Bitcoin Trading for Beginners (A Guide in Plain English)

What are the five common mistakes made by 90% of Bitcoin traders? How do I start

trading

? How do I read all these confusing price charts I see online? Well, stick around... Here at Bitcoin Whiteboard on Tuesday, we'll answer these questions and more. If there's one thing we get asked a LOT here at 99Bitcoins, it's how to trade Bitcoins. So we decided to dedicate this episode of Bitcoin Whiteboard Tuesday to teaching you what Bitcoin

trading

is all about. This lesson will be longer than usual, but I assure you it will be worth it. We will cover four main topics: The definition of Bitcoin trading The main terms you will encounter when trading on exchanges A very brief introduction to reading price charts And finally, we will go over some common trading mistakes Let's get started...

So what is the Bitcoin trading and how is it different from investing in Bitcoin? Well, when people invest in Bitcoin, it usually means that they are buying Bitcoin for the long term. In other words, they believe that the price will eventually rise, regardless of the ups and downs that occur along the way. Typically, people invest in Bitcoin because they believe in the technology, ideology, or team behind the currency. Bitcoin investors tend to HODL the currency for the long term. HODL is a popular term in the Bitcoin community that was actually born from a typo of the word "hold" in an old 2013 post on the BitcoinTalk forum.

So while Bitcoin investors buy and HODL for the long term, Bitcoin traders buy and sell Bitcoin for the short term, as long as they believe a profit can be made. Traders see Bitcoin as an instrument to make profits. Sometimes, they don't really care about the technology or ideology behind the product they market. Of course, people can still trade Bitcoin if they care. And many people invest and trade at the same time. But why are so many people suddenly looking to trade cryptocurrencies, especially Bitcoin? Here are some of the reasons: First,

bitcoin

is very volatile. In other words, you can make a good amount of profits if you manage to anticipate the market correctly.

Secondly, unlike traditional markets, Bitcoin trading is open 24/7. Most traditional markets, such as stocks and commodities, have an opening and closing time. With Bitcoin, you can buy and sell whenever you want. Finally, Bitcoin's unregulated landscape makes it relatively easy to start trading, without the need for lengthy identity verification processes. But not all traders are the same and there are different types of trading methods. For example, day trading involves placing multiple trades throughout the day and trying to profit from short-term price movements. Day traders spend a lot of time staring at computer screens and, at the end of the day, they typically close all of their trades.

Scalping is an intraday trading strategy that many people talk about. Scalping attempts to make substantial profits with small price changes, and is often known as "penny picking in front of a steamroller." Scalping focuses on very short-term trading and is based on the idea that making small profits repeatedly limits risks and creates advantages for traders. Scalpers can make dozens or even hundreds of trades in a day. Meanwhile, swing trading attempts to take advantage of the natural “oscillation” of price cycles. Swing traders try to detect the beginning of a specific price movement and enter the trade. Then they hold out until the movement dies out and take the profits.

They try to see the big picture without constantly monitoring their computer screen. Swing traders can open a trading position and keep it open for weeks or months, until they reach the desired result. Now that you know what trading is, how is it actually achieved? How can anyone predict what Bitcoin will do? The short answer is that no one can really predict what will happen to the price of Bitcoin. However, some traders have identified certain patterns, methods and rules that allow them to make long-term profits. People follow two main methodologies when trading Bitcoins or anything else: fundamental analysis and technical analysis.

Fundamental analysis looks at the big picture. In the case of Bitcoin, fundamental analysis evaluates the Bitcoin industry, news about the currency, technical developments of Bitcoin such as the Lightning network, regulations around the world, and any other news or issues that may affect the success of Bitcoin. . This methodology analyzes the value of Bitcoin as a technology regardless of the current price and external forces to determine what will happen to the price. For example, if China suddenly decides to ban Bitcoin, this analysis will predict when the price is likely to drop. Technical analysis attempts to predict the price by studying market statistics such as past price movement and trading volumes.

It tries to identify patterns and trends in the price, which can suggest what will happen to the price in the future. Technical analysis assumes the following: Regardless of what is currently happening in the world, price movements speak for themselves and tell a kind of story that helps predict what will happen next. So which methodology is best? Well, as I said at the beginning, no one can accurately predict the future. However, a healthy combination of both methodologies will likely produce the best results. Now let's continue by breaking down some of the confusing terms and statistics that you will find on most exchanges.

Bitcoin exchanges are online sites where buyers and sellers are automatically matched. An exchange is different from a Bitcoin company that sells Bitcoin directly to you, like Coinmama. This type of company usually charges a higher rate. An exchange is also different from a marketplace like Local Bitcoins, where buyers and sellers communicate directly with each other to complete a transaction. The complete list of buy and sell orders is included in the market order book, which can be viewed on the exchange. Buy orders are called bids as people bid on prices to buy Bitcoin. However, sell orders are called demands because they show the selling price that sellers are asking for.

Whenever people refer to the "price" of Bitcoin, they are actually referring to the price of the last trade made on a specific exchange. This important distinction occurs because there is no single, global Bitcoin price that everyone follows. And sometimes, the price of Bitcoin in other countries may be different from the price of Bitcoin in the US, as the major exchanges in these countries include different trading. Aside from the price, sometimes you will also see the high and low terms. These terms refer to the highest and lowest prices of the last 24 hours. Another important term is volume.

It represents the total amount of Bitcoins that have been traded in the given time period. Strong trends are usually accompanied by high trading volumes, while weak trends are accompanied by low volumes. A healthy uptrend is accompanied by high volumes when the price rises and low volumes when the price falls. If you witness a sudden change in price direction, experts recommend checking how significant the trading volume is to determine if it is just a minor correction or the beginning of an opposite trend. Now you know most of the terms you'll find on the average exchange. It's time for us to move on and go over the types of orders you can place on an exchange.

There are three types of orders. A market (or instant) order refers to an order that will be executed instantly at any possible price. So if you place a market order to buy five Bitcoins, you will find the cheapest possible sellers, until you accumulate enough sellers to deliver five. Bitcoins. In other words, you could end up buying three Bitcoins at one price and the other two at a higher price. In a market order, you do not stop buying Bitcoin until you reach the requested amount. With market orders, you can end up paying more than you intended, so be careful.

Meanwhile, with a limit order, you will only buy or sell Bitcoin at a specific price that you decide. In other words, the order may not be fulfilled in its entirety, as there will not be enough buyers or sellers to meet its requirements. Let's say you place a limit order to buy five Bitcoins at $10,000 per coin. Then you could end up owning only 4 Bitcoins, because there were no other sellers willing to sell you the final Bitcoin for $10,000. The remaining order of 1 Bitcoin will remain there, until the price reaches $10,000 again, and then the order will be executed. A stop loss order allows you to set a specific price at which you want to sell in the future, in case the price drops dramatically.

This type of order is useful to minimize losses. It's basically an order that tells the exchange the following: If the price drops by a certain percentage or to a certain level, I will sell my Bitcoins at the preset price, thus losing as little money as possible. A stop-loss order acts like a market order. In other words, once the stop price is reached, the market will start selling your coins at any price until the order is filled. Other terms you may encounter when trading on exchanges are maker fees and taker fees. Personally, I still find this model to be one of the most confusing, but let's try to break it down.

Exchanges want to encourage people to trade. In other words, they want to “make the market.” Therefore, whenever you create a new order that cannot be matched by any existing buyer or seller, you are basically a market maker and will usually have lower fees. Meanwhile, a market taker places orders that are fulfilled instantly, since a market maker already existed to fulfill his requests. Takers remove business from the exchange, so they generally charge higher fees than makers, who add orders to the exchange's order book. For example, maybe you place a limit order to buy one Bitcoin at $10,000 (at most), but the lowest seller is only willing to sell at $11,000.

So you just created a new marketplace for sellers who want to sell for $10,000. So whenever you place a buy order below the market price or a sell order above the market price, you become a market maker. Using the same example, perhaps you place a limit order to buy one Bitcoin at $12,000 (at most), and the lowest seller is selling one Bitcoin at $11,000. Then your order will be fulfilled instantly. You will remove orders from the exchange's order book, so you will be considered a market taker. Now that you are familiar with the main Bitcoin trading terms, let me give you a brief introduction to reading price charts.

They are Japanese candlesticks. They are based on an ancient Japanese method of technical analysis, used in the rice trade in the 17th century. Each candlestick shows the open, low, high and close prices for the given time period. This is why you will sometimes see people refer to candles as OHLC (Open, High, Low and Close). Depending on whether the candle is green or red, you will be able to tell if the closing price of the time period was higher or lower than the opening price. If a candle is green, it means that the opening price was lower than the closing price, so the price generally rose during this time period.

On the other hand, if the candle is red, it means that the opening price was higher than the closing price, so the price went down. In the image, you can see the opening price at the wide bottom of the candle, the closing price at the wide top of the candle, and the highest and lowest trades within this time period at both ends of the candle. candle. When we are in a bull market, most candles are usually green. And if it is a bear market, most of the candles will be red. So what are bull or bear markets?

These markets are named after these animals because of the way they attack their opponents. A bull raises its horns in the air, while a bear moves its paws downward. So these animals are metaphors for the movement of a market. If the trend is bullish, it is a bull market. But if the trend is downward, it is a bear market. Here's another important feature to be familiar with when analyzing charts: resistance levels. From time to time, the price of Bitcoin seems to reach a virtual ceiling and it is not possible to overcome it for a long time.

That is a level of resistance. So if Bitcoin fails to break above $10,000, the resistance level is $10,000. Usually at a resistance level you will see a lot of sell orders and that is why the price fails to break above that.specific point. Meanwhile, there is also a support level. In other words, there is a price below which Bitcoin could not go down. Support levels act as floors by preventing the price of an asset from going down. A support level will be accompanied by many buy orders set at the price of that level. High demand from a buyer at the support level dampens the downtrend.

Historically, the more frequently the price has failed to overcome support or resistance levels, the stronger these levels are considered. Here is a common feature of support and resistance levels: they are usually set to a round number, as most inexperienced traders tend to buy or sell when the price is a whole number. Typically, you will see many buy or sell orders around prices like $10,000, rather than a price like $10,034. Because so many orders are placed at the same level, these round numbers tend to act as strong price barriers. Psychology also creates levels of support and resistance. For example, until 2017, it seemed expensive to pay $1,000 for Bitcoin.

So there was a strong resistance level at $1,000. But once that level was broken, a new psychological resistance level was created: $10,000. Congratulations! Now you know the basics of Bitcoin trading. However, there is still much more. Since it's not possible to go over everything in one lesson, I want to direct you to additional resources that will take you to the next level of trading. Take a look at the resources section at the end of this video. You will then be able to learn about advanced Bitcoin trading lessons, the best Bitcoin trading tools, and the best Bitcoin exchanges to start trading.

But before we end this video, let's go over the most common mistakes people make when they start trading, in the hopes that you can avoid them. The biggest mistake you can make is risking more money than you can afford to lose. Take a look at the amount you are comfortable with. This is the worst case scenario: you will end up losing everything. If you find yourself trading above that amount, stop. You're doing it wrong. Trading is a very risky business and if you invest more money than you are comfortable with, it will affect the way you trade and may cause you to make bad decisions.

Overall, you may end up losing a portion of your money that you cannot do without. Another mistake that people make when starting to trade is not having a clear enough action plan. In other words, they don't know why they enter a specific trade and, more importantly, when they should exit that trade. Therefore, clear profit targets and loss limits should be decided before starting the trade. Moving on, NEVER leave money on an exchange you are not currently trading. If your money is on the exchange, it means you have no control over it. If the exchange gets hacked, goes offline, or shuts down, you may end up losing that money.

Whenever you have money that is not needed in the short term to trade on an exchange, be sure to transfer it to your own Bitcoin wallet or bank account for safekeeping. Two basic emotions tend to control the actions of many traders: fear and greed. Fear can show up in the form of closing your trade prematurely, because you read a disturbing news article, heard a rumor from a friend, or got scared by a sudden drop in price (which will soon be corrected). The other major emotion, greed, is actually also based on fear: the fear of missing out.

When you hear people telling you about the next big thing, or when market prices rise sharply, you won't want to miss all the action. Therefore, you may initiate a trade too early or even delay closing an open trade. Remember that in most cases, our emotions rule us. So never say, "This won't happen to me." Be aware of your natural tendency toward fear and greed, and be sure to follow the plan you laid out before starting the business. Let's finish things. Regardless of whether you made a successful trade or not, there is always a lesson to learn.

No one manages to make only profitable trades and no one gets to the point of making money without losing some money along the way. The important thing is not necessarily whether you made money or not. Rather, it's about whether or not you managed to gain new insights into how to trade better next time. We have spent a lot of time today talking about Bitcoin trading, but I must warn you: most people who start trading Bitcoin stop trading after a while, because they fail to make money successfully. This is my opinion: if you want to be successful in trading, you will have to invest a significant amount of time and money to acquire the relevant skills, just like any other endeavor.

If you want to get into trading just to make quick money, it may be best to avoid trading altogether. There is no such thing as quick and easy money, without risks or disadvantages on the other end. However, if you are committed to learning how to become a professional Bitcoin trader, take a look at our resources section below. Then you can get the best tools possible and continue your education. You may still have some questions. If so, please leave them in the comments section below. And if you're watching this video on YouTube and enjoy what you've seen, don't forget to hit the Like button.

Then, be sure to subscribe to receive notifications about new episodes. Thank you for joining me on the board. For 99Bitcoins.com, I'm Nate Martin and I'll see you in a moment.