Lately it seems, everyone wants to know about Bitcoin. Almost everyone I speak to about what I do for a living seems to have the same default question “what do you think about Bitcoin?”. For me to be able to even begin answering that question, the person asking it needs to know what a Bitcoin is.
Firstly, Bitcoin is down 55% over the last three months. Secondly, “doing well” is relative.
I personally do not trade Bitcoin because of the volatility. Crypto currencies are only worth what people are willing to pay for them. Bitcoin is not even the only crypto currency out there. This crypto currency however, is prone to extremely violent price swings so if you have the stomach for it, trade it by all means.
A lot of novice traders have had entire accounts wiped out within minutes. Of course there are those who have made huge returns trading it but like I said, it’s all relative. If you bought Bitcoin in the last three months you’d be down massively but if you had bought them in 2010, you’d be stinking rich.
Do you know what a Bitcoin is?
Before you think about trading it, it is important to understand what it is.
Simply put, Bitcoin is bank-free internet money.
Standard currencies that define our modern economy are centralized in banks and controlled by the government. Standard currencies are called “centralised” currencies. Bitcoin is decentralised or rather, Bitcoins are controlled by a network of users who control and verify the monetary transactions.
Even though Bitcoin seems very unlike the forms of currency you are used to, it works just like normal money. You give your Bitcoin to someone and they, in turn, give you goods or services. You can sell your lawnmower to your neighbour for a Bitcoin, just like you would sell it for physical currency.
If you wanted to buy something from the United States for example, you would usually have to pay for it in US Dollars. This is where Bitcoin becomes really cool. Using Bitcoin, there is no conversion rate, no bank delay, and no bank fee. Banking hours are irrelevant with Bitcoin because there is no bank controlling your money. The transaction is instant.
Every transaction is recorded in the Blockchain. While the main goal of tracking Bitcoin transactions is to prevent counterfeiting, it also makes the details of your deal a matter of public record. In other words, it’s trackable.
One issue with Bitcoin, versus other currencies, is that Bitcoin is worth only what people are willing to pay for it. Bitcoins are not backed up by other commodities like gold, so the Bitcoin value has been known to fluctuate a lot.
At this stage I cannot buy a beer using Bitcoin but things are starting to change. Overstock.com, Subway, and Whole Foods are a few retailers who have signed on to accept Bitcoin transactions. Who else signs up to join the party remains to be seen.
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