Revolution How to Trade Bitcoin
Bitcoin is the world’s very first cryptocurrency, and it is the most popular contender to pose a severe threat to fiat currencies. While bitcoin is a valuable asset, there is also a lot of volatility in its pricing history.
There are generally four steps to begin trading with bitcoin:
- Determine how you want to purchase bitcoin
- Educate yourself on the factors that affect the price of bitcoin
- Select a trading strategy for bitcoin
- Perform your first trade with bitcoin
How to Buy and Trade Bitcoin
In purchasing and trading bitcoin, you can buy it and sell it for a profit or estimate its value. If you determine the value without owning the coin, this is how derivative trading or contract for difference (CFDs) and spread betting works.
For spread bets, you are mostly guessing on if the market price will increase or decrease. CFDs let you trade using a contract based on basic market prices. They are both considered to be leveraged products, which means that you can use a small amount for your initial deposit and still have the coverage of a more substantial position. Trading using this method can multiply your profits, although your losses will also multiply if all doesn’t go as planned.
Should I trade bitcoin using an exchange?
With exchanges, you are not interacting directly when you trade bitcoin. You would be trading on buy and sell pricing that is sourced from several other exchanges. All you need is a trading account to bid on the price of bitcoin.
Bitcoin and other cryptocurrency exchanges function the same way as a more traditional exchange. These allow the investor to purchase cryptocurrency from one seller and sell it to another buyer. There are quite a few advantages to not using an exchange for your trades.
They are not regulated and don’t have the infrastructure or public records that are required to support requests from users, and they are slow to respond to inquiries.
Their servers and matching engines are not reliable and can reduce the accuracy of execution or suspend markets on a whim.
Exchanges can enforce restrictions or fees for funding or withdrawals from your account. Account approval can also take days or an excessive amount of time.
When trading with bitcoin, you can take advantage of improved liquidity at your highest bid price or lowest offer price. When purchasing and selling directly from an exchange, you can only choose to accept prices offered to finalize your order.
What Affects the Price of Bitcoin?
Many traders see the volatility of bitcoin as a real opportunity. Bitcoin’s volatility can also make it a risky trade. The price can shift quickly and dramatically, and because bitcoin trading happens 24 hours a day, these shifts can happen anytime.
Because bitcoin is a decentralized currency, it is not governed by political or economic policy that affects fiat currencies.
Cryptocurrency is still a relatively new market, and there is significant uncertainty surrounding it.
The following factors can all have a very sudden impact on bitcoin pricing, and it is wise to educate yourself on any possible risks involved.
Supply of Bitcoin
Bitcoin has a finite amount of 21 million, and it will all be mined in its entirety by 2040. The availability of bitcoin will fluctuate based on the market rate and the trading activity of people with bitcoin.
Market Cap of BTC
Bitcoin’s value or perceived value determines if traders will invest for the short or long term.
Public perception rules the value of currency, and bitcoin is no different. The value, security, and permanence of bitcoin is always questioned by the press.
For bitcoin to compete in a market with traditional currencies, it will need to go through an integration of technologies with new payment systems, and crowdfunding platforms. It will need to be utilized more in the mainstream markets.
Wider Industry Exposure
More businesses will need to embrace bitcoin around the world. Many wonder what kind of impact cryptocurrency will have on corporations globally.
There could be severe consequences for bitcoin and cryptocurrency that include possible breaches of security, changes in regulation, global economic setbacks, and others.
Trading Strategies for Bitcoin
Day Trading Strategies
Day trading with bitcoin will involve trading based on short term movements that stop at the end of the day’s trading.
It is a good strategy if you want to take advantage of short term opportunities in the market due to new emerging patterns in the market or news affecting bitcoin.
Swing Trading Strategies
Swing trading happens fast, and spots trends the moment they arrive. This kind of trading involves holding onto the trade until it ends or starts to go in the opposite direction.
It’s a useful strategy for you if you are looking to capitalize on new opportunities that happen during the momentum of the market.
Scalping is when you place regular same-day trades on small pricing changes in the market.
Scalping is a good strategy if you are looking for smaller continuous profits instead of waiting for more significant moves in the market.
Automated Trading Strategies
You can automate your trading strategies to adjust to beneficial market conditions automatically. If you prefer passive trading, this might be the option for you.
Bitcoin Trading Steps
1. Start by opening your account.
To begin trading using a derivative strategy, you will want to create a trading account. Setting up a trading account only takes a few minutes, and once it is set up, you can start adding funds to trade.
You probably won’t need a Bitcoin exchange account if you are only engaging in derivative trading. You will be trading on the prices that are derived from several different exchanges.
2. Develop a plan for trading.
Select a trading strategy and a plan of action that is suitable for you. A plan of action will help you to make better choices from logic and not emotion when the stakes are high. This way, you avoid leaving your trades open for too long or closing them too quickly.
To create a trading plan:
- Determine what it is that you want to achieve with your trading strategy. Map out short and long term goals.
- Define your tolerance for risk with each trade, along with the amount of money you are comfortable risking in these trades.
- Select a risk to reward ratio that will help you determine the amount of profit that will justify any losses.
- Choose the markets where you will trade. Are you going to be working with cryptocurrency markets exclusively, or will you include others?
3. Research cryptocurrency and trading strategies.
Be sure to educate yourself on bitcoin or cryptocurrency news updates and understand how changes in the market will affect your trading strategies and pricing.
Take an in-depth look at financial charts as they are valuable tools for research. Look at how past data and trends and compare different timeframes that can help you discover emerging patterns and trends.
4. Start practicing by placing trades.
After you have researched your trading strategies, start practicing on a web trading platform.
Additional Information on Bitcoin
Bitcoin’s trading hours are generally 24 hours a day, and market holidays may affect these times. XBT is the official stock market symbol for bitcoin, and BTC is often used to represent the bitcoin cryptocurrency.