Bitcoin has been one of the rare investment vehicles that has minted an abundance of millionaires and billionaires that built fortunes off of the digital currency’s meteoric rally from lows of under $1 to highs of $20,000.
Although this massive price increase is on its own enough to make any and all early investors wealthy, a significant amount of Bitcoin millionaires have built their fortunes by utilizing margin trading to translate the cryptocurrency’s volatility into massive profits, thereby securing their positions as some of the wealthiest and most influential market participants.
At face value, margin trading can be intimidating to new traders and investors, but by implementing a few simple investing and trading strategies that all Bitcoin millionaires abide by, all traders can set themselves on a path to success.
Margin Trading 101
Before we dive into the secrets of trading success, it is important to fully understand what margin trading entails and how it can enhance one’s trading strategy.
Margin trading – also referred to as leverage trading – is an instrument that allows individuals to tremendously increase the amount of capital they trade with without having to increase their baseline funding.
For instance, many traders utilize 100x leverage on platforms like PrimeXBT, which allows them to trade with 100 times what their baseline capital is, meaning that each $100 that traders use is magnified to $10,000 by margin.
Because of this, traders can amplify their trading profits and capitalize on Bitcoin’s volatility in a way that would otherwise be impossible for small and medium-sized traders to do.
Secret #1: Knowledge is Power
From the dawn of time, knowledge has been a finite and highly valuable resource across all markets, industries, and aspects of life, and this is particularly relevant while looking towards the cryptocurrency markets.
When it comes to trading cryptocurrencies, knowledge is power, and the more factors that a trader takes into account when plotting their trading decisions, the better off they will be.
There are a multitude of factors that should be considered, but it all primarily boils down to two key components: technical factors and fundamental ones.
Technical factors encompass features surrounding Bitcoin’s price action, like chart patterns, volume, and multi-timeframe trends. By studying common technical patterns, traders can begin recognizing signs that point to future price movements for Bitcoin and other assets, which can prove to be a lucrative skill that translates into substantial profits for all traders, and especially those utilizing leverage.
Fundamental factors are comprised of the non-technical factors that can influence an asset’s price action over various timeframes. For Bitcoin, some commonly referred to fundamental factors are its hash rate – which elucidates BTC’s network utilization – as well as developments relating to its adoption as an investment vehicle amongst large investors, like institutions and family offices.
By being well-versed in both fundamental and technical analysis, traders can use their knowledge to develop and execute a profitable trading strategy similar to the ones employed by Bitcoin millionaires.
Secret #2: Diversification is Key
Building a well-diversified portfolio of assets has long been a strategy used by prudent investors across all markets, as it helps to mitigate risk while also opening up more avenues for potential profitability.
This strategy is equally applicable to investing and trading within the cryptocurrency markets.
For passive investors who are looking to build a portfolio of digital assets that they hold for the mid-to-long term, creating a basket filled with a diverse array of digital assets helps mitigate the risk entailed by simply holding one cryptocurrency, and can allow investors to catch anomalous rallies that individual cryptocurrencies occasionally experience.
For active traders, it can similarly be prudent to trade across multiple digital assets beyond just Bitcoin, as BTC can occasionally get caught in extended bouts of sideways trading that limit the profitability of active traders. By trading multiple cryptocurrencies, one can ensure that there is never a dull moment.
PrimeXBT is one example of a well-respected platform that allows traders to easily utilize leverage to trade a variety of cryptocurrencies with 100x leverage, guaranteeing that they never miss a perfect trading setup.
Secret #3: Don’t Give in to “FOMO” or “FUD”
Market psychology is one force that has a heavy influence on movements within the crypto markets, which can favor both bears and bulls – fueling massive rallies and sharp selloffs.
The two terms that traders use define the primary forces behind market psychology are “FOMO” and “FUD.”
FOMO stands for “fear of missing out” and represents the overbearing feeling that investors feel while watching an asset’s price climb, which can lead them to enter long positions on the asset while ignoring the technical and fundamental factors that are underlying its price action.
FUD, which stands for “fear, uncertainty, and doubt,” is used to describe the feeling of fear that can be sparked by precarious price actions, like selloffs and extended periods of sideways trading. The feelings stemming from FUD can lead investors to irrationally sell or short an asset, which has a tendency to backfire on those who give in to these feelings.
Ignoring the feelings created by FOMO and FUD is an important part of removing one’s emotions from their trading activities, which is imperative if one intends to have long-term success as a trader.
Secret #4: Dollar Cost Averaging
One popular strategy employed by Bitcoin millionaires that helps them to continue growing their Bitcoin holdings while also fighting off the FOMO and FUD that can otherwise adversely impact their portfolio’s long-term growth is dollar cost averaging.
This strategy is very simple and any investor – no matter how large or small – can utilize this simple practice to ensure that their portfolios see long-term growth.
In order to execute this strategy, investors can simply set a certain date on a pre-determined timeline (ideally weekly, monthly, or quarterly) where they buy a fixed amount of Bitcoin regardless of its price.
This is a frequently utilized strategy by large and savvy investors that can easily be implemented by everyone.
Secret #5: Hedge Risk by Strategically Opening Short Positions
When a trader shorts an asset like Bitcoin, they are essentially betting that the asset’s price will decline.
Assuming that one has been building up their BTC holdings by applying the dollar cost averaging strategy discussed above, the next step is to begin looking for ways to hedge against potential downside in the markets.
One way that large and wealthy traders hedge their portfolios against risk is by strategically opening short positions on Bitcoin so that they can offset their losses in the case of a market crash or significant downwards movement.
It is important to note that these short positions should be opened strategically at times when investors believe that there is increased risk of a downside movement – like after massive rallies or during prolonged downtrends.
As mentioned previously, PrimeXBT is a perfect platform for investors looking to open short positions on Bitcoin, as it allows traders to utilize 100x leverage while also offering a clean interface, a plethora of indicators and tools, and cutting-edge security that ensures the safety of investors’ funds.
Secret #6: Self-Confidence
By adhering to the strategies that Bitcoin millionaires use to grow their wealth, all traders – no matter how big or small – are able to set themselves upon a path towards financial freedom and success, but there is one overarching principle that all traders need in order to stay on this path long-term: self-confidence.
Having confidence in one’s self allows investors and traders alike to dodge the dangers that come from emotion-based trading and allow them to remain on course through difficult times by relying on themselves and their strategies.
Following in the footsteps of those who have already found victory in the cryptocurrency markets is a sure-fire way to find success, and by sticking to the simple set of tricks that they employ to grow their wealth, all traders can climb their way up to the upper echelons of the crypto world.