After Bitcoin crossed the $10k mark, it went into an extreme period of volatility diving below 10k and up and down again numerous times.
This is nothing new. Bitcoin has always been extremely volatile. So if you're thinking about trading the cryptocurrency I've together some useful tips on how you can avoid losing your money and also hopefully make a profit.
This post is for Bitcoin traders – i.e people who are trading the price of Bitcoin. If you're a Bitcoin investor then this isn't for you. You can safely hold onto your coins and sit out the price movements (don't panic sell!). But if you're trading here are some tips:
While Bitcoin is moving around rapidly, it may not be the best time to trade. Volatility is good for traders as it creates profit opportunities. But it can also be dangerous. One of the biggest mistakes rookie traders make is jumping in at the wrong time and not waiting for the right market conditions. If you lose a trade, don't try and make it back right away. Set your ego aside and be patient!
During times of extreme volatility you need to reduce leverage. Otherwise your entire position can be wiped out in seconds. The price of Bitcoin jumps so much that 1x leverage is good enough during the extreme periods of volatility. Some platforms don't allow you to trade without Leverage – stay away from those platforms. A platform like eToro does allow non leveraged trades. You can also trade on an exchange like Poloniex or Gdax which is non leveraged.
Let more experienced traders make the call
If you're new to trading then perhaps jumping in while the market is moving so rapidly is a bad idea. So why not let a more experienced trader help you out. Thanks to copy trading, you can automatically copy the trades of more experienced, profitable traders. eToro is the worlds largest copy trading platform – with plenty of traders who specialize in crypto. 1Broker also offers copy trading tools for those looking to trade using Bitcoin.
Sit it out
Probably my best advice I can give. When their is extreme volatility, just sit it out. Sure it's possible to make some ridiculous amounts, but it's so, so easy to also lose ridiculous amounts. Wait until the market returns to normality and you'll have a better chance of making long term gains.
Practice, practice, practice – if you can't make money using a practice trading account, you sure as hell ain't gonna be able to make real money. Do yourself a favour a sign up for a free practice trading account and try making trades their first.