Bitcoin is an exciting investment, but it can be intimidating for beginners. As a currency, it can be unpredictable in the blink of an eye. With only a short history, it’s still plagued with concerns about risk and security.
If you’re interested in learning more about Bitcoin trading, here are six strategies that might work for you.
- Take Advantage Of Arbitrage Opportunities
You can take advantage of arbitrage trading by simultaneously buying and selling the same currency on two different exchanges. You can even use the Bitcoin arbitrage method because it’s a way to profit from the price differences.
In arbitrage trading, you tap into the little differences in the price of similar assets in different markets. Through this low-risk trading strategy, you’ll buy assets in one market and sell them in another market to save the exchange’s profit.
This is low risk because you aren’t trading anything. Instead, you’re taking advantage of the relatively small differences in value between exchanges.
- Start With A Small Investment
To be clear, Bitcoin is risky. Cryptocurrencies are notoriously volatile and can lose value in a matter of seconds. Thus, don’t let an obsession with crypto overtake your life (or finances).
An initial investment of USD$1,000 or less will suffice for getting started because you’re depositing funds you can afford to lose. If all your savings are tied in a down payment on a house or car, don’t use it on Bitcoin. Rather than purchasing 1 BTC, you can start with smaller units and build your assets.
- Diversify Into Different Cryptos
Investing in different cryptos is one of the most effective trading strategies to diversify your portfolio. You can buy stocks from companies that support a coin or invest in a fund that tracks multiple cryptocurrencies simultaneously.
You can also diversify by investing in other assets and sectors of the market, like real estate or commodities like gold and silver. If you think you can’t keep track of your portfolios, you can try Shrimpy, an essential trading bot, to manage them.
Diversification reduces risk because when one asset goes down, another may rise or hold its value, protecting you against total losses. For example, if Bitcoin crashes while Ethereum holds steady, your overall portfolio will still perform as expected without outright failure.
- Use Cold Storage For Your Cryptocurrencies
Cold storage is a form of Bitcoin security that involves keeping your cryptocurrency offline. In other words, you keep your bitcoins in a device that’s not connected to the internet every time. This means hackers won’t be able to access them remotely.
It’s a low-risk trading option for long-term investors or large investors who want to keep their bitcoin away from hackers. You can still trade when Bitcoin is kept in cold storage, although it may take longer depending on the size of transactions. This is because they will require manual verification by miners.
- Use Hodling As Recommended By Expert Investors
Hodling is a term that refers to the act of holding onto your cryptocurrency rather than selling it. The idea behind this strategy is that you should keep your coins and wait until the price of bitcoin and other cryptocurrencies go up again before selling them.
Hodlers believe in the long-term growth potential of bitcoin and other cryptocurrencies; thus, the prices will rise. See, you can trade Bitcoin for a living only if you’re smart about it. Hodling is one of the most popular trading strategies among many successful investors, and you can be lucky with a trade.
- Use A Stop-Loss When You Trade Cryptos
Stop-loss is an order to sell an asset once it reaches a specific price. It’s essential to protect yourself from losing more than you can afford, and stopping losses is a surefire way for that. A stop-loss order allows you to set a specific point at which your trade will close automatically if the price moves against it.
Hence, when setting up your trade, make sure you’ve checked whether there’s a stop-loss option available for this currency pair or not before entering the market (buying/selling cryptocurrencies). If yes, choose one with a reasonable amount; for example, USD$50-USD$100 in case BTCUSD goes down by 100% in 1 day.
Investing in Bitcoin is a risky business. Its price can fluctuate wildly, and there are no guarantees that you’ll make money by investing. However, by following these six simple tips, you can create a low-risk trading strategy while still enjoying the profits of cryptocurrencies. Remember that you should never invest more than you can afford to lose, and it’s always good to stick with strategies that have a low risk of loss.