Bitcoin is an independent asset class traded on major stock markets worldwide. It has outperformed all the other asset classes in recent years, becoming the most profitable asset in the market today. However, crypto exchanges boast the most significant Bitcoin daily trading volumes. While Bitcoin trading has attracted many businesses and individuals continually, it is a murky frontier with several risks.
A past study established that about 95% of Bitcoin traders lose money, and the numbers could even be higher for various reasons. So, why do Bitcoin traders lose money? The following article explores the main reasons that would impact losses in Bitcoin trading.
Lack of a Precise Trading Strategy
Like other open markets, the crypto market undergoes constant changes requiring unique trading strategies. Experts recommend that beginners understand the different Bitcoin trading strategies and how to apply them based on the market environments. That would enable traders to avoid losses and generate incomes even in seemingly unpleasant conditions. Various approaches exist for trading Bitcoin, including day trading, range trading, scalping and Dollar-Cost Averaging.
Day trading involves taking positions and exiting them on the same day. Essentially, day traders leverage the price differences on various crypto exchanges to generate minimal regular returns. It requires a technical analysis to determine a particular crypto’s ideal entry and exit points.
Range traders acquire and exit positions based on experienced analysts’ predictions of Bitcoin’s support and resistance levels. The resistance level is the highest point to which Bitcoin’s price may rise above the current price. The Support level is the lowest point where Bitcoin’s worth should not fall.
Scalping involves using increased trading volumes to make profits. While it is a risky strategy, savvy traders consider the margin requirement and other important indicators to avoid bad experiences. Scalping requires conducting a proper analysis of the specific crypto, its past trends, and volumes and choosing profitable entry and exit positions daily.
Unlike the other Bitcoin trading strategies, Dollar-Cost Averaging involves buying and holding a fixed amount of Bitcoin regularly. It enables traders to avoid the cumbersome task of timing the market, with prospects of substantial future returns.
Several decentralized crypto exchanges allow traders to apply different Bitcoin trading strategies. If you are interested in bitcoin trading, check if the government has seized bitcoin.
Social Media Tips
Social media is the go-to platform for information and communication for many people. Thus, many people today make decisions based on what they read, watch or listen to on social media. That has made social media a fertile ground for marketers, targeting the growing pool of online users. However, not all the information shared on social media is accurate.
Most ICOs and marketers mainly mention Bitcoin in their reviews and posts as a promotional tactic to attract traffic to their websites and increase the value of their Bitcoin reserves. Many social media tips seek to create a fake hype that could be disastrous if followed blindly. So, research extensively to understand the market before buying Bitcoin.
Fear of Missing Out (FOMO)
Several individuals rush to invest in Bitcoin mainly because it is the most prominent asset that investors believe will become the next big thing. Such traders invest due to the fear of missing out on potentially lucrative future opportunities. Thus, they end up making emotional decisions, oblivious of the risks involved in Bitcoin investments.
Unlike traditional assets, Bitcoin is a new invention with unique pitfalls that could impact huge losses even to seasoned traders. So, keep these pointers in mind and invest with caution to avoid losing money.