Success with bitcoin does not come by chance. In order to increase your chances of success and enjoy a continuous stream of profits, you need to learn the best practices that can significantly turn the odds in your favor. It is recommended that you turn these practices into a habit. Here are the best practices or guide to earn profit through bitcoins that you should know:
Fundamental analysis
Fundamental analysis is something that every investor could not ignore. This is a strategy where you should focus on the fundamentals. Usually, investors focus on the fundamentals of a business by studying a company’s financial statements, cash flow, and others. With bitcoin, you can still apply fundamental analysis by studying bitcoin as a whole. You can study the market cap of bitcoin, the businesses that use bitcoin, even the competition, among others. Although fundamental analysis is more focused on the numbers, it is worth noting that this strategy also pays attention to the quality.
If you intend to make a long-term investment in bitcoin, then this strategy is something that you should apply. Take note that you are free to combine fundamental analysis with other strategies. It is believed that by studying the fundamentals of bitcoin, you can more easily predict the direction that bitcoin will take in the market. Of course, once you know how bitcoin will move in the market, you will know the best investing and trading decisions to make.
Technical analysis
If analyzing numbers is not your strong point, and if you are more of a visual person who wants to analyze graphs and charts, then the technical analysis is for you. The concept behind this approach is that the many factors that affect the price of bitcoins have an overall effect on the price. Therefore, simply by dealing directly with the price and analyzing how the price moves in the market, you already get to deal with the said factors which affect the price of bitcoins. As such, this is not only simpler than fundamental analysis but may also seem to be the most practical way to study the behavior of bitcoin.
When you use this strategy, you should pay attention to any pattern that you may encounter. However, do not commit the same mistake as other investors who force themselves to see a pattern even if none exists. It is worth noting that patterns come and go. This means that it is also possible for you not to see any pattern at all — and such is normal. When you do not see a pattern, then admit that no pattern exists at the moment. Now, in case you do see a pattern, you should take advantage of it. Again, patterns come and go; therefore, when you see one, you should take advantage of it as quickly as you can. Whether or not a pattern is still worth pursuing depends on the circumstances.
But, you might be wondering: Do patterns or trends really exist? The answer is yes. It is worth noting that even a random generator will, from time to time, produce a set of patterns or trends. Also, take note that for something to be considered a pattern, it must repeat itself at least twice. Others suggest that it should be repeated at least three times. Again, this is a matter of personal preference, and it is up to you to decide. Relying on patterns alone is tricky. Therefore, to further increase your rate of success, you should also apply other strategies or analyses.
Technical analysis is a recommended strategy for short-term investments or trades. After all, it is hard to gauge the behavior of the market simply by looking at graphs and charts which show the past and present trend.
Follow on the news
When you invest in or trade bitcoins, you should make it a habit to follow the news, especially those that may affect the price of bitcoin, such as news on the business, economy, technology, governments, and international relations, among others. By doing so, you can get a hint on what direction the bitcoin will take in the market. Bitcoin gets featured on new many times. It is positive news about bitcoin. As an expected effect of publicity, the price of bitcoin took an upswing.
Being updated on the news also means that you should be updated as to any write-ups or sites that talk about bitcoins, especially those that have a huge following. Do not forget that an important factor of the price of bitcoin is the portion of its market that still uses it. The more people use bitcoins, the more demand there will be, which will tend to increase the price of this cryptocurrency. Also, pay attention to the competition. There are other cryptocurrencies in the market today, such as Etherium, Iota, and others. These are newcomers in the world of cryptocurrency but are also getting their own share in the market.
Beware of fraudulent schemes
If you are familiar with the pump and dump scheme, then you should know that the same may apply to bitcoin. Hence, if you are an investor, you should learn how this works. So, what is a pump and dump scheme? This is a fraudulent scheme that is usually applied in stocks.
For example: Let us say that person A owns some bitcoins. He will then promote bitcoins, usually using a promotional hype, with the hope that it will draw attention and interest and for its price to increase. He will then sell his bitcoins for a higher price for a profit. The drawback here is that after the promotion, the price of bitcoin will decrease. Hence, the seller (person A) makes a profit, while the buyer (who could be you) gets in possession of bitcoins whose price has just decreased.
This is one of the reasons why you should not buy bitcoins simply because you see that it is getting more popular or is being promoted. To avoid getting fooled by this scheme, you need to do research and analyze the market to see if you are buying a bitcoin at a fair price. If not, then be patient enough to wait for the best moment to make a buy order.
As you can see, you can also use this scheme to your advantage. In the bitcoin world, usually, a pump and dump scheme is made by a group of people. The good thing about this is that the price of all bitcoins will experience a temporary increase, especially during the promotion — and this is your key to profit. When you identify that a pump and dump scheme is taking place, and if it appears that the promotional hype is working, then it is time for you to sell your bitcoins and take advantage of the increase in value brought about by the scheme. Take note that for this to work, the promotional hype must also work, so that the price of bitcoins will increase.
Start small
Regardless of how much money have in your bitcoin account for investing, trading, or gambling, you should always start small. In fact, it is strongly recommended that you take advantage of a demo account. A demo account will allow you to invest, trade, or gamble, in a real-life environment without risking any real money. Of course, you also will not win any real money, but at least you can test the water without any risk to your bitcoins.
Always have a strategy
When you deal with bitcoins, regardless even if you just want to buy or sell bitcoins, you must always have a strategy. This is true, especially if you want to actively trade bitcoins for a profit. Also, take note that merely reading about the different strategies is not enough. Even if you have already read about fundamental analysis, technical analysis, or any other strategy, you must learn to use them before you apply them using real money. Knowing is different from the actual and effective application. A good way to test your strategy is with the use of a demo account or simply start with small wagers or investments. The important thing is for you to have a strategy.
Have a bitcoin journal
Although this is not considered a requirement, having a bitcoin journal can be helpful. But, first, what is a bitcoin journal? It is a record of all your thoughts and experiences about bitcoin. It should also record any investment or trade that you make. Don’t worry if you are not good at writing. After all, you do not need to be a professional writer just to write a journal.
However, you do need two things: One, you need to be very honest with everything that you write in your journal. And, two, you need to update it on a regular basis. Your journal should be a mirror of yourself. It should allow you to see yourself from a different perspective. This will give you more insights, and even be a key to effectively develop your strategies.
Beware of following expert advice
Beware of those experts that you find online. It is true that when you are a beginner, these experts would be your go-to source for almost anything that has to do with bitcoins. However, as your understanding of bitcoin develops, you will know that not all of these so-called experts really know what they are talking about. Sadly, many of these “experts” do not know anything about bitcoins but merely market themselves as experts. So, be careful.
It is also worth noting that even experts commit mistakes from time to time. An expert may suggest that now is a good time to buy bitcoins only to find out that it would have been better if you waited for a week more. This is another reason why you should develop your own understanding of how the bitcoin market works.
Research and analysis
When you engage in bitcoins, you need to ensure that every action you make is backed up with research and analysis. Do not forget the fact that bitcoin is still an investment. Its price rises and falls on a regular basis. If you have no intention to invest in bitcoins, then it would be better if you do not use them at all. You should also remember to do sufficient research.
Many people do read about bitcoin and somehow study the market, but their efforts are not enough. Do not think that since you have spent five hours of research today it already means that you have a good understanding of how bitcoin works in the market. If you are serious about making money with bitcoin, then research and analysis should be a normal part of your day-to-day activities. Just as the market continues to develop and grow, bitcoin and its competitors also keep on evolving.
Time and money management
How you manage your time and money is important to your success. Of course, managing your money is important. You have to be sure that get more income and lower expenses. If engaged in trading, you need to buy low and sell high for a profit. No matter how effective your strategy is, you may still lose money if you do not manage your money properly. Again, having a journal can help you with this.
Of course, time management is also important. Although the price of bitcoin usually fluctuates, sometimes it may take longer for it to reach the price that will allow you to profit. Also, as a trader, you need to manage your time for work and for leisure. Do not forget to give yourself a chance to take a break from time to time. After all, you will be able to think more clearly and come up with better decisions if you give yourself time to relax.
Averaging down
If you intend to invest in bitcoins, then you should know how averaging down works. To illustrate: Let us say that the price of one bitcoin is $100. You first buy bitcoins at the said rate of $100 per bitcoin. Now, if the price drops down to let us say $96, you again make a buy order and purchase bitcoins at the said rate. Now, if the price drops again to $90, you again make another buy order at the said rate, so on and so forth. Wait a second — are you not losing money this way buying something whose price keeps on falling down? The answer is no. In fact, this is why averaging down is an excellent strategy.
By buying bitcoins as their price decreases, you are assured that you get to purchase them at a bargain price. Now, how can you profit? You profit when the price of bitcoin increases back to its original price (the price when you first applied the strategy), or higher. Just imagine how much you can earn when its price goes up to the original price.
Of course, this strategy also has its downside. After all, this is an aggressive form of strategy where you can profit a lot but also lose so much money if things do not work out in your favor. So, the downside is when the price does not increase high enough for you to make a profit or at least cover your expenses each time you make those buy orders. Therefore, be careful when you use this strategy. It is strongly recommended that you only apply this strategy after researching and studying the bitcoin market and economy.
Buy and hold
This seems to be the easiest and most common strategy used by many investors. As the name implies, you just have to buy bitcoins and hold on to them until you can sell them for a nice profit. Although this may look so basic, this is actually one of the best strategies to use if you decide to invest in bitcoins. If only you had used this strategy back in 2010, then you would be filthy rich by now that you may no longer have to work a day in your life.
Only invest the quantity that you simply can afford to lose
Common advice given to gamblers is this: Only play with the money that you can afford to lose. The reason is that there are risks involved, and there is no strategy that can guarantee a return of positive income. The same advice is applicable when you invest in or trade bitcoins for profit. You should not use the money that you need to pay for your household bills and other obligations. The good news is that you do not really need to invest a lot of money when you invest in bitcoin.
Withdraw your bitcoins
The truth is that bitcoins do not exist. When you open your bitcoin wallet, you only know that you have bitcoins in your account is because of the numbers that you see on the screen. However, you do not literally see your bitcoins — only numbers that change every time you send or receive bitcoins.
It is a common practice for people not to withdraw their profits or winnings when they trade or gamble with bitcoins. Usually, their reason is to use the winnings to make their bankroll (funds in their account) bigger. Take note that this is a good practice; however, you should know that withdrawing a part of your profits or winning is also important.
Again, you do not have to withdraw the whole amount. You can set a particular percentage, for example, 25%. You can withdraw 25% of your profits per week. This is just an example; you are free to change the percentage and the frequency of your withdrawal to fit your strategy. So, why should you withdraw your profits? The reason is that the only way to really turn your profit into money is by withdrawing your bitcoins. This means selling your bitcoins and turning them into real cash. Also, by withdrawing your bitcoins, you get to minimize your possible losses.
Once you withdraw your money, you remove it from the risks involved with bitcoins. Therefore, even though it is a good practice to grow the number of your bitcoins in your account and your bankroll, make it a habit to withdraw some of your bitcoins from time to time. Not to mention, it is by withdrawing that you can truly enjoy the value of having bitcoins in your account.
Take note of the buy and sell price
When exchanging bitcoins, whether buying or selling, you should pay attention to the buy and sell price in the market. A good way to do this is by doing research online to view the actual and current price of bitcoin. This is to ensure that you are getting the best and fair deal out of a transaction. Of course, you may not be able to get the exact conversion, but at least be close to it, especially when transacting with a high amount of bitcoins.
Also, take note that the buy price and sell price are different. The buying price is usually higher than the selling price when you exchange bitcoin on a platform. Also, take note of the price difference between the buy price and the selling price. Remember that the price of bitcoin fluctuates significantly even in one day. Sometimes you just need to wait for the best time to make a buy or sell order.
Wait it out
Sometimes the greatest action is not to take any action. This is true, especially when the market is down. When you see that the price of bitcoin keeps on dropping, you can just hold your position until you find the best opportunity to take advantage of. Also, remember that just because the price of bitcoin is falling does not mean that it is no longer a good situation for you.
In fact, when the price of bitcoin falls, it may be the best time to starting making a buy order. However, before you buy any bitcoin, be sure to study the market and see if making a buy order today is the best choice. If you think that the price will still drop by tomorrow, then it may be best to wait it out. However, if your research makes you realize that the price of bitcoin will start to shoot upward, then do not hesitate to take advantage of the situation.
When you engage in bitcoin, there will be times when you may not know the best way to manage your investment. This may be because you do not have enough information that will allow you to make a sound decision. In such a case, do not hesitate to wait it out until you spot the best opportunity to take advantage of. Take note that you are not compelled to buy or sell your bitcoins. Sometimes simply waiting things out to turn in your favor is the best move that you can do. This is also the way to take advantage of the high volatility of bitcoin.
Read: Make money online with bitcoins(Ways to become a multimillionaire)
