Lots of people want to make money with Bitcoin and trading seems like a great idea. Unlike the stock and foreign exchange markets, cryptocurrency has a low barrier to entry due to being relatively unregulated. This can be both a good and a bad thing. The best part is that to start trading, all you need is to choose a cryptocurrency wallet and an exchange to start on your trade. From here, it is easy to get verified with the selected exchange and for your account funding. After the verification and the account funding process, the last step left is to fill out some order forms so that you can place your trade. It's so easy to get started but making money is where you'll run into issues. The world of Bitcoin is very volatile. So, what's the secret to making money?
Okay, let’s start.
Seems counter intuitive but let's get straight to the point. You're almost guaranteed to lose your money trading. Is it impossible to beat the market? No... It isn’t impossible for everyone. However, for the average person and especially a beginner you will lose money. You would be relying on luck.
What’s Working Against You When You Trade? How Do People Beat the Market?
People who beat the market have something that gives them a leg up on the competition. This is called an edge. When you’re trading you are competing against people that:
- Are professional, full-time traders. They have more time and experience than you yet more than 90% of them still end up with a net negative balance.
- Have inside knowledge.
Since cryptocurrency trading is unregulated, laws such as insider trading don’t apply.
The biggest cryptocurrency exchanges can literally see who is buying and selling in real time. Like cheating in a card game, they can make their trades based on the hands of millions of other traders. Even worse, they can assure that their trades are the first to go through.
- Have more money than you. People who can afford to drop a million dollars in the cryptocurrency have a huge advantage
The market cap of a lot of cryptocurrencies is relatively small. Someone who buys or sells a million dollars’ worth of a coin could literally make the market. This happens all the time and is called a pump and dump
Pump and Dump (Briefly): Groups of high net worth individuals decide to all buy one cryptocurrency (pump). When outside people see the price go up because of this they may be enticed to buy. Once a lot of people have bought into the coin, driving the price up even further, the original high net worth individuals sell all their shares (dump). They make a ton of money while everyone else is left holding the bag when the price makes a steep drop
- Have better technology than you.
They may have access to better price data than you do.
High-frequency traders will be able to make a trade quicker than you.
Algorithms can make trades better than you.
Even if you have an edge to exploit, you need to do better than simply beat the market to make a profit. You need to worry about the exchange fees, taxes, etc.
So, How Do You Make Money with Bitcoin and Cryptocurrency? HODL!
It is super simple, unglamorous, and passive but it works
- Buy into bitcoin and hold onto it.
- When the price has increased enough, sell some of it.
- Use your profits to buy more
Just since last year, Bitcoin has increased 65.91 percent. Someone who invested 1000 dollars in bitcoin last year made a profit of 659 dollars. That is an incredible return that has outperformed traditional investments. Although there is no guarantee that it will happen again, it goes to show that you can make huge returns without trying to beat the market.
How Can Beginners Start to Practice Bitcoin Trading?
So far, this article has been just dissuading you to trade. One day or the other, everyone will have to step out of their safe zone. For the people out there who have read this far and understand the risks and yet still want to trade here's how you can learn more about the subject.
Practicing The Art of Bitcoin Trading Using a Demo Account.
You can learn a lot about trading by using fake money. This allows you to learn how the market moves and develop your edge. There are some trading platforms that provide this feature of practicing bitcoin trading as well as other cryptocurrencies using a demo account. Sometimes there are even competitions where you can earn cryptocurrency. When you're just starting out, its best to make full use of these types of services. Only from practice will one understand the trade in its true nature. Using a demo account, one can convert ideas into actions without the risk of any loss. To get started, we suggest checking out AltcoinFantasy or Niffler. To make it more authentic, set the demo account to be an exact replica of your real account. Make sure to account for all of the things that you'd find in a real exchange such as fees. The only difference that sets them apart should be the authenticity of the money they claim to hold. The amount in the demo account is imaginary and not real, whereas the money value your actual account holds is real and cannot be lost during practice. The goal is to get used to trading. Trading is a highly stressful activity. You'll need to get comfortable and temper your emotions. After a year or so of demo trading you won't truly be a beginner anymore. You'll end up in one of either two situations:
- You realize your edge. Whether it's your strategy or the information you've been able to acquire, you've been able to reliably make a profit.
- You haven't made any money or you're in the negatives. It sucks and feels like a waste of time, but at least you didn't lose any of your actual money.
You may have learned that maybe you feel like trading isn't for you. That's perfectly okay and statistically the result of 90% of traders. Maybe you learn to persevere and one day become a professional trader. Whichever situation you find yourself in, the experience is valuable. You are either making monetary gains or you've gained knowledge.
Moving on to Trading Bitcoin with Real Money
If you've been trading demo money for a while, you may think you know all you need to know. It's important not to stress about it and make an emotional decision but at the same time you need to realize that you're trading for real now. The money you have can double or disappear and you have only yourself to blame. This is something that you just can't master until you have skin in the game.
- If it was easy, everyone would do it. Just like any other market, the cryptocurrency market is incredibly complicated and risky. Even more so than traditional markets.
- When you are not trading, do not leave your money on an exchange. This is because you will not have any control over your money as long as it sits on the exchange. If the exchange goes offline, hacked or simply vanishes out of business then you may end losing your money.
What you need to do for safekeeping when you are not in need of the money for trading in the short term is to make a transfer of it to your Bitcoin wallet or the bank account.
For a lot of exchanges, you may get hit with a withdrawal fee. You need to factor this into your strategy. The best idea is likely to just trade a small fraction of your total holdings.
- It is no doubt that trading tends to be sort of a very risky business. The biggest mistake that you can probably make is risking more money than you can actually afford to lose.
- It is a good idea to start your trading with a reputed company that provides both the wallet and an exchange for the purpose of keeping the process simple.
We have discussed a lot of information here. We have talked about the risks, how to practice and even a little about what to expect form cryptocurrency trading platforms. The truth is, most of the people stop their Bitcoin trading almost immediately, mainly because they are not making any money or maybe even losing money. However, you won’t know how far you can go until you give it a try Here’s the true secret to becoming a professional trader. If you want to become successful at this endeavor then you will have to invest a significant amount of your money and time to attain the required skills, just like any other skill. There is no such thing as a free lunch. Can you make quick money out of cryptocurrency trading? Sure. It won't be easy though. Plan on spending years of practice to make your quick money. Anyways, there is nothing that promises or gives easy and quick money without a risk of initial failures. It completely depends upon your perseverance and passion to gain the full potential of the cryptocurrency trading profits. Can you be successful? Of course, yes you can! You will never know the end until you start.
DON'T trade cryptocurrency. It's not a fair game. Buy and hold. HODL. If you must trade, practice first. Even some of the best traders started out by losing their whole portfolio. Do that with fake money for a long time: at least a year Trading real money is a lot like the demo, but not quite the same.
From The Author
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