Bitcoin is the most popular cryptocurrency in the world.It is the first currency accepted all of over the world.To know what bitcoin is you first need to understand the concept of cryptocurrency. It is a virtual or digital currency, that can be exchanged between people and even businesses that accept them. Kind of like Monopoly money that is not for a game but for real. In other words, it transfers value using digital currency.
Remember, Bitcoin is not Blockchain, whereas, Blockchain is the technology that runs the transactions between the parties who are exchanging Bitcoins. It is a technique that links blocks of data in the form of a chain. It was first described in 1991 by a group of researchers to timestamp documents so that no one would change them. This technique was employed by Satoshi Nakamoto to create Bitcoins. It is a digital ledger that keeps track of all transactions.
Each block has two IDs, one that’s of its own and other of the previous one and all members hold the ledger that contains all these details. The data boxes are designed in a way, that if someone alters the information inside, the id of the box changes with it. But the id of the previous block remains the same. Therefore, if changes are made to one block, they can be easily identified by the other data blocks.
Mining and Wallets
The bitcoins you buy go into your digital wallet. The interesting thing about bitcoins is that no one can manipulate this currency. So, even if the system crashes, you would still have all your details in your digital wallet.It is said that some time countries manipulate their currency to bring its price up or down, but that’s not the case. However, there are a limited number of bitcoins. We have not reached that number yet because those coins need to be mined. Not literally though, mining consists of solving complex mathematical problems. Miners’ mine bitcoin for money.
They were created by an unknown group of people or just one person. Satoshi Nakamoto mined the first coins known as the genesis block. The software was made open source in 2009 and was released on SourceForge. We already know that bitcoin is decentralized therefore the transactions can be made from anywhere. They are based on a reward system. People who mine get rewards for the completed task. Almost over a 100,000 business and people accept payment in bitcoin. The price of a single bitcoin is $ 11,000 (at the time of this writing) whereas in July 2008 it was $0.08 per coin.
Investing and Trading
Investors are people who buy Bitcoins for a long term. They just buy their coins and wait for their investment to raise. The term used for it is HODling, which was initially a typographic error of the word holding. Investors hodl the money because they believe in the technology and what it promises.
Moving on to traders, they buy the bitcoins but do not hodl it. They buy the bitcoins for a little while and sell them whenever they think a profit can be made. Later when they think it is profitable, they repurchase bitcoins.
Different Trading Methods For Bitcoins
There are two types of people who buy bitcoins. One who invest in them and wait for a long time for their investment to grow while traders are who exchange them often for fast compound growth. Bitcoin traders are people who buy and sell bitcoins when it is profitable. Even so, there are different types of traders. They each follow a philosophy and make exchanges in different ways. Listed below are the types of traders and how they accomplish their goal:
Day traders usually sit in front of their computer screens all day and look at market trends. They buy and sell bitcoins based on those trends. Typically, they hold their coin for about 6.5 hours. The good part of this is that there is minimum night risk as most of your trading would be for the long run. Since you will be trading for quite a few times for that day, you will have to pay for the commissions of those trades as well. Another great thing about day trading is that the compound growth is faster, since you are trading for the entire day, but it requires a lot of focus, and you need to be near the screen at all time.
Scalping is often described as picking coins while standing in front of a bulldozer that’s headed your way. It is a day trading strategy in which people attempt to make significant profits by making small changes to the price. Scalpers can make from a dozen to hundreds of trades per day.
Swing traders are people who buy their bitcoins and put it up for trade for some time. It usually is from 2.5 days to months. Here there is a bit of a night risk since your coins are still up there while you are sleeping. The good part is that the number of trades is comparatively lower, hence fewer resources are spent on trading commissions. Here, the compound growth is slower than in day trading. While day traders can spend their profit any time, they want swing traders to have to wait for their time to be over.
Swing traders try to see the big picture and hold or exchange their bitcoins based on their observation of the marketing trends.
While choosing between the two, you should know that both people have made a profit and sometimes faced loss both ways. So, if you are still confused about, how to choose between the two trades is simple, think about the time you can invest and what kind of lifestyle suits you. Can you afford to sit in front of the computer screen all day and not do anything else? Some experts advise having a healthy mix of both if possible, or you can choose not to use your investments over a period.
Therefore, with bitcoins, it is always advisable to invest the money that you can afford to lose. As the market is highly volatile and the risk is high.
Fundamental Vs. Technical Bitcoin Trading
Bitcoins almost took over the world in 2007. With some investors who made became millionaires because they invested in the cryptocurrency at the right time. And that is the key to trading, no matter what you are trading at that point. Recent news of scams and South Korea planning to ban the trading of bitcoin there have been some fluctuations in the exchange rate of the coins. But not enough for people to pull out entirely. To choose whether to trade or not trade bitcoins, people use some techniques and employ certain philosophies. Most people have their views and reason, but there are two that everyone knows about and uses.
Whenever trading is involved, be it trading of stock, commodities or currencies, traders employ at least one of the two philosophies. They could even employ both these techniques for more powerful results. Bitcoin traders are the same as well; they either use the fundamental approach or the technical one, while some of them use both. To know which one suits you, you need to get a clear understanding of both. Read the text below to understand both these approaches work.
This is the first type that people tend to employ in which people have a rather holistic view. These analysts look at the big picture. They examine everything about the Bitcoin industry. The evaluate the latest news, technological developments, regulations and laws regarding Bitcoin. They look for any news or reason that might prompt them to buy or sell the Bitcoins. It examines the value of bitcoin and tries to predict what will happen to the price. They do so by not looking at the actual price but the outside influences that might alter their value.
In the second type of analysis, people pay attention to charts and graphs of the price itself. Technical analysts pay attention to the price of the coins. They look at the past trends of the price of bitcoins, along with their movements and their trading volumes. They think that no matter what happens in the world, the prices are insulated from it. They think that if the trend is moving a certain way, it will remain the same even though the news around it changes. To them, the patterns of the price of Bitcoins is more than enough to know if the investment will reap profit or loss.
It mostly depends on your personal preference when you choose between the two ways of trading. Experts usually advise people to take a good look at everything and try to employ both these techniques. As in some cases, one of the techniques can be applied but the other can not. Either way, it is always advised to be careful and to make your decision after giving everything a full thought. Bitcoin industry can be a bit unstable and volatile, therefore try to invest the money that you can afford to lose. Remember, it is never a good idea to keep all your eggs in one basket.
Bitcoin orders are placed on the exchanges places by the traders. These orders have limits that allow us to bend the market trends to our advantage, as much as possible. There are three kinds of orders, the reason why there are three different types of orders is that there are different types of buyers and sellers. They are usually exchanging based on their circumstances and requirements. Before getting into the game and placing an order, take a close look at your options and find out what works best for you. It is pretty simple stuff all you need to do is concentrate, learn and make an informed decision.
The market order is also referred to as the instant order. It is an order that is completed at any possible price. For example, you place an order for four bitcoins. You will find the cheapest sellers in the marketplace until your order is fulfilled and then the sellers can hand over the coins. Remember, it is not necessary that all these sellers would be selling at the same rate some might be charging higher than others while you there will also be those who would be selling at a lower rate. In market orders, you cannot stop until you complete your order and this way you may sometimes end up paying more than you initially intended to. Therefore, it is advised to be careful when you choose this option.
On the other hand, instead of choosing the number of bitcoins you can set a limit to the price. In other words, set your rate at which you are willing to buy or sell your bitcoins at. In this case, you order may not be completed entirely as the sellers or buyers won’t always be working on your limits. For example, you buy three bitcoins at $12,000 per coin. But what happens if there are just two sellers who are selling at that rate. In this case, you might end up owing only two bitcoins. On the bright side, you would not have to pay more than what you decided, and your order does just disappear either. It stays they until the remaining order is fulfilled.
A stop order or a stop loss order allows you to set a specific price. This amount is the rate at which you want to sell your bitcoins in a case where the rates drop quite significantly. This allows you to minimize your losses as you are telling the system if the price at which the bitcoins are being sold and bought drops to a certain point, you will sell your coins at that price. This way you can decrease your losses. It is almost like the market order, but here you are setting a limit for your bitcoins based on the market rates. Therefore, the market would automatically start selling your coins once the stop price is reached and it would not stop until the order is reached.
We have seen many success stories because of the bitcoin revolution. These were people who jumped on the bandwagon way ahead of the others. Their reasons for doing so are different and personal to them, but the prospect of gaining something physical out of the virtual world has blown away the minds of many people. The industry is still new and not one that was already there and people have been observing it since the beginning of civilization. It has recently been created and gained popularity. Therefore, it is understandable if you do not know what some of the words mean when you jump into investing or trading. We advise that you do your research and learn before actually buying any coins.
Bitcoins or cryptocurrency in any industry or profession it is vital to understand what the technical jargon is and what are the basic tools that people usually employ. The world of Bitcoin also has its terms and tools that the miners, investors, and traders usually use.
As we all know bitcoins are not exactly physical and it’s the same case with its trading place. You can buy and sell them from anywhere in the world, but still, you need a platform to make these transactions. A bitcoin exchange is a digital marketplace where people meet and exchange their bitcoins.
Since the government or any organization does not control Bitcoin, no one, in particular, decides the price. The price is decided by the exchanges made during trading, while people use the value of the most recent exchange in the marketplace.
Bids and Asks
Bids are what people are bidding when looking to buy Bitcoins. While asks are the sell orders or the amount that the sellers are requesting.
The Order Book
It is the complete record of what people are bidding and asking for that are listed in the marketplace.
High and Low
The price is usually determined by the latest exchange made in the marketplace. These values sometimes differ from one country to another. The terms high and low stand for the highest and lowest price at which bitcoin exchange was made in the last twenty-four hours.
The number of exchanges determines the volume of a marketplace. A higher volume means that there were a substantial number of exchanges made, while a lower volume indicates a smaller number of exchanges made in a time frame. An upward trend usually means a higher volume and happens when the price rises while a lower volume usually occurs when price decline.
With this information, you can look at the bitcoin world with more clarity. The industry is still in its nascent stages, and everything about it is still developing. We do not have any hard and fast rules yet. Even though it is a humanmade entity that is finite, we still cannot be sure, where it would exactly go. Since it is still in its developing stage, it is okay not to know the latest lingo, but you can always learn it as you move on.
Common Trading Mistakes
Once you have all the information about what you need to do to buy bitcoins, you might think you are ready for the exchange game. But, it’s not true because you do not know about the don’ts yet. There are some common mistakes that people usually make, that can make things a bit tough for them. Read on to know what these mistakes are and how you can stay away from them
Not Knowing Your Limits
Bitcoins or not trading is a volatile business. Anything can happen at any time. It is never a good idea to put all of your savings up in the cloud. Think of the worst-case scenario, what would happen if the market crashes and you lose it all. Remember, you should only add the money that you can live without, or at least the amount that you are comfortable with. This is a risky business as it is, there is no reason to add more risk to it. What people usually do is add a hundred dollars or so after a few intervals and slowly break into the game. This way you learn about the ups and downs and minimize your losses while staying on the safe side.
Lack of Planning
You know what they say about planning, failing to plan is a plan for failure. Many people just jump in without any set boundaries. They do not set any goal and do not even know why or what they are doing. Before buying any bitcoins set your goal and margins. How much do you want to profit from this and what kind of loss can you take? Think about all of that and set you to stop loss limits. Having limits allows you to persevere until you should and not give into pressure, while it also keeps your ego in check, and you know when you need to stop.
Not Protecting Your Investment
Sometimes people place their money on the exchange and leave it there. That’s the biggest mistake you can make. Think about all that can happen when you are not there. The exchange could get hacked or run out of business, what will happen to your money then? It is vital that you save your bitcoins in your wallet when you are not using them.
Being Over or Under Confident
It is very easy to fall prey to your emotions and fail to assess the situation right. It is common for people to jump into the market whenever they see a rise and put all of their bitcoins up for exchange. In other cases, people close their trade prematurely because they heard or read something disturbing. Know yourself and observe how you act when you feel excited or afraid. Remember business is not run by emotions, it’s just you. Do not forget your trading analysis techniques and do not make any decisions without considering all options. Make sure no leaf is left unturned when you decide to close or open before its time. Prevention is the best cure. Make sure you know all the details and have the right information before you make a move into the world of cryptocurrency.