With an increasing number of Bitcoin brokers operating in the market, traders now have more opportunities than ever to invest in the wildly popular cryptocurrency. Brokers like UFX, for example, even allow traders to fund their accounts with the digital asset.
Since the start of 2016, cryptocurrency prices have risen by more than 470%. Bitcoin, however,has seen large fluctuations in its value, forcing smart traders to be vigilant when opening positions.
Here are4 crucial tips to bear in mind when trading Bitcoin:
1. Diversify Your Investment Portfolio – Bitcoin is a Highly Volatile Asset
As the saying goes, “Don’t put all your eggs in 1 basket”. Smart traders avoid investing all their money in Bitcoin, as it can be a very volatile asset withrapid price movements. Because trading Bitcoin can result in both large profits and heavy losses,traders tendto invest in various asset classesto lower their overall risk.
2. Only Invest WhatYou Can Afford to Lose
Traders who invest more money than they can afford to lose often experiencestress and an inability to control their emotions. This ultimately affects their investment strategy as they are unable to make wisetrading decisions.The best traders are those who adopt a cautious attitude, bearing in mind that there is always the risk of losing their trading capital, especially with an asset like Bitcoin.
3. Set Limit and Stop-Loss Orders
Successful Bitcoin traders need to remain level-headed, especially during times of extreme volatility. They follow their trading strategiesto the letter and refuse to let emotions affect their decisions. When trading Bitcoin, try to set a price target and place stop-loss orders beforehandto be better prepared.
4. Close Losing Positions Within the Same Trading Day
Keeping positions open for longer than 24 hours can result in larger losses.It is therefore recommended that traders close their losing positions within the same trading day. This is especially important for inexperienced traders who wish to avoid paying any rollover fees.
Considering these points is crucial for investors interested in trading cryptocurrencies like Bitcoin. Choose a brokerwho understands these factors.