Is your head spinning from all the bitcoin trading noise?
Maybe you want to become a bitcoin trader because of its high volatility, but have absolutely no idea where to start. In this guide, we share exactly what is bitcoin, how to buy bitcoin, trade cryptocurrency, and the pros and cons of owning bitcoin. Keep reading to learn more.
What Is Bitcoin?
Bitcoin is a type of cryptocurrency. Crypto is a form of currency that exists digitally and is not monitored by any governing authority. So to clarify, there is no tangible coin purchasing involved in bitcoin.
Bitcoin is sold using blockchain technology, which is a computerized system tracking every transaction of bitcoin in a peer-to-peer network. Simply put, it’s like a bank but without any hierarchies or authorities.
How to Buy Bitcoin?
Just like stocks, you can buy bitcoin in apps or online. You can also buy bitcoin to trade and make fast gains (and sometimes losses) or you can invest in bitcoin for the long haul and hope that the price increases over time.
You buy bitcoin with money, so you’ll deposit money from your bank account to your bitcoin app and then buy as many coins as you want.
How to Trade Bitcoin?
There are four main strategies when it comes to trading bitcoin.
- Day Trading: With this strategy, you will buy and sell your bitcoin within the same day. This strategy works for those looking to profit from bitcoin’s short-term price fluctuations. It also helps you avoid the overnight funding fees associated with holding bitcoin in your account.
- Trend Trading: When there is a bull market, you will hold on to your bitcoin. When there is a bear market, you’ll day trade. With trend trading, you trade based on the entire crypto market trends.
- Hedging: A risk management strategy used to offset losses in investments. You’d trade a related asset to offset the losses of the bitcoin you currently own.
- HODL: Also known as “hold on for dear life.” This is a long-term hold of bitcoin for months or years with the hope that the price will increase.
Pros and Cons of Bitcoin
Some pros of bitcoin are its potential profitability, “currency of the future,” ease of conversion to cash, and convenience for travel.
The cons are potential losses, transaction fees when converted, and rapid changes in crypto as it is still new tech.
This link goes into more detail on the pros and cons of bitcoin. You should check it out to consider if this is a smart move for you before purchasing any bitcoin.
Bitcoin vs. Traditional Stocks
Crypto trading can be a higher risk than stock trading. Bitcoin was introduced in 2009 whereas stock trading has been around for decades.
Become a Bitcoin Trader Today
Anyone can become a bitcoin trader! All it takes is some disposable income and a cellphone. You can download your favorite bitcoin trading app and use a trading strategy that works for your goals.
For more financial insights, check out the “Finances” tab on our site!