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Pros and Cons of Bitcoin Day Trading
Unlike investors that were mostly focusing on bonds and various commodities, speculative traders have often looked into more volatile instruments: stocks, futures and so on. Later a newer type of traders appeared - day traders. This group of people mostly tried to make profits by longing and shorting various trading instruments that are even more volatile - mostly currency pairs and country indexes. In the recent years a new type of trading instruments have appeared - cryptocurrencies, which are mostly represented by the bitcoin. What makes it great as a trading instrument for the intra-day trades and can trading it be actually that profitable? Let’s learn more below.
Advantages of bitcoin trading
The main thing about bitcoin trading is its volatility. Unlike stocks or even currency pairs that can fluctuate for some 0.01% - 5% within the day, a price of bitcoin has seen such major movements as 30%-40% within a single day. Such a great volatility can be seen as not buying and selling assets but rather as bitcoin gambling. Having said this, it is very rare to find brokers offering leveraged trading. This way you can actually offset your risks quite a lot. In other words, trading bitcoin with no leverage and seeing the price of it changed for 20% would result equal the same P&L as seeing a change in EUR/USD for 2% when gearing up to 10:1.
Another great advantage of trading BTCUSD or any other BTC currency pair is the lack of swaps. There is no interest rate on bitcoin, hence you should not really be afraid of having your position transferred overnight. Having said this, such an advantage is not really available with all of the brokers, as some of them offer day trading exclusively, meaning that they will close all of the bitcoin positions before the midnight and a trader would need to re-enter the position, hence pay the spreads and / or commissions again.
Weak points of trading with bitcoin
Unlike dollars, euros and other currencies, the bitcoin rate is not heavily influenced by a single government. It is actually quite challenging to find out the reasons behind the BTC’s appreciation and depreciation. This may give a feeling to many traders that buying or selling this crypto currency may actually feel more like bitcoin gambling than trading. However, it is not a major disadvantage as the less information is publicly accessible, the better informed decision a dedicated person can take.
Next to this, both bitcoin trading and bitcoin gambling is pretty immature. Even though the later has developed quite rapidly, trading cryptocurrencies is still quite behind of other types of financial trading. Bitcoin trading software programs are not as developer as its Forex or Stock alternatives. On the contrary, there are a few FX brokers, like Plus500, that offer day trading with bitcoins via its regular trading terminal.
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