Can I Get Rich Trading Bitcoin?
Since Bitcoin first appeared in 2009, an increasing number of people have started trading cryptocurrencies. Some made it big, others lost their entire capital, while many traders manage to make a decent living doing this job. Truth be told, getting rich trading Bitcoin most often takes a lot of time, learning and personal dedication. Still, it is certainly possible, so in this article, we’ll discuss all the key aspects of crypto trading to get you started on the road to success.
Day Trading Strategies
There are several ways to trade Bitcoin. One of them, that can get you a sizable profit in a short timeframe, is called day trading. When day trading, you open and close positions (i.e. buy and sell) in one single day. The idea is to take advantage of small price differences that occur throughout the day. Note that for this to work, you will need a lot of know-how and research, but no one said getting rich with Bitcoin was easy.
When day trading, you may employ several different strategies. The first we’ll explain is called scalping – relying on crypto’s rising trading volume (sum of all trading for the given crypto in a certain period). Namely, as the demand rises, so does the price, which is what scalpers capitalize on to purchase and sell at a slightly higher price.
For the range trading strategy, you will need to know how to read crypto candlestick charts and thus find a crypto’s support and resistance levels – the points when a crypto is in relatively high demand and, conversely, in low demand. When range trading, you buy when the price is at the support level and sell when it’s at the resistance level.
The third strategy is called arbitrage trading. While for the other two strategies you may only trade on one crypto exchange, arbitrage trading is all about finding the price differences of the same crypto across different crypto exchanges. You buy at the exchange where it’s cheaper, and then sell it at the exchange where it’s valued higher. This is possible due to the differences in liquidity and trading volume on different exchanges, so you will need to locate the exchanges where there’s enough of a spread to make you profit.
Using one (or all three) of these strategies can make you rich, but tread carefully. For any of them to work, there’s a lot of learning ahead of each beginner before you become proficient enough to be a capable day trader.
Manual or Automated Trading?
Apart from choosing the right trading strategy for you, there’s also the question of whether to be a fully manual trader or rely on automated trading bots to do a portion of crypto trading on your behalf. For instance, scalpers often use these trading bots to quickly make trades as soon as the appropriate change in crypto’s price occurs. High-quality trading bots include Cryptohopper, Trality, and Pionex.
This sounds really neat, but again – trading bots are complicated to use and you still need to come up with a trading strategy on your own, making the bots unsuitable for beginners. And even for advanced users, there’s no guarantee of profit, as trading bots can certainly lose money, too.
In addition, there’s also the matter of the growing number of trading bot scams, as explained in this Bitcoin Fast Profit review at scammerwatch.com. ‘Bots’ like Bitcoin Fast Profit, Ethereum Code, and Crypto Engine attract users looking for a quick profit with ridiculous claims, promising extremely high profits. But that’s certainly not a way to get rich with Bitcoin, as you would only lose the $250 deposit the scammers ask for, never to hear from them again. Therefore, if you do decide to use a trading bot, you should first do a lot of research to see if it’s a reliable one.
Risk Management Strategy
Finally, the chances of getting rich trading Bitcoin without a sound risk management plan in place are practically nonexistent. The purpose of such a plan is to help traders control their losses, which are inevitable in the crypto world. But without a risk management strategy, these losses could easily be too much for your budget.
There are several elements of good risk management. Firstly, only invest what you can afford to lose. This one is pretty self-explanatory, but apart from the obvious, investing substantial sums is not only risky by itself, but also involves more pressure and stronger emotions, which is always bad when it comes to decision-making.
Generally speaking, you shouldn’t invest more than 3% of your trading capital for each trade. Similarly, it’s best not to go above the 1:3 risk-to-reward ratio. To calculate this ratio, we divide the stop loss level (a crypto’s projected downward price change percentage) by the take profit level (the projected upward price change), which again implies plenty of research.
Risk management is always important, but especially so when doing leveraged trading, i.e. the kind of trading where you borrow your trading capital. Losing your capital is one thing, but it’s a lot worse when you somehow need to pay back the debt.
Conclusion
So, there you have it. Choose the right trading strategy, avoid trading bot scams, and work with a considered risk management plan backing you at all times. And most important of all, always work on learning and improving your trading abilities over a prolonged period of time, and who knows, you just might get rich as a Bitcoin trader soon.
Certified blockchain and front-end developer
