Digital currency Bitcoin has been on a rollercoaster in the past year, the price climbing by a whopping 600% at its peak.
You can make some serious money buying and selling Bitcoin if you do it in the right way. Are you aware of how to buy Bitcoin and the best way to sell it? Here are five tips for profitable Bitcoin trading.
1. Choose a Reputable Exchange With Low Fees
If you’re not familiar with how to buy Bitcoin, you first need to sign up for a cryptocurrency wallet to store it in. Then you need to open a trading account on a cryptocurrency exchange, buy Bitcoin, then transfer it to the wallet for safekeeping.
Research the top exchanges to find out which ones operate in your location and deal in the currency you want to use to trade. Some exchanges only allow deposits in US dollars, so if you want to deposit another currency they may not be right for you. You should also check the trading fees they charge. High transaction fees can eat into your profits if you plan to trade often.
2. Use Stop Losses
Cryptocurrency prices are notoriously volatile, so when you start trading Bitcoin on exchanges it’s essential to set a level where you will cut your losses if the price falls. It’s easy to get greedy after a big run-up in the price and hold out for more gains. But it’s no fun watching all your profits evaporate because you didn’t sell when the price started to drop.
3. Trade Bitcoin Directly
Exchanges are not the only venue for Bitcoin selling. You can buy and sell Bitcoin for cash using a Bitcoin ATM and you can trade using a peer-to-peer service like LocalBitcoins. You can also trade Bitcoin on the “over-the-counter” (OTC) market.
What is OTC Bitcoin trading? In OTC trading you deal directly with a dedicated trading desk to buy and sell assets. If you want to trade large amounts of cryptocurrency, an OTC desk is more likely than an exchange to be able to fill the transaction.
4. Follow Cryptocurrency News
Keep on top of what’s happening in the cryptocurrency markets so you’re aware of good opportunities to buy and sell Bitcoin. With some trading platforms, you can set news alerts so that you don’t miss out.
The Bitcoin price can move sharply in response to news of companies and financial institutions starting to use it for payments or rejecting it as an option. It can even react to tweets from influential people like Tesla CEO Elon Musk.
5. Learn Technical Analysis
As you become familiar with the Bitcoin market, you can use technical analysis to make more sophisticated trading decisions. Technical analysis uses charts to predict the direction of price movements.
There are several popular technical indicators that traders use to identify the direction of price trends. These include moving averages, the relative strength index (RSI), and the moving average convergence divergence (MACD).
Get Started Selling Bitcoin
Now you know how to sell Bitcoin and you’re on your way to getting into the game. Make sure you research the wallets and exchanges that are right for you. And don’t hesitate to take profits, selling Bitcoin in stages at different prices.
For more investing tips, check out the finance section on our blog.