what are the five common mistakes of 90% of Bitcoin traders How do I even start trading how do I read all of these confusing price charts that I see online well stick around here on Bitcoin whiteboard Tuesday will answer these questions and more if there's one thing we get asked a lot here on MTG
It's how to trade bitcoins so we decided to dedicate this episode of Bitcoin whiteboard Tuesday to teaching you what Bitcoin trading is all about this lesson will be longer than usual but I assure you it will be worth your time we're going to cover four major topics the definition of Bitcoin trading the main
terms you'll encounter when trading on exchanges a very short intro reading price graphs and finally we'll go over some common trading mistakes let's get started so what is Bitcoin trading and how is it different from investing in Bitcoin well when people invest in Bitcoin it usually means that they are buying Bitcoin for the long term in other words they believe that the price will ultimately rise regardless of the ups and downs that occur along the way usually people invest in Bitcoin because they believe in the technology ideology or team
behind the currency Bitcoin investors tend to hold all the currency long-term Hodel is a popular term in the Bitcoin community that was actually born out of a typo of the word hold in an old 2013 post in the Bitcoin talk forum so while Bitcoin investors buy and Hodel for the long term Bitcoin traders buy and sell Bitcoin in the short term whenever they think a profit can be made traders view Bitcoin as an instrument for making profits sometimes they don't really care about the technology or the ideology behind the product
they're trading of course people can still trade Bitcoin if they do care about it and many people out there invest and trade at the same time but why are so many people looking to trade cryptocurrencies especially Bitcoin all of a sudden here are a few of the reasons first Bitcoin is very volatile in other words you can make a nice amount of profit if you
manage to correctly anticipate the market a second unlike traditional markets Bitcoin trading is open 24/7 most traditional markets such as stocks and commodities have an opening and closing time with Bitcoin you can buy and sell whenever you please finally bitcoins unregulated landscape makes it relatively easy to start trading without the need for long identity verification processes
but all traders are not the same and there are different types of trading methods for example day trading involves conducting multiple trades throughout the day and trying to profit from short-term price movements day traders spent a lot of time staring at computer screens and at the end of the day they usually just close all of their trades scalping is a day trading strategy that a lot of people are talking about scalping attempts to make
substantial profits on small price changes and it's often referred to as picky Penny's in front of a steamrolle scalping focuses on extremely short-term trading and it's based on the idea that making small profits repeatedly limits risks and creates advantages for traders scalpers can make dozens or even hundreds of trades in one day meanwhile swing trading tries to take advantage of the natural swing of the price cycles
swing traders try to spot the beginning of a specific price movement and enter the trade then they hold on until the movement dies out and take the profit they try to see the big picture without constantly monitoring their computer screen swing traders can open a trading position and hold it open for weeks or months until they reach the desired result so now that you know what trading is how is it actually accomplished how can someone predict what bitcoin will do the short answer is that no one
really can predict what will happen to the price of Bitcoin however some traders have identified certain patterns methods and rules that allow them to make a profit in the long run people follow two main methodologies when they trade bitcoin or anything else for that matter fundamental analysis and technical analysis fundamental analysis looks at the big picture in bitcoins case fundamental analysis evaluates bitcoins industry news about the currency technical developments of Bitcoin such as the Lightning Network
regulations around the world and any other news or issues that can affect the success of Bitcoin this methodology looks at bitcoins value as a technology regardless of the current price and it outside forces in order to determine what will happen to the price for example if China suddenly decides to ban Bitcoin this analysis will predict when the price will probably
drop technical analysis tries to predict the price by studying market statistics such as past price movement and trading volumes it tries to identify patterns and trends in the price which may suggest what will happen to the price in the future technical analysis assumes the following regardless of what's currently happening in the world price movements speak for
themselves and tell some sort of a story that helps you predict what will happen next
so which methodology is better well like I said in the beginning no one can accurately predict the future however a healthy mix of both methodologies will probably guild the best results now let's continue to break down some of the confusing terms and statistics you'll encounter on most of the exchanges.
Bitcoin exchanges are online sites where buyers and sellers are automatically matched an exchange is different than a Bitcoin company that sells you Bitcoin directly such as coin mama this type of company will usually charge a higher fee an exchange is also different from a marketplace such as
local bitcoins where buyers and sellers directly communicate with each other in order to complete a trade the complete list of buy orders and sell orders are listed in the markets order book which can be viewed on the exchange the buy orders are called bids since people are bidding on the prices to buy Bitcoin
however the sell orders are called asks since they show the asking price that the sellers request whenever people refer to bitcoins price they are actually referring to the price of the last trade conducted on a specific exchange this important distinction occurs because there is no single global Bitcoin price that everyone follows and sometimes bitcoins price in other countries can be different from bitcoins.
price in the US since the major exchange in these countries include different trades aside from the price you will also sometimes see the terms high and low these terms refer to the highest and lowest prices in the last 24 hours another important term is volume it stands for the number of overall bitcoins that have been traded in the given time frame significant trends are usually accompanied by large trading volumes
while weak trends are accompanied by low volumes a healthy upward trend is accompanied by high volumes when the price rises and low volumes when the price declines if you are witnessing a sudden change of direction in the price experts recommend checking how significant the trading volume is in order to determine if it's just a minor correction or the beginning of an opposite trend so now you know
most of the terms you link on the average exchange it's time for us to move on and go over the types of orders that you can place on an exchange there are three types of orders a market or instant order refers to an order that will be instantly fulfilled at any possible price so if you put a market order in two by five bitcoins you will find the cheapest sellers possible until it accumulates enough
sellers to hand over five bitcoins in other words you might end up buying three bitcoins at one price and the other two at a higher price in a market order you don't stop buying Bitcoin until the amount requested is reached with market orders you may end up paying more than you intended so be careful meanwhile with a limit order you will only buy or sell
Bitcoin at a specific price that you decide on in other words the order may not be entirely fulfilled since there won't be enough buyer's or seller's to meet your requirements let's say that you place a limit order to buy five bitcoins at $10,000 per coin then you could end up only owning four bitcoins because there were no other sellers willing to sell you the final Bitcoin at $10,000
the remaining order for one Bitcoin will stay there until the price hits $10,000 again and then the order will be fulfilled a stop-loss order lets you set a specific price that you want to sell at in the future in case the price dramatically drops this type of order is useful for minimizing losses it's basically an order that tells the exchange the following if the price
drops by a certain percentage or to a certain level I will sell my bitcoins at the preset price so I will lose as little money as possible a stop-loss order acts like a market order in other words once the stop price is reached the market will start selling your coins at any price until the order is fulfilled other terms that you may encounter when trading on exchanges are maker fees and
taker fees personally I still find this model to be one of the more confusingones but let's try to break it down exchanges want to encourage people to trade in other words they want to make a market therefore whenever you create a new order that can't be matched by any existing buyer or seller you're basically a market maker and you will usually have lower fees meanwhile a
market taker places orders that are instantly fulfilled since there was already a market maker in place to match their requests takers remove business from the exchange so they usually have higher fees than makers who add orders to the exchanges order book for example perhaps you put a limit order in 2x1 Bitcoin at $10,000 at most but the lowest seller is only willing to sell at 11,000
then you've just created a new market for sellers who want to sell at $10,000 so whenever you place a buy order below the market price or a sell order above the market price you become a market maker using that same example perhaps you place a limit order to buy a 1 Bitcoin at $12,000 at most and the lowest seller is selling 1 Bitcoin at $11,000 then your order will be
instantly fulfilled you will be removing orders from the exchanges order book so you're considered a market taker now that you're familiar with the main Bitcoin exchange terms let me give you a short intro into reading price graphs these are Japanese candlesticks they are based on an ancient Japanese method of technical analysis used in trading rice in the 1600s each candle
shows the opening lowest highest and closing prices of the given time period that's why you'll sometimes see people refer to candles as ohlc open high low and close depending on whether the candle is green or red you can tell if the closing price of the timeframe was higher or lower than the opening price if a candle is green it means that the opening price was lower than the closing price
so the price went up overall during this timeframe on the other hand if the candle is red it means that the opening price was higher than the closing price so the price went down in the image you can see the opening price in the wide bottom part of the candle the closing price in the wide top part of the candle and the highest and lowest trades within this timeframe on both ends of the
candle when we're in a bull market most of the candlesticks will usually be green and if it's a bear market most of the candlesticks will be red so what are bull or bear markets these markets are named after these animals because of the ways they attack their opponents a bull thrusts its horns up into the air while a bear swipes its paws downward so these animals
are metaphors for the movement of a market if the trend is up it's a bull market but if a trend is down it's a bear market here's another important feature to be familiar with while analyzing graphs resistance levels occasionally bitcoins price seems to hit a virtual ceiling and you can't break through it for a long time that's a resistance level so if Bitcoin fails to break $10,000 the
resistance level is $10,000 usually at a resistance level you will see a lot of sell orders and that's why the price fails to break through that specific point meanwhile there's also a support level in other words there's a price that Bitcoin might not go below support
levels act as floors by preventing the price of an asset from being pushed downward a
support level will be accompanied by a lot of buy orders set at that levels price the high demand of a buyer at the support level cushions the downtrend historically the more frequently the price has been unable to move beyond the support or resistance levels the stronger these levels are considered
here's a common characteristic of both support and resistance levels they are usually set at a round number since most inexperienced traders tend to buy or sell when the price is at a whole number so usually you'll see a lot of buy or sell orders around prices like $10,000 rather than a price like 10,000 $34 because so many orders are placed at the same level these round numbers tend to act as strong
price barriers psychology also creates support and resistance levels for example until 2017 it seemed expensive to pay $1,000 per Bitcoin so there was a strong resistance level at $1,000 but once that level was breached a new psychological resistance level was created 10 thousand dollars congratulations you now know the basics of Bitcoin trading however there's still a lot more to it
since we can't possibly go over everything in one lesson I want to direct you to additional resources that will take you to the next level of trading take a look at the resource section at the end of this video then you can find out about advanced Bitcoin trading lessons the top bitcoin trading tools and the best bitcoin exchanges for starting your trading but before we end this video let's go over some
of the most common mistakes that people make when they start trading in the hopes that you'll be able to avoid them the biggest mistake you can make is to risk more money than you can afford to lose take a look at the amount you feel comfortable with here's the worst case scenario you'll end up losing it all if you find yourself trading above that amount stop you're doing it wrong trading is a
very risky business and if you invest more money than you're comfortable with it will affect how you trade and it may cause you to make bad decisions mostly you may end up losing a portion of your money that you can't do without another mistake that people make when starting out with trading is not having an action plan that's clear enough in other words they don't know why they're entering
a specific trade and more importantly when they should exit that trade so clear profit goals and stop losses should be decided before starting a trade moving on never leave money on an exchange that you're not currently trading with if your money is sitting on the exchange it means that you don't have any control over it if the exchange gets hacked goes offline or goes out of business you may
end up losing that money whenever you have money that isn't needed in the short term for trading on an exchange make sure to move it into your own Bitcoin wallet or bank account for safekeeping two basic emotions tend to control the actions of many traders fear and greed fear can appear in the form of prematurely closing your trade because you read a disturbing news article heard a rumor
from a friend or got scared by a sudden dip in the price that will soon be corrected the other major emotion greed is actually also based on fear the fear of missing out when you hear people telling you about the next big thing or when market prices rise sharply you don't want to miss out on all the action so you make it into a trade too soon or even delay closing an open trade remember that in
most cases our emotions rule us so never say this won't happen to me be aware of your natural tendency toward fear and greed and make sure to stick to the plan that was laid before you started the trade let's wrap things up regardless of whether or not you made a successful trade there's always a lesson to be learned no one manages to only make profitable trades and no one gets
to the point of making money without losing some money on the way the important thing isn't necessarily whether or not you made money rather it's whether or not you managed to gain some new insight into how to trade better than next time we've spent a great deal of time today talking about Bitcoin trading but I have to warn you the majority of people who start trading
Bitcoin stop after a short while because they don't successfully make any money here's my opinion if you want to be successful at trading you'll have to put in a significant amount of time and money to acquire the relevant skills just like any other venture if you want to get into trading just to make a quick buck then perhaps it's better just to avoid trading altogether there's no such thing as quick easy
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