Investors from all over the world are looking to cash in on the volatile Forex market, trading with the cryptocurrency, Bitcoin. Well, it is quite easy to get started with online trading, but it is important for you to know that there are risks involved that you cannot afford to overlook.
As with any of the speculative or exchange markets, Bitcoin trading is also a messy business, which can possibly cost you a lot of money, especially if you don’t get it right. Therefore, it is important for you to know about the risks involved, before you decide to start with it.
If you are a newbie, who is interested in trading with Bitcoin, then you need to first understand the basics of trading and investing.
Avoid common mistakes that new traders usually tend to make
Any type of financial investment can bring losses, instead of profits. Likewise, with the highly unstable Bitcoin market, you can expect both, profits and losses. It’s all about making the right decisions at the right time.
Most beginners tend to lose money by making wrong decisions that are usually driven by greed and poor analytical skills. Experts say that you should not venture into trading if you are not ready to lose money. Basically, such an approach helps you mentally face the worst possibilities.
Diversify the portfolio
First, successful traders diversify their portfolios. Risk exposure increases if most of your funds are allocated to a single asset. It becomes more difficult for you to cover losses from other assets. You cannot afford to lose more money than you have invested, so avoid putting more funds on limited assets. It will help you sustain negative trades to some extent.
Second, putting in more money than you can afford will also cloud your sound decision-making ability. In most cases, you will be forced to opt for “desperate selling” when the market declines a bit. Rather than hold through the market dive, the investor who has over-invested in the trade, is forced to panic. The person will feel the urge to sell the holding for a low price, in an attempt to reduce losses.
You will also be losing more money when the market recovers. That’s because you have to buy the same network, but at a higher price.
Set goals – Emotions make you blind
Setting the goal for each transaction is vital when trading Bitcoin. It helps you stay level even in extremely volatile conditions. Therefore, you need to first determine the price to stop your losses.
The same rule applies for profits too, especially if you let your greed go. The benefit of setting goals is that you can easily prevent decision making based on emotions.
Instead, you should work on improving your skills to read charts and do market analysis. It is also recommended for new traders to close their losing positions in 24 hours, to avoid paying recurring interest.