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Trading Basics
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Trading Basics

Bitcoin trading is exciting due to the gigantic price fluctuations, its global nature, and 24/7 trading cycle. It’s important, however to recognize that Bitcoin trading also includes a high level of risk.
If you want to make money trading bitcoins, first and foremost you need to research what Bitcoin trading is all about. Trading Bitcoins is just like trading any financial asset with a buy low/sell high concept and comes with risks caused by volatility and unpredictability. Therefore, it is highly recommended to follow the education structure and/or work with an experienced Bitcoin analyst. Trading success requires a well-defined strategy, as well as knowing precisely what you want when you open a trade, the duration of trade and what changes you are able to make you if you needed to rethink your position. To be a successful bitcoin trader you must investigate bitcoin trading and how it works even if you have previous background in other forms of trading. Our professional team is always available to share multiple levels of trading strategies which may give you an idea where to start.
Besides Bitcoin, the cryptocurrencies market includes also Ethereum and many other coins, that have made numerous ordinary folks fortunes. Arca Capital allows you to invest funds and trade multiple digital coins at once. Once you are logged into your account you can start trading bitcoin. You will be at the forefront of the most powerful crypto market trading platform available today.
An alternative to our trading platform is opening multiple accounts on different sites that offer trading bitcoin, which will ultimately make it difficult for you to trade at the time you choose, and sell and receive funds to continue to operate your account
Arca allows you to hold various digital assets in a single trading account, buy and sell them at lightning speed, with the quickest executed positions, for maximum advantage, and capitalize on additional profit, you would likely not be able to ascertain otherwise.

Strategic Trading Methods

Riding the Trend

Most financial markets will have long-term price trends to make money trading bitcoins. In these the general direction of motion will be in one direction for months or years at a time. The price will go up and down all the time, of course, but a clear trend will remain. Some long term traders will simply look for this long-term trend and trade in that direction. You do not even have to spot the point at which a trend turns and a new one begins in the opposite direction, as long as you don’t need to cash out any time soon using an online crypto trading platform.

Day-Trading

Alternatively to Riding the Trend, where you might hold your investment for months or years, day-trading involves profiting from the short-term movements. These can happen on a time scale as short as from minute-to-minute or even less, since the markets are driven by sentiment and herd mentality as well as by appreciation of the long-term value or potential. Bitcoin is still in its infancy and has a relatively small market cap, and comparatively small amounts of money (by expert day traders’ standards) put into or taken out of it can push the price significantly one way or another – only to have the effect amplified by other traders who want to get in on the next major movement and make money trading bitcoins.

Swing Trading

This method uses a range of technical indicators that are usually available on the crypto trading platform, to look for the turning points in short-term trends. You can then profit from the daily swings up and down in the price of Bitcoin, regardless of whether the long-term direction is up or down. This often involves looking for ‘support’ and ‘resistance’ levels.

Leverage Your Positions

Leverage, or margin trading, means borrowing money on a short-term basis to speculate on the price of bitcoin. The loan is paid back when you exit the position so you can make money trading bitcoins.

Margin trading can magnify your profits 10 fold but, you can also lose a lot of money this way: if the price goes the opposite direction then you expect. It is potentially extremely profitable, but can also be very costly.

Shorting the Markets

Shorting is a way of profiting from downward movements in price. Usually you would need to purchase bitcoins to profit, selling them at a higher price and pocketing the difference. If you want to profit from the price falling, you must own bitcoins in the first place on a crypto trading platform. You sell them and buy back at a lower price. This is the simplest way of shorting, but it only works if you have bitcoins in your account.

Scalping

Scalping is a strategy applied mostly within short term trading timeframes. The trading profit earned is the difference between bid price buying and ask price selling. Scalping works well in a quiet market, and for smaller amounts.

Position Trading

This is a more complicated strategy compared to day trading where the timeframe can be as long as from many days to months. To execute this trading strategy, you will have to consider many different factors and analyze the long-term market trends. In general, positions can be opened as soon as a trend is established, and closed when it breaks.

Here are the top 3 trading mistakes and how to avoid them

It is very likely that traders today will take a position on multiple financial trading markers but these particular traders are prone to making these common mistakes…

So what are these mistakes and how can you make sure to avoid them?

Miscalculating the general rule of balance between risk and reward

Some studies have shown that the most common mistake that losing traders seem to make is not getting the balance right between risk and reward. Many will keep a losing trade going in the hope that the market will change and the loss will turn into a win. The reverse approach is applied to profits as well. A lot of traders get too excited to reap in a quick profit with worry that it may disappear.

This is completely the opposite to the well-worn trading advice of ‘let your profits run and take losses quickly.’ The maths is pretty straight forward, if you for example are losing £100 on trades that go wrong, and only making £50 on trades that go well, your trading account is probably only going to head in one direction which of course will be: down.

Before you place any trade you should always weigh up the potential profit versus the risk that you can afford to take, (risk:reward ratio). As a general rule you should factor in double of the potential profiting amount (if not even more) you expect to make versus the amount you stand to potentially lose if the price moves in any unexpected direction.

If the trade does not fit those requirements, then the sensible approach is to pass on that particular trade and be patient for a better opportunity to come up where the potential is more on your side. This takes discipline and understanding of the trading environment of course which sadly, another trait that most traders just don’t have.

Impatience is a virtue

Patience is another useful and integral trait in trading, but one that many of us will not have in the beginning of our trading lifetime. With any time access to international markets and breaking news and changing prices, there can be a feeling that you need to act at the speed of light. But how many times have you opened a trade and refreshed the page multiple times to then be disappointed that the market has not immediately taken off in the direction you were expecting?

The reality is that just because you have decided through the information that you have acquired the market needs to move in a certain direction, it rarely means it will start going that way as soon as you place your trade. The market has not been waiting patiently for you to decide to buy or sell before going on its merry way!

Trades need time to develop, you can’t throw a load of ingredients into a bowl and expect a cake to appear, and so if you have seen what you think is a good opportunity in the market then place your trade and give the market a chance to prove if you will be you right. This is why Stop losses are very important in trading, to help protect against trades that don’t go in your direction, but don’t place them too close to where you entered the market that you will be taken out of the trade on just a normal fluctuation in price.

Risking too much capital in a single trade idea

This is the third most common mistake is in relation to the capital amount at risk. The sad truth is that most people risk too much on one particular trading idea.

For example, if you have a balance of £1000 in an account, then taking a risk of £200 on whether the euro is going to fluctuate is a foolish approach by most professional traders’ standards. If losing on one trade means a serious percentage of your account balance will disappear, chances are that the account will not last very long at all.

Most professional traders would advise on only risking around 1-3% of the capital value of your account on any one trading idea. In other words, start conservatively, even though this might be going somewhat against the nature of many aspiring traders, patients is a virtue and does pay off in the long run.

Build a Trading Strategy

Technical analysis

Trading with a trend is the core of many investors trading strategy, which can also be referenced as ‘trend-following’. Trends can develop over minutes, hours, days and even weeks.

The basis of trend following is to recognise the opportunity of a slight trend in the general trend and hop on board. An example of this is when the market is in an up-trend then you should be looking to buy in and when the trend is going down the trader can look at making a profit by selling short.

Trend line analysis

Trend lines are an effective way of identifying where the trends are in order to build a trading strategy. They usually sit below the lows in an upward trend and slightly above the highs in a downward trend.

Success of trading is playing within the probabilities so trading with a trend as part of your trading plan and strategy would put you on the right side of the market sentiment so that momentum would be in your favor. You must also take into account that trends do not last forever and you should be prepared to make quick decisions keeping an eye on the market and making changes when the trend equally changes.

Support and resistance

Trend lines can act almost like a barrier to the price so a market which is trading upwards should have the occasional sell-off as markets do not move in straight lines. A wise investor should see weakness in an uptrend and take that as an opportunity to buy in utilising that trend line as a reference point. When the market is above the trend line as in an uptrend, is thought to still be intact and this can be a core component of an effective but simple trading strategy.

On the flip side is a downward trend, the market does have the occasional strong rally but it resists to break through the falling trend line. Trend following traders will use these short bursts of strength to short sell and make a profit accordingly. You can only really asses if the trend line you are following is broken by the price, then you know that it could be running out of steam.

Trading market rises and falls

Unfortunately no one has successfully built a time machine as of yet, so spotting trends aren’t so easy, so everyone has to trade on the present value of the asset. Although after some timely experience and expertise advice upward trends can be spotted in early stages.

A classic understanding of an uptrend is very spikes and equally higher lows. These should be quite easy to spot within the time frame of your trade. Applying a trend line is a great way to give you a reference point on where exactly you should enter the trade and equally where to come out if in fact the trend ends.

Learn to trade the non-farm payrolls

The non-farm payrolls report is the monthly US employment figures, is a hugely significant indicator of the health and wealth of the US economy and one of the more eagerly-awaited largest economic indicators in the financial markets.

The point of the report is to represent the total number of paid workers in the US, with excluding farming, private-household employees, government and employees of non-profit organizations. The non-farm payrolls are usually released an hour before the official opening of the US stock market, (8.30am New York time) on the first Friday of each month, although the date will sometimes vary due to a public holiday. As there are 24-hour sessions for many markets currently, reactions tend to be extremely fast.

Trading strategies

With a vast number of investors watching this crucial data release, the payrolls can result in some very sharp moves in the markets, both up and down, depending on how close the actual figure is to estimates and judgements made ahead of the announcement. This makes payroll trading a very popular opportunity for many forex and indices traders.

There are several interesting techniques used when it comes to trading the non-farm payrolls, with some popular strategies including fading the ‘initial move’ and trading the ‘trend’.

Fading the initial move

One way of assessing the payroll is to wait and see how the markets react when the news is released. Since market moves can be very volatile, there could often be an initial spike reaction when the data is first published. This can be combated by using what’s known as ‘fading’ the initial move.

For example, let’s assume the payrolls have exceeded all our expectations and are indeed expected to boost the value of the US dollar against a handful of other major currencies including the pound. Instead, the GBP/USD exchange rate rallies as soon as the announcement comes out, and the pound initially moves vividly higher against the dollar.

Fading this kind of move involves waiting for this initial rally to run out of steam, which may only take just a few minutes. Once that’s happened, traders could then short-sell GBP/USD, placing a stop-loss order over the high for the rally. The assumption is that the trader is expecting a move back to where the market was immediately before the non-farm payrolls were released.

This will also work if the market significantly drops once the number has been published. It would be useful, however, to wait and see if the market pauses and then buy in on the position with a stop-loss order under the most recent low.

Trading the trend

Another approach is where traders correctly assume the initial market reaction was actually right. If the market has moved sharply after the non-farm payrolls release then one assumption is that this is the start of an interesting trend for the day ahead.

To confirm a new trend, traders often tend to look at previous reference points. For example, has the move broken the previous day’s high? If so, some would see this as a prominent change in sentiment and expect the markets to move even higher.

Another approach is to place a trade just a few minutes before the payroll is released. While this could result in a healthy profit, it is something of a ‘coin-flip’ on market direction as the markets can sometimes initially react contrary to the general expectations. Risk management enables you to close the position if that view proves to be in fact incorrect.

Risk management

It’s very important to pay attention to your risk management while volatility in the markets around the non-farm payrolls announcement is an opportunity for traders to try and profit, it can also result in the loss of a trade very quickly.

It is important to place a stop-loss order in case the market does not move as you expect, if you want to place a trade directly ahead of a major release.

The bottom line

When it comes to trading the non-farm payrolls, the volatility involved means it can deliver a nice short-term profit, but also take into account the risk of greater short-term losses, so placing ‘Risk-management’ orders can be very useful in this particular instance. If you’ve never before traded the non-farm payrolls, you could start by trading in small values, with the appropriate stop-losses in place to protect your position.

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