- Published: Sunday, 09 March 2014 10:47
- Written by Editor
One of the reasons that so many Bitcoin were lost during the recent Mt. Gox collapse is because it is very clear that many people were effectively using Mr. Gox to speculate in Bitcoin price movements instead of simply using it as an exchange and moving Bitcoin or fiat currency away to a safe location.
Like trading any currency or commodity, trading Bitcoin without the basis tools and supporting services do so is a major disadvantage and could prove to costly where every second is profit or loss.
In the context of trading - speculation - where the objective is to profit from price movements, it is necessary to have a full range of tools available as well as instant execution of trades. Also when trading Bitcoin on a real custom designed trading platform and service, there are no commissions to be paid with each trade, the service making their profit on the difference between the bid and ask prices.
In addition to a full set of trading tools such as fully configurable charting with a wide range of indicators, easy and speed of trading is absolutely crucial when every second could cost profit. Also crucial is the ability to set buy and sell orders which are triggered at a pre-determined price, so that trades can be entered or exited without actually being present.
A vital aspect of trading any currency or commodity is "money management" which many experienced traders regard the true keys to success and the difference between making big ongoing profits and being wiped out. The is a saying among traders - "cut the losers and run with the winners". Most inexperienced traders do just the opposite. If a trade goes against them they hang on to the position in the hope that it will turn around and become profitable, fear of losses being the motivating factor. Conversely, when inexperienced traders see a profit, being eager to take the profit they close the trade far too soon and miss out on the majority of the potential profit. So these two major errors alone are enough to cause most inexperienced traders to lose their available stake and give up at an early stage.
Another reason inexperienced traders lose is because they attempt to second-guess the market instead of trading a well defined trend. It is much better to take 50% or 75% out of a clearly defined price move rather than try to guess the beginning and end of the move which is what most inexperienced traders tend to do.
The ability to set predefined entry and exit prices is absolutely crucial. In this way the emotion can be taken out of trading in favour of a sound trading strategy that facilitates buying and selling only when the price movement is favourable, and not based on any impulsive trade which most of the time will result in losses.
Another benefit of predetermined market entry and exit limits is that they are active for 24 hours per day so you can sleep at night knowing that if the market moves against your position, your pre-defined stop order will take you out of the market instantly, so you know the loss is restricted.
Another very useful feature of trading platforms is the ability to set a "trailing stop". This is a stop loss that moves up with the market price so that large price movements can be profited from automatically while the predefined stop is always trailing at the specified distance from the market.
These then are just a few of the crucial benefits of trading Bitcoin on a professional forex platform as opposed to on an exchange which provides few or no trading tools, and while the risk is always there of losing deposited Bitcoin or fiat currency due to hacking, theft, account seizure or bankruptcy as with Mt. Gox.
Of all the Bitcoin trading platforms evaluated by Bitcoin Reporter, we highly recommend Avatrade. The main trading platform of Avatrade is Ava Trader which offers all of the above features and much more.
Bitcoin exchanges are just that - exchanges - for exchanging between Bitcoin and fiat currencies and moving the funds away. For those wishing to actively trade Bitcoin and professional forex exchange such as Avatrade with professional trading tools that maximise profit potential and flexibility is the only viable choice.
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