It’s all thanks to Bitcoin that cryptocurrencies became a craze across the world. Ever since it made its unaware holders instant millionaires, many people are trying their luck in investing in it and other crypto tokens and altcoins.
Dive deeper into the world of cryptocurrencies and Bitcoin trading here. CryptoShimbun is your top source for the latest crypto news and trends, market movements, Bitcoin trading market analysis, guides, tips and more!
All you need to know about Bitcoin trading
Bitcoin was the first cryptocurrency made by an unknown developer called Satoshi Nakamoto. Today, there are over 2,000 cryptocurrencies available to buy and sell. However, Bitcoin remains the top crypto coin you can trade and make a profit from.
Bitcoin trading is the act of investing in the price movements of Bitcoin through buying and selling BTC on a crypto exchange site using different kinds of fiat money or altcoins. Bitcoin traders profit from it by buying BTC when its price is low and selling it when the price goes up.
It can also be done through a contract for difference (CFD) wherein you invest in the price movements without ever taking possession of the coins. In crypto terms, the units used to measure the movement in the price of Bitcoin is called pips. A one-digit shift in the price at a specific level is one pip.
In CFD trading, you can go long if you think Bitcoin will grow in value or go short if you think it will drop by opening a contract with a buyer/seller. At the end of the contract, the buyer and seller exchange the difference between the opening and closing prices of the asset that forms the substance of the CFD.
The seller then pays the buyer the difference between the current value of Bitcoin and its value at the time the contract was made. If the difference is negative, it is the buyer that pays the seller.
The difference between the buy and sell prices quoted for is referred to as the spread. If you want to open a long position, you trade slightly above the market price or at the buy price. On the other hand, opening a short position means you trade slightly below the market price or at the selling price.
Bitcoin can be traded in lots, which are batches of BTC used to regulate the size of trades. Without paying the full value of your Bitcoin trade upfront, you gain leverage. Meanwhile, a margin refers to the initial deposit you put up to open and maintain a leveraged position. Your profit or loss depends on the full size of the trade when you close a leveraged position.
How to start Bitcoin trading
When you buy Bitcoin on a crypto exchange, you purchase BTC itself so you will need to create an exchange account. It allows you to put up the full value of the coins to open a position and store them in your wallet until the time you want to sell them.
There are a lot of Bitcoin exchanges in the market so it is important to find the most ideal platform for your purpose. Here are some factors you need to consider when looking for an exchange for Bitcoin trading:
- Exchange rates. Bitcoin exchanges have their own set of exchange fees. Therefore, you should take the time to search and compare these platforms to find the one with the most profitable rates in the market.
- Reputation. Another crucial thing you need to check in a Bitcoin exchange is its reliability. The reviews and comments made by its users are telling signs if it is worth opening an account in a Bitcoin exchange.
- Validity. It is always important to know if the Bitcoin exchange you prefer offers its services to the country you are in. It only takes a few minutes to check instead of spending more time on an unavailable Bitcoin exchange.
- Safety. Since you are going to invest in Bitcoin which means you are going to spend money, you need to ensure that the Bitcoin exchange you prefer is a trusted platform with a great security policy. Choose Bitcoin exchanges that request for some sort of ID verification from you instead of anonymous platforms that come with more risks.
Different ways to start Bitcoin trading
Once you have signed up and set your account on a Bitcoin exchange you like, there are many ways you can start trading BTC. The volatility of Bitcoin makes it an attractive venture, but it also makes it a market with great risks to speculate on.
It takes knowledge and expertise to be successful in Bitcoin trading. You will also need resources like constant updates on the latest cryptocurrency news and trends, Bitcoin trading market analysis, and other useful information.
Before delving into Bitcoin trading, you should also know what kind of trading tactic is best for your goal. There are many ways to start trading. Here are the four main kinds of Bitcoin trading:
Day trading is the practice of buying and selling a security within a single trading day based on small, short-term price fluctuations. This means it is short-term trading for a small, but quick profit.
When you are day trading Bitcoin, you have to be a quick thinker to process data or metrics. However, the volatility of Bitcoin offers excellent rewards before the day is over in day trading.
Swing trading is the act of trading your Bitcoin by holding positions longer than a single day. The intraday price shift of Bitcoin is often small so traders choose margin trading to boost the smaller intraday price changes and improve profits or losses if things go wrong.
With swing trading, you can use trading aids such as candlesticks, trading bots, and expert advisor software to do more and have faster trades in bigger numbers.
Scalping allows traders to make smaller profits with less risk by starting a group of small trades very quickly that adds up to a large sum at the end of a trading day. Bitcoin scalping is one of the most popular trading plans since Bitcoin is fairly stable than other digital assets.
In scalp trading, you have to keep an eye on the price of a crypto pair, like BTC/USD or ETH/BTC to benefit from the price fluctuations and make a series of profit from each of the small trades.
Unlike the other types of trading, Passive trading is a safer but far less thrilling option. It is mostly a waiting game, potentially for years, to get a payoff. However, there is almost always a guaranteed profit in it.
Passive trading can be done through:
- Mining – It is the oldest passive trading technique using computing power to secure a network to get a reward.
- Staking – It involves holding funds in a suitable wallet and maintaining the network’s security through ownership to get staking rewards.
- Lending – It allows you to earn interest on your Bitcoin holdings by locking up your funds in a lending platform for a certain period of time and collecting interest payments later on.
- Running a Lightning node – Lightning nodes offer liquidity and build up the capacity of the Lightning Network by securing Bitcoin into payment channels where, later on, they get the fees of the payments running through them.
- Affiliate programs – It is earned through affiliate links, referrals and other discounts offered to new users who are introduced to a platform.
- Masternodes – Projects with masternodes give out special rewards to users who have a high incentive in maintaining network stability. However, you will need a large upfront investment and a sizable amount of technical knowledge to set masternodes up.
- Forks and airdrops – They are relatively straightforward tactics for investors who only need to hold forked coins or ownership of a wallet address.
- Blockchain-based content creation platforms – They permit content creators to monetize their content in many unique ways without any intrusive ads.
Things you should remember when trading Bitcoin
Bitcoin trading is not for the faint of heart. The crypto market is one of the most difficult trades to speculate on, especially to novice Bitcoin traders. The market is open 24/7 and this can cause traders to feel that they should always be trading for fear of missing out (FOMO). However, this can cause extreme fatigue and can potentially destroy their finances.
As a smart Bitcoin trader, it is important to have a solid grasp of your purpose and goal in the market. Remember to take the time to review the price movement of Bitcoin, reports and blogs, trade volumes, charts, Bitcoin trading market analysis, and countless other barometers of success.
Find all of that information and other helpful articles about Bitcoin and other cryptocurrencies here at CryptoShimbun. You can also keep track of the latest cryptocurrency news and trends of the crypto market here.