Bitcoin is the first digital and decentralized cryptocurrency to gain prominence, prosperity, and popularity within the market. It is that digital coin that opened the virtual door of opportunities to thousands of other cryptocurrencies. As an advanced medium of trading and transacting, it has enabled users to interact on a platform that operates free of any central governance. The blockchain technology records and stores transactions on a public ledger making it a transparent affair. Contrarily, users deal anonymously with the help of encryption. If you’re new to the crypto-verse, let us throw some light on bitcoin trading and explore through the A to Zs on how it works;
What is bitcoin trading?
It is how a trader calls their shot at dealing in cryptocurrencies by predicting its price movements. To be more precise, it involves bitcoin trading platforms where traders conventionally buy or sell bitcoins, either relying on an analysis, gut-feeling, or just the hope that the prices thrust beyond the current market rates, securing a win. Since bitcoin persistently breaks the records and the news feed with its volatility, many cryptocurrency traders are now taking up derivatives to speculate through its highs and lows.
Most bitcoin traders favor financial derivatives such as CFDs (Contract for Difference). It equips the trader with the chance to speculate and profit from the market fluctuations without owning the underlying financial assets, which means one won’t have to take up any responsibility for the safety of the cryptocurrency.
The Fundamental Steps to Trading in Bitcoin
Determining What Moves Bitcoin’s Pricing
Passing your judgements and speculating on Bitcoin’s pricing can turn ugly if you haven’t uncovered what’s the deciding factor in its pricing, what influences its stability, etc. Being attentive to these parameters can support traders make the most out of market movements.
Demand and Supply
Unlike other markets, cryptocurrencies solely rely on its demand and supply to adjust its valuation. While new digital coins are circulated in large numbers, Bitcoin is highly valued due to its scarce supply. Its supply has been restricted to 21 million and its final share of coins expected to be mined in 2140. Such a stunted supply infers that the demand and price rates are likely to scale up through the upcoming years.
Big News or Word on the Streets
In the history of cryptocurrency trading, any references or news related to cryptocurrencies have had a direct and harsh impact on its pricing. For instance, an altcoin known as Dogecoin procured the biggest chunk of its popularity and value from celebrity endorsements and memes. Likewise, any good or bad news following Bitcoin’s ability to perform, security, endurance, and valuation could have a favorable or unfavorable affect.
Bitcoin’s reputation and reliability depends on its responsiveness and integration to different modes of payments and banking systems. If market experts, economists, critics, and investors approve of it and see things in a positive light then its demand and value will certainly rise.
Other Key Measures
Factors such as its security concerns, regulatory shifts, or macroeconomic statements could influence Bitcoin’s pricing. Additionally, any arrangement among users to improve the network’s momentum will strike confidence in investors, resulting in a price hike.
Decide on Your Bitcoin Trading Personality/Strategy
Bitcoin Day Trading
So, How can you Day Trade Bitcoin?
Day trading strategy aims at opening and closing bitcoin trading positions within the same day, avoiding any overnight risks or costs. So day traders get to say no to overnight funding expenses on any of their positions. Day trading could be the right fit for you if you want to put Bitcoin’s volatility to the test and make money in the short run.
Trend Trade With Bitcoin
How does one trade Bitcoin based on trends? Trend trading, as its name goes, links to opening of positions in synchronization with the current market trends. Let’s catch on with an example. Suppose the market sees an upward or bullish trend then investors would rather go long or buy more. Inversely, if the market faces a bearish or downward trend, one would rather go short or sell out. Similarly, if you notice that a given trend is going downhill or not performing up to your expectations, you might as well consider closing that position and initiating a new trade with a promising trend.
This strategy helps bitcoin traders cut down on the risk involved by diverting to an opposite position as compared to the current one. Such a move can prove to be beneficial if the market has shifted against your position. Say for instance, you started trading in bitcoin but are now suspecting its short-term dip, in such a situation you can take up a short CFD trading position. Will that make a difference? How?
After adopting a short CFD trade if Bitcoin’s market rate sinks, profits established through your short-termed trade will cancel out a few or all of your Bitcoin possessions.
The HODL strategy teaches bitcoin traders the benefits of buying and holding onto their investments. The term was amusingly derived from an incorrectly spelled version of “HOLD” across a renowned crypto forum. Some even believe that it’s an abbreviation to “Holding onto Dear Life.” One shouldn’t pay too much heed to the term but the efficacy it delivers. Here, the strategy indicates that if you have reckoned that Bitcoin will rise in the long run, you should buy and hold your Bitcoin investment. Further, after studying the market and erecting your trading plan if you feel that you need to close your positions for a profit or control your losses, you can opt for stop losses which will automatically end your trade.
Understanding Your Suitable Trading Option
Bitcoin traders can step into the market and gain momentum with distinct trading opportunities. Let us explore the three prime trading options;
Trading with Derivatives/ Bitcoin CFDs
>We’ve already discussed how trading in derivatives like CFDs allows traders to make profit without any underlying ownership, let us now infer the other benefits of trading in Bitcoin derivatives. The biggest merit it has to offer is the freedom to ‘open a long position’ when Bitcoin grows in value and ‘going short’ when it falls. Listed below are the other additional benefits and features of trading bitcoin CFDs,
|No.||Features/ Merits||A quick Synopsis|
|1||Accessibility||There are no barriers, anyone interested in trading bitcoin CFDs can access this alternative. Traders can find it across platforms such as Web, MT4, or mobile trading apps.|
|2||Commission||Many bitcoin trading platforms charge little to no commission on CFD trading.|
|3||Margin and Leverage||CFDs are mostly dealt with leverage. It implies you can start with a deposit, also referred to as margin and still enjoy a full trading opportunity.|
|4||Liquidity||The Bitcoin CFD trading market is highly liquid, which means your trade orders will be fulfilled instantaneously, even if you go big with your order.|
|5||Hedge Your Funds||CFD trading is the best way to hedge your investments, securing yourself against market risks.|
By Means of a Bitcoin Exchange
Bitcoin trading through an exchange is an ideal pick for traders who follow the HODL (buy and hold) strategy. Moreover, placing a buy order via an exchange gives you access to direct ownership, anticipating a hike in Bitcoin’s pricing over time.
To get an out-an-out overview of how dealing in bitcoin through an exchange works, let us also glide through some drawbacks;
- Most bitcoin trading exchanges run short of the necessary regulations or infrastructure that is needed to promptly serve the problems and requests of their clients.
- The corresponding servers and engines employed by bitcoin exchanges aren’t always reliable. At times it could lead to market suspension or lowered rate of execution accuracy.
- Some crypto trading platforms levy plenty of charges and limit depositing or withdrawing funds from your own account. Additionally, the account set up and registration could take up to days until you are deemed as eligible to trade.
Choosing Crypto 10 Index
If you aren’t compatible with trading in derivatives or through an exchange, you could give the Crypto 10 Index a go-ahead if you’re also looking to diversify your portfolio. The Crypto 10 index is a compilation of the top ten cryptocurrencies including Bitcoin, which you could trade in a single attempt. It is an index that replicates the performance of these top cryptocurrencies while closely monitoring and tracking their prices.
Would You Rather: Go Long or Go Short?
Trading in financial derivatives lets you explore the two-way path, a trader can go long or short depending on the market responses and sentiments. Here going long is an investment term referring to the times when the bitcoin trader is expecting a price rise. Contrarily, going short indicates when an investor/trader is suspecting a price fall.
Taking Stop-Losses and Other Limits into Account
Let’s talk risk management tools! Bitcoin is one of the most volatile financial assets, it means your investment risks could go haywire any moment now. Hence, risk management tools like stop losses and limits play a crucial part. Listed below are some popular stop options that you could exercise in your trade;
These stops end your trade at a set phase. However, you could be held accountable for slippages if the current market prices shift at the wink of an eye.
Again, these are stops that close your position at a set size, but irrespective of any slippages. Some exchanges allow traders to set guaranteed stops without any charges, but they might charge you once the stop is implemented onto your trade.
These stops trail the market movements and lock in profits when the market is lucrative and restricts the losses when the market turns risky. Trailing stops could be subject to slippages.
Continual Performance Monitoring
Before commencing a bitcoin trade, investors depend upon research, analysis, and negotiation. Subtly put, you wouldn’t buy into a trade if you don’t expect a growth in its future pricing, and you wouldn’t hold back if you’re confident about it. But, monitoring the market and bitcoin’s performance before initiating your investment isn’t enough. Every trader needs to devise and implement a plan to monitor and correct their investments even after processing it. Since the market for cryptocurrency is unstable, its performance could divert from the anticipated results. Hence, conducting a frequent market evaluation could help avoid any losses.
Some of the best Bitcoin trading platforms offer charts, technical indicators, and other tools that give you a sneak peek into the Crypto market. These tools act as a window into current market movements with an upfront view to the range of volatility, market sentiments, trends, and pattern of fluctuations.
Selling Out- Incurring a Profit or a Loss
You can skip to the part where you sell out your Bitcoins whenever you feel like it and are sure about it. That’s irregardless of whether you have reached lofty profits or an uncomforting level of losses that you can no longer stand. When you buy out, your earnings get credited to your trading account or wallet. In case of losses, it automatically gets subtracted from your investment.
How Do You Sell Bitcoin?
You can use the same platform to sell Bitcoin where you bought it, that could be a crypto exchange or a P2P platform. The procedure is also identical to the purchase. With the liquid market, you can withdraw your funds with the click of a button. One only needs to fill in additional details like order type, whether you’d prefer selling it out immediately or on a limit loss. However, the demand and users may vary across all crypto trading platforms. So depending on their wait period, your sale order may take some time.
Most crypto exchanges impose a small fee, calculated on the amount taken out. There are also daily, weekly, or monthly limitations on how much a trader can withdraw. So if you are taking out a huge chunk of your earnings then it might delay the process. On the other hand, a trader is free to sell their desired number of cryptocurrencies.
How Bitcoin Works?
Every Bitcoin you buy is a file that’s located in your e-wallet, accessible through your computer or smartphone. Traders can send or receive their Bitcoins either whole or in fractions through their digital wallets. Here are some terms and concepts that can unravel how Bitcoin works;
The Blockchain Technology
The cryptocurrency market is known to be the most innovative and technologically advanced due to its blockchain technology. Blockchain is an open-sourced code that records each transaction, making it publicly available, assembled into groups called blocks that are connected together in the form of a chain. Since it presents a permanent record publicly, it conveniently traces transactions and prevents users from tampering with the Bitcoins.
What are Public and Private Keys?
Making the platform more secure, Bitcoin works around encryption where each wallet operates with a private and public key, assisting traders to digitally attest their transactions. It is also one of its most attractive features as it allows traders to safely transfer their Bitcoins from one person to another.
What is Bitcoin Mining?
It is the process where users verify new transactions and bring new Bitcoins into circulation. Miners confirm the new transactions and add them to the blockchain or to the past string of records. Bitcoin mining is a costly and complicated process that lends the support of sophisticated softwares that crack mathematical problems and algorithms. These Bitcoin miners then get rewarded in a small proportion of Bitcoin per block which makes it an enchanting offer.
Quoting Some of the Best Bitcoin Trading Strategies
Cryptocurrency trading is a profitable venture that is often hit with a breeze of volatility. Strategizing your investment implies that you establish a plan that researches, explores, and votes for the techniques that curb risk, reacts according to the market behavior, and finally helps you meet your set goals. Besides, trading without a strategy is like turning up on your trip without a roadmap. It somehow delays or loses sight of the destination. Helping you reach your ultimate objecting, we have laid down some of the best proven strategies for Bitcoin traders.
We’ve earlier discussed the renowned trading personality that most traders vouch on – day trade. It’s a brilliant way to earn through a fluctuating market or asset. In contrast to the long-term traders who cling onto their bitcoin investment for a prolonged duration, day traders make the most of the volatile crypto market.
Day trading refers to the speculation in an asset’s pricing while opening and closing position on the same day. Since Bitcoin accommodates its supporters with a liquid and volatile, there are plenty of trading shots that a trader can take within 24 hours. There is no ceiling on the trade volume to be taken up within a day. It is not only a strategy but also a trading methodology that can be coupled with other strategies.
Assessing the technical indicators and transpiring trends can assist in suspecting any price decline or hike that may arise through the day. Other elements like Bitcoin’s relative strength, volume, moving average, and oscillators are also reviewed by traders before day trading. The OBV (On Balance Volume) is one prime indicator referred to by Bitcoin day traders. It relies on the price and volume movements to analyze the financial flow streaming in and out of an asset.
Swing trading categorizes the participants who time their traders for a few days, week, or month. These traders strategize their trades based on technical and fundamental indicators. As compared to day traders, swing traders have adequate time to keep an eye on Bitcoin pricing and performance, resulting in well-evaluated decisions. However, a week or few days’ time might not be sufficient for a beginner. It’s exercise is more suitable for active traders who spend a reasonable amount of their time quantifying the market movements. Although the trader may not trade on a daily basis; however, it hogs onto a lot of your time and effort.
Automated technology in the form of crypto trading bots and signals are often endorsed by the traders who are very preoccupied and have little time to spare for any research. Bitcoin trading bots trace the buy and sell activities and market movements, meeting the desired goals, free of any human interference.
Trading initiated with the scalping technique depends on the shortcomings within the Bitcoin market to exploit and book a profit. It also believes in enlarging the trading volume directly boosting the profits. Their trading entry and exit decisions rely on the analysis of the volume levels and historical trends.
Although it encompasses risk, sharp-witted traders give due attention to the fundamental rules and margin requirements. It keeps them away from an awful trading experience. Most scalp traders favor a highly liquid market since it makes it easier to suspect the market and make judgments on whether to open/close a position. Scalping is a popular strategy among whales and large-scale traders who deal in a gigantic amount of money.
Expert Advisors for Bitcoin Markets
Cryptocurrency EA (Expert Advisors) are a programme or blocks of a code that permits automated trading. These EAs may be built in a way that they uniquely serve each trader as per their trading preferences and targets. One of the primary reasons why traders fancy this practice is because they get to work with a robot that has analytical abilities and makes evaluations without being emotionally biased.
A trader has the freedom to buy into an Expert Advisor service or create their own from scratch. While coding isn’t a child’s play, there are plenty of resources, funds, and skills that the programmer might lack. However, based on your trading experiences, you can pick the determinants such as market conditions, indicators, trends, or events that will trigger a buy or sell position.
You certainly don’t have to be a programmer or pro trader to use EA as you trade. There are Expert advisors available both in paid and free versions. You can download a demo version of the suitable EA and verify how it works for you before you buy or rent it.
Step by Step Guide to Bitcoin Trading
You can profess yourself as a knowledgeable person in the field of crypto currency trading, if you’ve absorbed a few things on what bitcoin is, what influences it, and what are the universally-known strategies from this article. While these concepts can theoretically boost your confidence, beginners find themselves sulking onto questions like ‘where to get started’ or ‘which is the best Bitcoin trading platform?’
We’ve jotted down a step-by-step guide to give you an upper hand on how crypto trading practically works;
Open a CFD account
You can sharpen your skills and work out your plans with a demo trading account first until you are ready. Once you are all prepped up, create a CFD or crypto trading account with your selected platform. Understand how trade works, explore the market, and browse through all the features and services that you can access through your account.
Devise your bitcoin trading strategy
You’ve got the hang of some of the globally-adopted crypto trading strategies, but there is still a lot that you need to study and pull up your sleeve. For instance, comprehending the significance of Bitcoin pricing charts, using varied methods to interpret these charts, and handpicking plenty of other techniques such as dollar-cost averaging, high-frequency trading, etc.
After you’ve briefly walked through all the potential trading techniques, you’ll feel comfortable with picking an ideal strategy that meets your trading persona and targets.
Build your trading strategy plan
The secret isn’t appointing the suitable strategy but planning your course of action. How you execute your strategy has a lot more impact. It defines how your investments may respond to the current market circumstances, keeping in retrospection the future predictions and anticipatory progressions. Your nominated strategy and strategic planning goes hand-in-hand and contributes towards bringing you better successes.
Research the markets
If you feel lost for direction as you invest then the problem could just be a lack of research. For most people who believe that research is a warm-up performed before the actual trade, they are highly mistaken. There is a wider perspective that fits the practical trading world. Market research is an on-going process. Of course, one can’t neglect the fact that researching before you open your position is fundamental, it helps you decide the right time, market, asset, and investment. But, constantly researching can give you the keen eyes to expand, alter, and boost your investments like a pro.
Trade and Monitor
Unlike the conventional practice where traders financed assets and did nothing until their investments appreciated, modern-day trading requires more backbreaking work. Even after you’ve positioned your money into an asset, monitoring your trade can result in minimized risks and losses. You may want to keep an eye for your investment status and market trends, if you observe any divergence from your plans and predictions, you can then revise your position to stay in line with the market movements.
Blockchain Tradein is a globally outreaching trading platform that has set the trend as a user-friendly, technologically futuristic, and result-driven brokerage service. With a world of innumerable options, it allows new and experienced traders and investors to access and explore over 500 assets, using varied methods and strategies. Converting as a one-stop solution, it renders dedicated portfolio managers, advisors, and lucid learning courses for all. Whether you are interested in a traditional market like stocks or commodities or prefer a decentralized trade dealing in international currencies or cryptocurrencies, with Blockchain Tradein, you’ve got it all!
Why Choose Us
If you have however fallen short of reasons to partner with Blockchain Tradein, here are some of our features, services, and characteristics that have captured and converted many users to our platform;
- We are all ears when it comes to establishing what your agenda or goal as a trader is.
- Once we’ve mapped out what you expect from your trade, we give you an idea of how your journey may appear to be.
- We guide you with the best of strategies, signals, market trends and make sure you make the most out of your funds.
- We eliminate any miscommunication and constantly monitor your trade.
- With the reputation of the best bitcoin trading company, we accept consultations and queries at any given hour.
Frequently Asked Questions
Yes. You can make a profit by trading Bitcoin. You can either trade across cryptocurrency exchanges or in the cryptocurrency market. You have a choice to trade Bitcoins using different trading methods. In the end, no matter how you trade, the idea of buying Bitcoin when the prices are low and selling when the price is high can bring you lucrative returns.
While buying or selling Bitcoin, you need to do fundamental and technical analysis that will help you settle for the best buy price or sell price.
There are two options while trading Bitcoin, either you trade the underlying asset, or you trade on the price of the underlying asset. Both have pros and cons.
When you buy Bitcoin, it is pretty expensive. The price of Bitcoin now trending in the market is quite high. Further, if you purchase Bitcoin from the market, storing and protecting it from cyber threats is a risk. Nonetheless, you can surely make a considerable profit by selling Bitcoin at a higher price.
Although you may not have money to invest in Bitcoin, if you wish to be exposed to the risk of volatility and have little funds to invest, you can always opt for Contract of Difference or CFDs of Bitcoins.
With margin money, you can trade on the price of Bitcoin without buying the underlying asset.
Since cryptocurrency is highly liquid compared to traditional financial markets, it is very volatile. The perception created by the outbreak of the news on social media platforms can affect the price of Bitcoin. Many new cryptos are boasting about their revolutionary technology, walking in and out as most of the new cryptos. Initial Coin offerings, or ICOs can create upheaval in the price of the overall crypto market. Any negative news, like a fake ICO or scam, can cause the crypto market to fall.
Thus while trading in Bitcoin, you should allow yourself to invest only if you are willing to lose when your trade goes against your investment plan.
Although the cryptocurrency market never sleeps and is
open 24 hours a day, 365 days a year, it has been observed that the price fluctuation occurs typically at 11 am GMT, or 7 am EST, or 12 pm UK time as UK and US markets get ready to start their day.
There are four steps involved while purchasing Bitcoin:
- Choose a broker or an exchange.
- Place an order for Bitcoin.
- Select a payment method to buy Bitcoin.
- Keep your coins safe and secure in a digital wallet.
Depending upon the broker or the exchange, they may or may not offer a digital wallet. Under those circumstances, you will require a third-party digital wallet to store your coins.
Generally, the price of Bitcoin will consist of transaction fees plus the cost of converting fiat currency (usually dollars) to Bitcoin. In addition, each trade is charged certain fees. The higher the trade the more the fees charged. The broker or the exchange levies these fees; that is how they make money. Some brokers or exchanges may or may not offer digital wallets. Therefore before you go and purchase Bitcoin, you need to plan out your budget likewise.
Besides purchasing Bitcoin from an exchange or a broker, you have other venues like Bitcoin ATMs and other online payment services like PayPal.
It is pretty simple to fund your account. Follow these simple steps:
- Using your email address and password, access your account.
- Proceed to open the wallet and click on the deposit button.
- As per your convenience, choose a payment method.
- After choosing the payment method, specify the amount you wish to deposit, follow the instructions and confirm the payment.
- After confirming, the deposit amount will reflect in your Transaction History.
- Now you are all ready to begin trading.
Trade in the most popular digital currency, Bitcoin, with the most accommodating service provider in the trading universe, Blockchain Tradein.