What Is Bitcoin Trading?
When it comes to trading bitcoin, there is also the option of owning and storing the currency through exchanges. Instead, you can use CFD trading to speculate on bitcoin price swings. Based on our ‘buy’ and ‘sell’ prices, you decide whether the price of bitcoin will climb or decline.
To learn more, read the step-by-step guide to trading bitcoin below.
In the crypto market, Bitcoin has influenced the course of most cryptocurrencies. It’s the most well-known cryptocurrency, yet only a few people truly comprehend it. Bitcoin is known for its volatility, and traders should expect significant price swings while trading it, which adds to both its attractiveness and risk.
This post is for those interested in learning how to trade bitcoin. Following this step-by-step method will assist you in making informed bitcoin market selections.
Methods of trading bitcoin
There are two main types of bitcoin trading. The first involves purchasing bitcoins on an exchange with the intention of eventually selling them for a profit. This method is primarily reliant on the matching servers of bitcoin exchanges, which can be problematic. The second bitcoin trading strategy is based on price movement speculation rather than actual ownership of the currency. This strategy is used in conjunction with a CFD trading account.
Bitcoin Exchanges
Bitcoin exchanges are ideal targets for cyber theft because they keep significant sums of bitcoin and other cryptocurrencies. Hacking and theft from cryptocurrency exchanges is a typical occurrence; on average, every other month in 2018, a major exchange was hacked. In 2018, $534,800,000 was stolen from Coincheck in January of that year, and $195,000,000 was stolen from BitGrail in February1. Clearly, holding bitcoins on an exchange carries a risk.
CFDs on Bitcoin (contracts for difference)
CFD trading is a globally available derivative product based on financial leverage.
CFDs can be used as a hedging technique, allowing you to balance any losses from a physical trade in the underlying market by, for example, placing a ‘sell’ CFD position. This could be especially advantageous in volatile markets, where prices fluctuate frequently and unexpectedly. For tax purposes, you should be able to credit any losses you incur against your profits, depending on your circumstances.
Trading techniques for bitcoin
Which bitcoin trading technique is best for you? It all boils down to your level of experience, free time, investment funds, and daily discipline. When it comes to bitcoin trading, everyone has various aims, and some people will restructure their obligations to accommodate trading, while others will want trading to accommodate their responsibilities.
If you want to invest in bitcoin or trade it, you’ll probably use one of the following techniques.
· Bitcoin Day-Trading
Buying and selling bitcoin on the same trading day is referred to as day-trading bitcoin. The approach entails placing long and short bets in an attempt to profit from price movement speculation. At the end of the trading day, a day trader will close all of their positions, ensuring that no positions remain open overnight.
For traders who want to make a living trading markets, day trading is perhaps the greatest alternative. It can be extremely technical, time-consuming, and have a steep learning curve. This may be for you if you are really devoted and have the focus to analyse charts on a regular basis.
· Bitcoin Swing-Trading
Swing trading entails purchasing and selling bitcoin in response to market moves, then maintaining that position until the trend slows or a trend reversal occurs. Positions can be kept for a few days to a few weeks, unlike day trading.
Technical analysis is widely used by swing traders, while fundamental data is rarely examined. Swing traders benefit by capitalising on trends as soon as they occur, using technical indicators such as Fibonacci retracement and moving average convergence divergence (MACDs).
Swing traders are more risky than day traders since their positions are open for longer periods of time. However, because trades generally span several weeks, this trading approach often demands less time commitment.
· Scalping Bitcoin
Scalping bitcoin is a trading method that entails making a large number of deals in a short period of time, perhaps as little as a few minutes. Scalping traders try to profit on minor market moves.
When scalping bitcoin, you should always have a clear exit strategy in place, as a single trading loss might wipe out any winnings you’ve achieved. Scalping bitcoin can be a low-risk trading strategy if done correctly. This is because diversifying your capital risk by spreading it across a large number of small trades.
· Expert Bitcoin Market Advisors
In forex markets, traders frequently utilise algorithmic trading or trading automation. Traders can utilise EAs for bitcoin by using a function called ‘Expert Advisors’ (EAs) on the MetaTrader 4 (MT4) platform. These programmes monitor, appraise, and trade on financial markets using algorithms you create. EAs will locate and grasp chances based on the filters you provide.
Because EAs remove the emotional side of trading and may set risk-management conditions such as limit orders, stop-losses, and take-profit, they can also be used to manage risk.
Because the cryptocurrency markets are less developed than many other well-known sectors, such as forex and stocks, there is less historical data on which to construct algorithms. When you consider the volatile and unpredictable nature of cryptocurrencies, it’s easy to see why Expert Advisors for bitcoin are riskier.
Step by Step Guide for Trading Bitcoin
· Sign up for a CMC CFD account. You can open an account with CMC Markets to trade bitcoins using CFDs. To begin trading bitcoin, create a live account, though it’s a good idea to practise with a demo account first.
· Make a plan for your bitcoin trading strategy. Conduct research to assist you in deciding how you will trade bitcoin. This will aid in the development of your trading plan’s position sizing and entry/exit techniques. Are you unsure which method is best for you? Choose based on the amount of free time you have, the amount of money you have to invest, your level of experience, and your discipline.
· Create a trading strategy plan. After you’ve decided on your bitcoin trading strategy, you can go on to defining your trading strategy. A trading plan can assist you in making judgments based on objective data you’ve gathered prior to placing a trade. This allows you to make consistent decisions based on your strategy in order to avoid entering or exiting a trade too early or too late. Do you need assistance creating your trading strategy? We offer a guide that can assist you in developing a trading strategy.
· Investigate the markets. When trading bitcoin or any other financial instrument, you should keep up with any news on the market, industry, and/or country’s security and macroeconomics. This understanding can aid in the prediction of future trends and provide insight into the factors that influence the pricing of an instrument. Our news and insight tools, as well as our news and analysis section, can help you keep up with changes in the bitcoin market and its surrounding factors.
· Trade and keep an eye on things. After that, you can place a bitcoin trade based on your market analysis and trading strategy. Put in your position size and risk-management options like stop-loss and take-profit orders. These trading conditions might be quite important in risk management.
