However, the number of people that still want to trade in Bitcoin is still high. Unlike what most people assume, trading in Bitcoin is actually quite straightforward, once you learn how to trade it.
Table of Contents
Why Bitcoin Trading?
You may be wondering, why should I trade in Bitcoin? Am I not putting my finances at risk with this volatile asset? Well, there is truth about the volatility angle, but here is why you should consider trading in Bitcoin.
The second reason to trade in Bitcoin is that unlike other investment options, you can trade Bitcoin 24/7. The crypto market does not close at the end of the day. Unlike stocks which are specific to a given country, cryptocurrencies are universal.
With the difference in time zones, one can access the industry at any time of the day. Also, there is a significantly large number of Bitcoin and crypto exchanges around the world that facilitate secure trading.
How to Trade Bitcoin: 4 Easy Steps to Start Bitcoin Trading
The first step in trading Bitcoin is to open an account on a trading platform that allows the buying and selling of Bitcoin. You can do this on platforms like AxiTrader, Coinmama, Paxful, and several others.
The account opening process differs from one platform to the other. Nonetheless, opening an account is usually easy and may require you to provide your email address, name, and a password only.
For setting up an account with AxiTrader, go to www.AxiTrader.com and follow the instructions in the video below.
2. Choose your Bitcoin trading strategy
Every successful project relies on there being an efficient strategy. In trading Bitcoin, you will also need a strategy that you can rely on in your trading journey.
The strategy will help you know how to go about with opening and closing orders and entering and exiting trading positions. Bitcoin trading strategies are quite easy to follow.
3. Do your research
As you get into trading Bitcoin, you have to devote time to researching the industry. Be updated on all the current affairs and any factors that may affect Bitcoin trading. With this awareness, you can make more accurate forecasting on trends, which is key in trading.
You will also learn a lot as you research, and regardless of how advanced your trading tools are, knowledge is the best tool you can have in Bitcoin trading.
4. Place your trade
The final step in getting into Bitcoin trading is for you to place your first trade. With the strategy you’ve chosen and the knowledge you’ve acquired in your research, making the first trade should not be a problem.
Most, if not all, Bitcoin trading platforms will give you a chance to either start with a live account or a demo. If you are a novice trader, it is advisable to go for the demo account to familiarize yourself with the platform using ‘fake’ currency. This reduces the risk of losing your money on a platform.
A Quick Tutorial on Opening an Account with StormGain
There are four common bitcoin trading strategies that are used. They include:
Bitcoin day trading
Day trading requires one to open and close an order within a day. This strategy is suitable if you want to profit from the short-term fluctuations in the Bitcoin market.
Bitcoin swing trading
Swing trading, just like day trading, requires someone that’s actively involved in the trading process. You earn by catching trends as they form and then holding the position until the trend is complete. It is based on changes in market momentum.
Scalping is all about placing multiple small trades on minor movements of the Bitcoin price. This strategy calls for someone patient enough to catch and get into the intraday trades. You will benefit from this strategy if you are not after large profits, after a long time.
You can also automate your Bitcoin trading. Most trading platforms will provide you with this option. I find it to be the best solution for someone who’s not actively involved in the trading process, especially if trading in Bitcoin is a side hustle.
It is also ideal for someone who’s just gotten into the market and is not willing to risk it.
Bitcoin Trading vs. Investing
While the number of people getting into cryptocurrency trade continues to increase, a large percentage of them are not fully aware of the difference between Bitcoin trading and Bitcoin investing.
Before we delve further into the guide, it is important to understand what Bitcoin trading is and differentiate it from Bitcoin investing.
Bitcoin Investing is the case where people buy Bitcoin for the long term. They hold onto the belief that the price of Bitcoin will ultimately increase at some point. That is why Bitcoin investors tend to be more inclined to hodling their currencies.
On the other hand, Bitcoin trading is where people buy and sell Bitcoin over a short period. It is aimed at making a profit from the Bitcoin price fluctuations.
While Bitcoin investors are more interested in understanding the technology around Bitcoin, Bitcoin traders are only focused on making profits.
Nonetheless, it is important to note that you can choose to invest in Bitcoin, and still trade it at the same time.
Understanding the history of Bitcoin is important for anyone that wants to learn how to trade Bitcoin.
Satoshi Nakamoto founded Bitcoin in 2008, and over the years, it has experienced massive change, ups, and downs.
In 2009 when the first exchange was established to facilitate Bitcoin’s trade, a $1 was relatively equivalent to 1,308 Bitcoin. Within eight years, the value of Bitcoin had risen to about $10,000 for one Bitcoin.
Bitcoin has experienced four bull markets already. The most notable bull market being in December 2017, where the price of one Bitcoin surged to $20,000.
In just one night, many Bitcoin traders were made millionaires. However, the surge was short-lived as Bitcoin plunged to $5,900 in January 2018.
Where to Trade Bitcoin
You can either trade Bitcoin via exchanges or online brokers like FP Markets. You can choose to trade from either platform and still make a profit. It all depends on what you are comfortable with. Let’s take a look at how you can trade on some exchanges and some of the popular online brokers.
StormGain is one of the leading Bitcoin trading platforms where traders can focus on leverage trading. To start trading, you will need to register on the platform by providing your email address, phone number, and a password.
Once you’ve registered, you are redirected to their trading application, where you can monitor the price of Bitcoin. It is important to note that StormGain has an intuitive trading platform that shows real-time trading data that makes it easy to open trades.
StormGain also gives you the option to trade Bitcoin, or exchange it with another cryptocurrency like ETH. You can also use your credit or debit card to buy Bitcoin on StormGain.
You will be required to make a minimum deposit of 50 USDT for you to trade. However, the minimum amount you can use on a single trade is 10 USDT. StormGain provides a 150X leverage for traders and also has some of the lowest compared to other exchanges.
Paxful is more of a Bitcoin trading marketplace where buyers are connected with sellers. To start trading on Paxful, you will first have to open an account.
Upon opening your account, you will be assigned a free Bitcoin wallet. You can begin your trading journey by clicking on sell Bitcoin first. You will be redirected to a page where you can choose the payment method and also the seller to buy from.
Paxful shows you a list of those sellers that accept the payment option you choose. You have the liberty to trade with any seller that you find suitable for you. It is important to note that the Paxful fee is determined by the payment method you choose. Generally, Paxful offers low trading fees.
Cex.io is one of the leading exchanges where you can trade your Bitcoin from. It provides several payment options and allows for trading Bitcoin with other cryptocurrencies.
You can convert your fiat currency to Bitcoin and vice versa on Cex.io without issue. The platform offers an intuitive dashboard for trading and margin trading.
It is important to note that Cex.io offers a brokerage service that allows novice traders to buy Bitcoins for a lower price than the prevailing market price. It also supports the use of credit cards in cryptocurrency trading, which gives it an edge over several other Bitcoin exchanges.
AxiTrader is an Australian Forex and CFD broker that offers CFD traders over 65 CFDs, including commodities, Bitcoin, indices, and metals. It was established in 2007 and has since experienced massive growth.
Lately, eToro has become increasingly popular as a leading online trading platform. Trello draws its strength from the community of traders that it has and the ability of these traders to share strategies amongst themselves. When starting, you are given $100,000 virtual money to practice trading.
It is important to note eToro, unlike other online brokers, offer trading in real Bitcoin and other cryptocurrencies. With your own eToro crypto wallet, you can fund and trade Bitcoin as you wish. After adding this feature, eToro has become an all-in-one broker.
FP Markets provides the MetaTrader 4 and 5 for both desktop and mobile traders. This gives you a customizable interface to work with, access to one-click trading, expert advisors, live price, and market watch details.
Bitcoin is a decentralized and unregulated currency. Thus, it is difficult for it to be affected by some of the factors that affect Fiat currency. However, certain things determine the price of Bitcoin at a given time. The following factors influence Bitcoin price:
Supply of Bitcoin in the market
It is important to note that BTC has a total market cap of around 21 million coins, and once Bitcoin miners finish mining all the coins, the supply of Bitcoin will end. We currently have around 18.5 million bitcoins in supply, which translates to around 88% of the total amount that should be mined.
Unlike other coins like ether with a high supply, Bitcoin has a low supply, which gives it a higher value. Once the supply is completely tapped out, we should expect its price to rise significantly.
Like with any other product, the process of mining Bitcoin involves the use of machines, energy, and manpower. All these resources require money. The cost of producing the coins is transferred to the price. If the production costs are high, then the price of BTC also increases and vice versa.
Bitcoin halving refers to when the reward for adding new transactions into the Bitcoin blockchain is reduced by half. It happens once in four years. From what we’ve seen with past halving occasions, the event is often followed by a significant change in bitcoin price. The most notable was the bull run in 2017, which saw bitcoin’s value reach $20,000.
It is important to note that there are over 2,000 cryptocurrencies in the market today. All these are competing for the people in one market, and even though Bitcoin is the most popular, altcoins such as XRP are getting people’s attention. The stiff competition is likely to affect the value of Bitcoin in some cases.
Choice of exchange
As a bitcoin trader, you should be aware that different bitcoin exchanges have varying trading fees. And on top of the trading fees, sometimes the price of Bitcoin is not uniform on all exchanges as you would expect.
Cyber attacks that lead to loss of bitcoins also affect the price of Bitcoin. The security issues create fear in investors, which forces some of them out of the industry. Consequently, the demand reduces, which in turn leads to a reduced price. Since Bitcoin trading greatly relies on technology and the internet, this is a factor that will always be in play.
How to Trade Bitcoin Using Fundamental Analysis
To succeed in bitcoin trading, you have to know when and how to trade. You have to know how to recognize market trends, and easily predict price movements.
If you don’t have this skill set, do not fret. Fundamental analysis provides you with indispensable knowledge of trading. So, what is it all about?
Fundamental analysis is an evaluation of an asset’s key variable and how the variables affect the value of Bitcoin. Unlike technical analysis, fundamental analysis focuses on the big picture instead of focusing on the intrinsic value of a given asset.
It is important to keep it in mind that fundamental analysis is not exclusive for cryptocurrencies. Additionally, how it is applied in cryptocurrencies is a bit different. To gauge Bitcoin’s value, you can look at factors such as the strength of its community, its uses, and its application.
If you realize that bitcoin is widely accepted as a payment method, you can invest in it because it will have a high demand, which equals an increase in the value of the currency.
How to Trade Bitcoin Using Technical Analysis
Technical analysis focuses on the history and past performance of an asset to determine its future prices. For bitcoin trading, you can look at past trading volumes and trends.
It is important to point out that technical analysis is formed because Bitcoin price movements are not random and that history tends to repeat itself.
Over the years, technical analysis has become increasingly popular with the development of advanced tools and charts that can track past prices and trends spanning years. That is why we have hundreds of indicators used in cryptocurrency trading today.
How to Set Up a Stop Loss Order
Learning how to trade Bitcoin cannot be complete without looking at how one can set up a stop-loss order. A stop-loss order helps limit risk in trading and protect an existing portion of the profit made when the market plunges.
In many Bitcoin trading platforms, you will always be given the option to open a stop-loss order, and you can always modify the order as you wish.
When executing a trade, you can specify your stop limit to activate at a static price point. Once the Bitcoin price falls past a certain level, or based on a percentage of the current market price of Bitcoin, usually a negative offset.
Take the stop-loss order as your exit plan should things not go as planned. With a stop-loss order, if the trade goes against your expectations, you can easily exit without any suffering risk.
Bitcoin Trading Using a Trend-Following Approach
A trending Bitcoin market is one that reaches a certain position and maintains it for an extended period. The trend-following approach relies on technical analysis to predict the behavior of the market.
To make the most out of the trend-following approach in trading, you may want to stay updated on events and news that may affect BTC’s price.
You should open your trade position at the onset of the trend, and when you believe that the trend will continue to move in its current direction. Trading averages, the stochastic oscillator, and the relative strength index are great tools to determine the direction of a trend.
How to Trade Bitcoin with Leverage
Trading Bitcoin with leverage focuses on making profits from small price movements. It allows you to effectively control your portfolio as it grows. The principal amount used in Bitcoin leverage trading is referred to as margin.
Different brokers have different leverage ratios that are needed for one to open a trade.
Some of the benefits of bitcoin leverage trading include:
The increased profits as you only have to invest a certain percentage of the trade but still get all the profits made by the trade amount.
Leverage trading frees up capital, which can be used to open more positions or get invested elsewhere.
Bitcoin trading can be profitable if carried out properly, but it also has significant risks. As an investor, it is prudent to be aware of the risks associated with Bitcoin trading before committing yourself. Some of the risks in Bitcoin trading include:
Cyber security issues
The trade of cryptocurrency relies 100% on technology, which exposes it to cyber attacks. The problem with hacking in Bitcoin or cryptocurrency trading is that it has devastating effects, and one may completely lose their coins, considering there’s no way for recovering lost Bitcoins.
Over the years, there has been a significant number of cyber attacks on exchange platforms, although Bitcoin itself has never been hacked, which left most people devastated.
The volatile market
Bitcoin’s price is constantly fluctuating. As of April 21st, 2020, Bitcoin’s value was at $6,874. But for those that bought some Bitcoins on June 2nd 2020, one Bitcoin went for $10,127. That is a whole $3,000 price difference in less than two months.
On June 3rd, traders could only sell their Bitcoins for an amount not exceeding $9,514. It is this constant fluctuation in the price of Bitcoin that makes it a risk trading. As an investor, there is no way that you can be assured of getting a return on your investment. In some cases, you may even suffer great losses.
However, if you want to reduce the risk, you must keep a keen eye on the market trends and trends in Bitcoin trading. Also, invest small amounts while starting.
Aside from hacking, there are also various instances where traders get defrauded in the Bitcoin market. With the exponential number of people getting into Bitcoin and cryptocurrency trade, some of the created exchanges are often fake.
Though relevant financial authorities and bodies continue to sensitize traders how they can protect themselves from fraud, cases are still reported. This security problem remains a big problem for investors, and if you are just getting into the Bitcoin trade, be careful only to trade with established exchange sites like Binance.
Bitcoin trade is not regulated
Currently, there is no established body or arm that regulates the Bitcoin market. Additionally, many governments are yet to give their clear stance on cryptocurrency trade in their respective countries. The trade has several loopholes, which may make it interesting to get into, such as no taxation.
However, if the governments realize that the Bitcoin trade is creating stiff competition for them, then chances are Bitcoin trade will get banned like it is in China. Although Bitcoin trading is currently allowed in several countries, we don’t know what the future holds.
Its limited use denies it the importance that fiat currency has. The fact that one may find it difficult to find a place where his or her BTC can be accepted as payment is one of the reasons why Bitcoin may never overtake the traditional Fiat currency.
Bitcoin lacks physical collateral
Bitcoin is a virtual currency that fully relies on technology. Mining of new Bitcoins requires technology, buying and selling the same also depends on technology, and the storage also relies on technology. This means that without the required technology, Bitcoin has no value. Unlike physical assets like property, Bitcoin’s lack of physical collateral makes it a risky venture.
Possible financial loss
To many people, Bitcoin is considered a Ponzi scheme, where only the ‘sharks’ get to benefit from the ignorance of other traders. As more people get into the Bitcoin trade, a bubble economy is created, which can burst at any time, rendering Bitcoin useless. If this comes to happens, many traders may suffer very painful financial losses.
Well, Bitcoin has been around for around ten years now, which makes it a significantly young technology. Over the years, it is yet to develop into something solid, and we continue to witness changes. As a result, it is not possible to tell what Bitcoin will look like tomorrow. The most valued currency today may end up useless in the future. Until it is fully established, one should only trade with caution.
As an investor that wishes to get into Bitcoin trade, practice caution as you start, carry out due diligence and only invest amounts that even if you lose, there will be no significant impact on your financial strength. Additionally, you should take the necessary steps available to secure your investments, and brace yourself for any outcome.
How to Store Physical Bitcoin
Did you know that Physical Bitcoins do exist? Well, they do and are quite valuable. Physical bitcoins give you a chance not to store your digital currency on computers, which is often not a safe option.
It is important to note that one physical bitcoin does not equal one bitcoin. Each physical bitcoin has a different value attached to it, and the coins come in different alloys. Silver is the most used alloy, although there are other variants like bronze and golden physical bitcoins.
All physical bitcoins come with their funding instructions, so you should make sure that you’ve gone through the print. Once you create a wallet to store your coins, you are given a small piece of paper with the wallet address and the private key printed on it.
A good number of Bitcoin traders use physical bitcoins to store their coins, hoping that the price of Bitcoin will increase in the future.
You should note that it is impossible to spend funds in a physical bitcoin unless you break the hologram, to access its private key.
You can either store your physical bitcoin in a hardware wallet or e-Wallet.
Hardware wallets are essential to any cryptocurrency trader. When it comes to storing Bitcoin, the user’s private keys are stored in a secure hardware device. Hardware wallets are also called cold wallets.
Hardware wallets have several benefits, including security, immunity to cyber attacks, and also the fact that software used is open source.
Ledger Nano X is one of the best hardware wallets out there for you to use in storing your physical bitcoins. One of its greatest features is that it supports mobile use, available for Android and iOS. Therefore, you can use it while on the go.
e-Wallet (digital wallet)
You can also store your bitcoins on digital wallets. They are less secure compared to hardware wallets, but they’ll get the job done. Some of the Bitcoin trading platforms provide e-Wallets for Bitcoin. StormGain and Paxful are perfect examples of e-Wallets provided by Bitcoin trading platforms.
Bitcoin trading may seem scary at first, but with the tips and knowledge in this guide, you should have an easy time starting. However, you can only become a good trader, keep learning on Bitcoin trade, and be an ardent follower of all happenings in the Bitcoin world. Although the trade has some risks, Bitcoin trading is still one of the best ways to make quick cash.
If you’re considering to start trading or investing in Bitcoin, this article has showed you that you should choose one of the following providers, depending on your preference:
TradingGator is a trading review website where you can read about everything from CFD signals to the best European forex brokers. Find the top trading platforms and courses to become lazer sharp in your execution. We even cover the best forex affiliate programs and show you step-by-step how to get started. TradingGator - For Traders, By Traders!