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Is There Risk Involved in Trading Bitcoin?

by Josh Pit
Bitcoin trading

Every trader has hundreds of questions on his/her mind when they start trading. That’s a natural and the right thing to happen because the more you ask, the more you will know. There is no point in starting your trading career without any knowledge of how trading takes places and what factors affect assets in the financial markets.  Now, when it comes to trading bitcoin, the first thing that traders and investors usually ask is if this type of trading is difficult. If you are having the same thoughts, you can find the detailed answer to all of them here Xtrgatereview

How You Will Trade Bitcoin

First, you have to know how you will be trading bitcoin. There are more on than one way of trading this cryptocurrency. You can always pick the method that sounds the easiest and safest to you. One of the best ways of trading bitcoin is through online brokers. Online brokers allow you to trade bitcoin and any other cryptocurrency without owning it. Yes, you can trade cryptocurrencies without owning them, and that type of trading is called CFD trading. The best thing about this type of trading is that you will receive huge leverages from the broker. This leverage allows you to trade big time and earn huge profits.

The other form of trading is more like conventional trading. What you will do in this method is that you will convert your fiat currency into cryptocurrencies and then you will wait for the right time to come to sell the cryptocurrency back in the market. Of course, you have several online exchanges that allow you to buy cryptocurrencies with whatever money you have. However, these methods are not as famous as trading with online brokers is. That’s because online brokers give you leverages and allow you to trade in many other financial markets through the same platform.

What Makes Bitcoin Trading Risky

You have to look at all the different factors that make cryptocurrency or bitcoin trading risky before you put your money in trading. First of all, you have to know that bitcoin can move up and down significantly all within the same day. In the past, people have seen the price of bitcoin drop or rise by 20% all within a single day timeframe. That can be scary for some investors and an opportunity for others. It is an opportunity based on the fact that such volatility of the market allows you to earn huge profits in very little time.

However, since the value of bitcoin is extremely high, your broker will allow you to trade through leverage. Leverage is the contribution from your broker so you can enter big trades. When you use leverage, you get an increase in the amount that you are investing in the cryptocurrency. While this amplifies your profits, it can also result in huge losses. So, that’s one way you make bitcoin trading risky for you. However, if you use leverage intelligently, it helps you make money from the market faster than you can imagine.

Another inevitable factor that makes bitcoin trading risky is the safety of trading. When you sign up with online brokers, you have to make sure that you pick the right one. The wrong broker is one that does not have any type of regulation, and is operating with a poor trading platform. Without regulation, the broker is free to run away with your money never to be caught again. So, always make sure that the broker you sign up with is properly regulated or has at least the latest security protocols in place to protect your money and information.

Trading on online exchanges might sound safe at first, but it is one of the riskiest ways of trading cryptocurrencies. You might not know but exchanges have been around for as long as cryptocurrencies have. Since the beginning, many exchanges have experienced huge accidents. Some of them disappeared from the scene without returning investors’ money. At the same time, many of them got hacked and caused investors to lose all their money.

But When’s Trading Not Risky

The important question you have to ask yourself is, “When is trading safe”? Trading is like investing your money in assets. Investment has risk as an intrinsic factor. You cannot make any investments until you are ready to take risks. Now, more importantly, you have to know that risk of investment is not a factor associated solely with bitcoin trading and investment. In fact, it is associated with any type of trading that you can think of. It does not matter which asset you are trading and in which financial market, you will have to take a specific amount of risk before you can make any money from your trades.

So, the notion that bitcoin trading is risky is nothing new. Trading is always risky unless you do it intelligently and with your emotions out of it. Asking whether bitcoin trading is risky or not is like asking if driving is risky. Yes, driving is risky too but that does not stop you from driving your car on the road.

How to Make Trading Less Risky

You can always make trading less risky by taking certain steps. For example, you can use the stop/loss method of trading where you can stop yourself from incurring an indefinite loss. At the same time, you can make sure that you invest only a small amount rather than going all in. choose a regulated broker or at least one that puts your money in segregated accounts and has proper encryption in place to protect your information.

Final Thoughts

So, a simple answer to the question would be yes, bitcoin trading is risky. However, the same goes for any other asset in the world. There is risk involved in trading no matter which financial market you are in or which asset you pick. If you consider the volatility of bitcoin trading, yes, it can go against you big time. However, if it goes in your favor, it can change the life for you forever.

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