Hello fellow Bitcoin enthusiasts. For this post I am going to explain
basic methods of trading Bitcoins and how this can maximize the amount
of Bitcoin you have!!
For a risk free method of increasing your Bitcoins see my previous Arbitrage post!
Before we get into more detail it is important that I inform you of the
risks; Bitcoin markets are highly volatile and create the opportunity to
generate large profits, however losses are possible as well. I advise
you to start with a low amount and build up as you gain experience, also it is important to diversify therefore consider reading the arbitrage I posted earlier.
The basics, you will need an account with a major bitcoin exchange. I
recommend Bitstamp, it has reasonable fees and large volumes are traded
this means that the market is liquid (which is what we want).
Now strategies, there are two approaches short term and longer term.
Starting with the longer term approach which is the simplest. To sum
this up you buy and hold Bitcoins over a period riding out the daily
fluctuations. Overall for this method it is important to keep up to date
with news in the Bitcoin community eg www.coindesk.com or
http://www.cryptocoinsnews.com. The idea being: wait for some negative
news for example recently the issues with Mt. Gox, this depresses the
prices and buy at these lower prices, then hold until the price rises.
It may require belief that Bitcoin will return to the high prices we
know it all can be.
Short term (THE BEST), this
is my favorite. You take advantage of short term changes in Bitcoin
prices. For example buying at 500 and selling within a few hours at a
higher price eg 525 which is a 5% increase. The question is how to spot
these opportunities.
This was Mt. Gox before it shut on http://bitcoinity.org/markets/, the
red lines are sell orders and the green lines are buy orders. The White
arrow marks the 'bid' price, the highest someone is willing to pay at
the current time, the 'ask' price is the lowest someone is willing to
sell at.
The important thing in this is the flat
line to the left shown by the green arrow. The current bid is 195 and a
total of 25 BTC are listed between 195 amd 158. This is a very low
amount hence the flat line, this creates the chance that the price will
jump temporarily to this lower price. I would list a buy order at around
161, then expect the price to jump straight back to a higher price at
around 200.
This is an easy way to make a profit in a
short time. You should adjust the price depending on how much risk you
want to take the smaller the range the less risk, These changes can happen very quickly so you need to be alert!
Thanks and please contact me with any questions! and remember don't risk what you can't afford to lose.