact the market. Of course the news media can help influence market sentiment, especially when it comes to a controversial product like cryptocurrencies. This means that fundamental analysis is especially important. With this said, it’s also important to realise that some ‘news sources’ can be speculative opinion, and therefore not always reliable. While the volatile nature of the crypto market can provide you with opportunities to trade, it doesn’t guarantee that you will make a profit. In this instance, it’s recommended that when trading in the crypto market you implement a stop-loss.

3 MARKETVOLATILE

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Whether you’re already an active trader learning about cryptocurrencies or you’re just getting to grips with the idea. It’s important to take a moment to assess the risks associated. High volatility in bitcoin trading translates to higher risk/reward. Always remember that no one, regardless of their experience can guarantee the financial performance of a product. Cryptocurrency is still a young technology, and you should expect it to continue to fluctuate. These volatile fluctuations can be products of public sentiment, companies and financial institutions that choose to exclude or include the product. You can take steps to manage your risk by first accepting it: You will lose money at some point. After this, you should look to adopt a risk management strategy.

4 MANAGEMENTRISK

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OPEN DEMO ACCOUNT

A Demo trading account is one of the most useful tools you’ll come across in your trading career. It’s an opportunity at the beginning of your trading experience to trade on live markets in real time with simulated funds. While it is indeed used by beginners to learn about the MT4 platform. It’s also just as important to seasoned traders looking to back-test and trial their trading strategies and ideas.This is especially useful in the cryptocurrency market if you’re unsure how to approach products like bitcoin. With a demo account, you’re able to explore the market without risking your capital.

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