What kind of Bitcoin Trader are you?Posted on February 21, 2014.
Perhaps we should ask, what kind of bitcoin trader are you planning to be?
If you are new to bitcoin before you start checking how much you can throw into bitcoin you should first ask yourself this question.
Are you trading bitcoin for fun? For serious trading? To speculate on the market with the intention of generating yourself an income? To save up bitcoins in case they become a second currency around the globe?
To spend them online or perhaps at a business you are a good customer of that you know already accepts bitcoin?
It is important to really know why you are going into something like bitcoin trading before you start because this will then enable you to plan properly. For example if you are trading bitcoin for speculation then you should consider the risk. Bitcoin has crashed several times and there are possibilities that it will crash again. The general trend is that bitcoin seems to recover each time it is knocked down and grows again some more.
If you put into bitcoin enough money to put yourself under pressure if you needed to get access to your funds then you haven’t made a wise decision. A sensible investment into bitcoin speculation should be less than 10% of your current wealth if you are a serious trader. That doesn’t mean you add up the price of your house if it’s under mortgage and then throw in 10%…. It means calculate how much liquidity you have if you sold all your assets. I.e. how much cash would you have in the bank and then take 10%. If your cash is tied up in assets that are not easily recognisable such as a property which could take you several months to sell and realise the cash then you need to lower your investment level to perhaps 5% of your current wealth.
Once you have decided how much you want to start with then make some preparations. Firstly do your research on the costs involved when you start trading.
Make a spread sheet for yourself on all the bitcoin exchanges you can find and list down their charges. Then see for yourself who is the cheapest, while your doing this exercise you should also have a column at the end for feedback in the market. I.e. what are people saying about this exchange? Are there many complaints on forums? Unfortunately due to trolling on the internet not all comments on the internet are true. Therefore you need to read a forum properly from top to bottom on a particular subject and then decide for yourself what is the general consensus? If you don’t feel good about it then make a note.
Look at their banking setup (if they don’t post it on their website make an enquiry). See how easy it is to transfer funds to your account. When sending or receiving funds from a bitcoin exchange the costs involved may hurt your profits if you’re an average trader so be aware of how much your going to be paying to move your money around. An international bank will generally be cheaper to move funds in and out from. Our HSBC bank in Hong Kong offers the lowest transfer rates in the world. Normally it’s banks that are local to their specific country that carry higher charges.
Once you have weighed up the pros and cons of trading then you should be somewhat ready to go and get your account opened. Spend some time watching trades and familiarise yourself with how to place a trade. Try a dummy trade for a ridiculous price that you know wont kick in just to see how it is to place a trade. Remember to cancel it once you have entered it in case the market moves drastically and your trade kicks in. Try to understand how the market moves and reacts to certain news in the economy. If you see something on the news channel then take a look at the trades and see if there is any sudden movement.
And finally, keep your cool at all times, never let your emotions get away with you, if you see prices drop don’t sell out completely unless you need the capital. Stay calm and focused and if you are too nervous then take a break and come back when you feel more relaxed to make the right trading decision. Trading is about having a clear head and not rushing into anything. So keep the faith in yourself and your trades (If you have done your homework) and enjoy….