Have you always wanted to get into bitcoin trading, but your level of experience has held you back? After you read this article, that will no longer be the case! Learn how to trade BTC, what factors affect its price, what strategies can help you to increase your chances to make profitable trades, and much more.
Bitcoin trading is the process by which you can speculate on changes in the value of the cryptocurrency. Before, the main strategy of the crypto market was to buy bitcoin through an exchange and wait until its value skyrockets to sell it later for a higher price. However, bitcoin derivatives made it possible to gain rewards within a day, being a so-called day trader. Bitcoin trading allows you to buy and sell the crypto on small-, medium-, or long-term timeframes. The higher the price volatility, the larger possible rewards (and risks, of course).
Bitcoin was the world's first-ever virtual currency. It appeared as something that would secure and integrate money transactions. This is what made it immensely popular. It flaunted a decentralized network to be run by usual people, not centralized authorities, such as governments or central banks, and as a result, it promised to open its doors to the financially excluded population of the world, who would be able to make transactions in seconds.
Nobody could deny the novel brilliance of the concept, and the timing couldn't have been better. As a result of financial deregulation, countries the world over were experiencing a global economic catastrophe, and Bitcoin provided a ray of hope.
Bitcoin’s creator, Satoshi Nakamoto, meant for Bitcoin to become the future of money. However, Nakamoto 'disappeared' around 2011. To be honest, no one ever saw him. The ability of Bitcoin to act as a store of value was conceived, and the financial world was off to the races.
In late 2009, you could buy 1,300 Bitcoins for $1. The first vital milestone was reached in eight years when the price of 1 BTC crossed the $10,000 threshold. By late 2017, everyone was singing Bitcoin’s praises as the cryptocurrency's price was near to cross the next significant level of $20,000. With the rise of Bitcoin and other cryptocurrencies, it has become necessary for every investor to have a holding in their portfolio.
However, from the beginning of 2018 until the middle of 2019, the entire crypto market was in doubt about Bitcoin’s future – the BTC price was trading below $10,000. The situation improved in the middle of 2019 when Bitcoin managed to recover and break above $10,000 again. The rise was promising but short-term. The cryptocurrency traded below $10,000 from August 2019 to July 2020, but then the star of Bitcoin began to rise once again.
Due to the widespread illicit usage of cryptocurrencies, governments in a number of nations have begun to regulate them. The People's Bank of China (PBC) took three different moves to implement the most significant regulatory changes:
The price of Bitcoin decreased each time significantly. Still, it allowed it to reach the all-time high several times in 2021 – in February, April, and November, when the price was above $65,000.
The price of Bitcoin continues to be supported and is heading upward as a result of the organizations and nations that allow the use of bitcoin in their operations.
In this section, we will tell you all you need to know about starting trading Bitcoin yourself. If you’re a complete beginner, the very basics are that you have a couple of options to do that. You can either buy and store coins at crypto exchanges or trade them in the form of CFDs with a broker. Based on your predictions on whether the price of Bitcoin will climb or decline in the future, you then open a buy or sell position.
Volatility is the biggest governing factor behind the value of Bitcoin, and you should be aware of that. The price changes its direction numerous times within a minute.
The very first thing you need to do is choose how you want to go about it. As we mentioned before, there are two main ways you can deal with cryptocurrencies. The first is through an exchange. The other is through CFD trading.
If you’re going through an exchange, you will be buying Bitcoin because you want to sell it later to get a profit. The main risk dealing with cryptocurrency exchanges is the matches made by the exchange’s server, which can be unreliable at times. Moreover, the high volatility of the cryptocurrency market, in general, makes it difficult to forecast cryptocurrency’s price direction. On the other hand, if you trade through CFDs, you’ll be speculating on the value of the currency without ever actually owning any.
We’ll go through both of these options in more detail below.
Buyers and sellers are connected through bitcoin exchanges. Traders can buy and sell bitcoin on the bitcoin exchange, just like they would on a regular stock exchange, by entering either a market order or a limit order. Market orders are placed when a trader wishes to instruct the exchange to trade the coins at the best possible price in the online market.
When you place a buy limit order, bear in mind that the trade will only happen at the limit price you’ve set or a lower one. In contrast, a sell limit order is executed at the limit price or a price higher than that.
In order to transact in bitcoin on an exchange, a user must first register with the exchange and then go through a number of verification processes in order to prove their identity to the exchange. Upon successful authentication of your identity, a user account is created for you, and you must transfer funds into this account before you can make trades.
Traders select an asset from a list of those supplied by the broker as a CFD (contract for difference). It might be a stock, an index, a cryptocurrency, or any other financial asset that the broker has available for buying or selling. A trader deposits funds and uses leverage if needed. After that, you can open a long or a short position. Still, remember that leverage raises not only potential profits but also multiplies losses.
The two parties enter into a crypto CFD, in which they agree on the opening price of the position, as well as whether or not any additional fees (such as overnight fees) will be charged. The position is then opened and remains open until it is closed by the trader or by an automatic instruction, such as hitting a Stop Loss or Take Profit point.
If the trader makes a profit at the end of the position, the broker rewards him. If the trade ends in a loss, the trader will be charged from their account.
Now that you’re aware of the different ways of trading BTC, we will look at the various factors that play a part in determining the price of Bitcoin. Some of the most important ones are listed below:
The quantity of bitcoins that can be mined is limited to 21 million. Every ten minutes, new bitcoins are added to the Bitcoin supply. Ten minutes is the average amount of time needed to create a new BTC block. After every 210,000 blocks, the number of bitcoins minted every block is cut by 50%.
Bitcoin halving events, which take place every four years, are typically accompanied by a big increase in the cryptocurrency's price, as it indicates that the cryptocurrency's supply has been cut. The latest halving event, the third, took place in May 2020, with the fourth one scheduled for 2024.
Due to the use of rounding operators, the number of Bitcoins issued will almost certainly never surpass 21 million. There will be no more bitcoins created after the Bitcoin supply reaches its top limit. Transaction fees are expected to be the only source of income for Bitcoin miners.
In spite of the fact that Bitcoin has yet to gain widespread acceptance as a medium of exchange, it has captured the attention of retail investors. The economic and geopolitical factors affect Bitcoin demand.
Bitcoin has also gained popularity in countries with high inflation and devalued currencies, as well as in developing ones like El Salvador, which has accepted Bitcoin as legal tender since June of 2021. Furthermore, it is well-liked by criminals, who use it to transmit big sums of money for their illegal activities. Finally, as a result of greater media coverage, there has been an increase in investor demand for cryptocurrencies.
All of this indicates that a decrease in supply has coincided with an increase in demand, which acts as a catalyst for the rise in Bitcoin prices. The bitcoin ecosystem has developed a pattern of booms and busts that alternates on a regular basis.
The cost of production for Bitcoin is roughly equal to the sum of the direct fixed expenses for infrastructure and electricity required to mine the cryptocurrency, as well as an indirect cost due to the difficulty level of the algorithm used to mine them.
Bitcoin mining is a process in which miners compete to solve a complex math problem; the miner who solves the problem first earns a reward consisting of newly minted Bitcoins, as well as any transaction fees that have accrued since the last block was discovered.
The application of brute force in the form of significant computing power is required to find a solution to the problem. In monetary terms, this means that the miner will have to spend money on racking mining rigs that are loaded with expensive processors in order to succeed. In addition, the bitcoin-mining process results in high electricity expenditures.
Armed with this knowledge, it is time to get this party started. To start trading, you will have to choose how you want to go about it. There are a few ways to choose from:
Day trading entails taking positions and closing them on the same day. For a day trader, their goal is to profit from intraday price swings in a cryptocurrency. Investors frequently rely on technical indicators to determine the best times to enter and leave a particular cryptocurrency trade in order to make a profit.
Using the swing trading method, you will attempt to capture price movements that occur within a medium- to long-term timeframe. Swing trading is based on the concept of catching market movements that can last anywhere from a few days to a few weeks or even months. Swing trading tactics perform well in Bitcoin markets that are trending. Whenever there is a strong trend over a longer time period, swing trading opportunities can be frequent, and swing traders can profit from larger price changes.
Scalping involves buying and selling the asset several times throughout the day for multiple small profits. Despite the inherent danger, a savvy trader pays attention to the margin requirement and other crucial trading guidelines in order to avoid having a negative trading experience.
The term "HODL" is a misspelling of the word "hold," and it refers to the buy-and-hold Bitcoin trading strategy used by cryptocurrency investors to accumulate wealth. Using this technique, investors can avoid suffering losses due to the short-term volatility of cryptocurrencies while reaping the benefits of long-term value appreciation. Despite the fact that the "hodling" position is theoretically less dangerous than futures trading, investors must still consider the possibility of altering regulations, as well as the public's perception of the market.
It is when the time comes to choose a trading broker that most newcomers falter. That is why, in this section, we will show you what you need to look for in a quality trading platform by pointing out the benefits offered by one of the best, NAGA:
Once you’ve found yourself a good trading platform, like NAGA, you’re ready to begin trading. Below, we will show you how.
Select a trading pair. You can trade BTC for various fiat currencies, where BTC/USD is the most common pair, or for digital currency, such as Ethereum, Ripple, and Litecoin.
Long and short positions are the two available choices you can take when you open a trade. Investors that take a long position in the market anticipate that the price of Bitcoin will rise from a specific point. Traders that go short, on the other hand, are betting that the price of the coin will fall from the entry point they choose.
To that end, you must also know about the two order types, market and limit orders:
Stops and limits are important tools that you can use when trading:
Once your deal is open, keep an eye on the market to ensure it moves in the direction you want. Trading platforms provide technical indicators that can help you forecast the price. Market variables, such as volatility and mood, can also be monitored using indicators.
You can close your trade if you want to capture a profit or stop a loss that you feel comfortable with. Profits are paid immediately into your trading account, almost within a single business day, while losses are withdrawn.
NAGA offers you a whole host of features you are unlikely to find anywhere else. When you choose us, you get the following:
And this is just the tip of the iceberg! Join us today to make the most of the world’s most mainstream financial asset!
Because of the volatility in the market, trading Bitcoin is subject to risks. The risk management and educational tools provided by the brokerage firm are included with the opening of an account with the firm. These include in-platform stops and limits, as well as everything else you'll need to be in complete command of your trading activities.
While a single Bitcoin can cost tens of thousands of dollars, you can trade it with small funds. With the aid of leverage provided by your broker, you can easily buy some for yourself. This way, there’s no need to empty out your bank account with your debit card.Still, remember that leverage raises not only potential profits but also multiplies losses.
You may undoubtedly make money from Bitcoin trading, though you also have a high risk of losing money. Your capacity to do so will be determined by the depth of your market analysis, your market knowledge, and the underlying market conditions that exist at the time of trade. Meaning the more you know about the market you’re in, the higher the profit margin you’re likely to generate.
Bitcoin trades happen around the clock. However, there will be periods of higher volatility and liquidity. Because both the UK and US markets are getting into their stride for the day around noon GMT, there may be some extra volatility at this time of day.
Cryptocurrency values are notoriously unpredictable, so experts advise only investing what you can afford to lose and never sacrificing important goals like emergency savings or debt repayment. They also predict a 400% increase in value by 2022, so take that as you will.
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