Why trade Bitcoin?
Before we show you how
to trade Bitcoin, it’s important
to understand why Bitcoin
trading is both exciting and unique.
Bitcoin trades 24/7
Bitcoin trading is exciting because of Bitcoin’s price
movements, global nature, and 24/7 trading. It’s
important, however, to understand the many risks
that come with trading Bitcoin. Unlike stock markets,
there are no official Bitcoin exchanges. Instead, there
are hundreds of exchanges around the world that
operate 24/7. Because there is no official Bitcoin
exchange, there is also no official Bitcoin price. This
can create arbitrage opportunities, but most of the
time exchanges stay within the same general price
range. Bitcoin is known for its rapid and frequent price
movements. Looking at this daily chart from the
ccxcrypto - ccxcrypto crypto Currencies BPI, it’s easy to spot multiple days with swings of 5% or more.
Bitcoin is global
Bitcoin isn’t fiat currency, meaning its
price isn’t directly related to the
economy or policies of any single
country. Throughout its history,
Bitcoin’s price has reacted to a wide
range of events, from China’s
devaluation of the Yuan to Greek
capital controls. General economic
uncertainty and panic has driven some
of Bitcoin’s past price increases. Some
claim, for example, that Cyprus’s
capital controls brought attention to
Bitcoin and caused the price to rise
during the 2013 bubble.
There are two techniques commonly used by day traders to increase their
profits from market movements. Leverage, or margin trading, means
borrowing money on a short-term basis to speculate on the price of
Bitcoin. The loan is paid back when you exit the position.
Tools and indicator
There are many tools to help you profit, and minimize your losses. Two you should learn about are limit
orders (which execute a trade at a certain price, whether you are there or not) and stop-losses, which
can be used to lock in profits when the price changes direction after moving in your
favor. You will also learn to read the market by keeping track of different
indicators. Technical analysis is an extremely complex
discipline, but you can start to understand the
underlying trends and forces that
shape the market by
learning about volumes,
moving averages of
different kinds, and
different patterns that
emerge in the charts.
Is a way of profiting from downward movements in price. Usually you would need to buy bitcoins to
profit, selling them at a higher price and pocketing the difference. If you want to profit from the price
falling, you must own bitcoins in the first place. You sell them and buy back at a lower price. This is the
simplest way of shorting, but it only works if you have bitcoins in your account.
With true short selling, you effectively borrow bitcoins, sell them, and buy them back at a lower price
before returning them to the lender – keeping the difference in price. This is carried out in various ways
(you may or may not actually be borrowing bitcoins from the exchange or another user), but the effect
is the same. You can also leverage your short sells in the same way that you would leverage a long
You can start day trading on any bitcoin exchange that has adequate liquidity. Smaller exchanges will have lower volumes, and therefore a larger ‘spread’ been bid (buy price) and ask (sell price). That means the price must move further before you are in profit, and trades may take longer to execute. Therefore, sign up with a large exchange where you can be sure that liquidity and speed of trading will be suitable. And, as ever, make sure the exchange is reputable. It makes no sense to make thousands of dollars (or bitcoins) day trading, only to have them disappear when the exchange is hacked or goes bankrupt through mismanagement. Bitstamp is a good place to start. It is the world’s largest bitcoin exchange and has an excellent reputation. Bitstamp is an exchange, rather than a Bitcoin trading platform.
You can buy and sell bitcoins quickly and easily, and begin to learn about the way the market tends to react. You can place orders in real time (buying and selling at the ‘spot’ price) and set limit orders, which execute when the price reaches a certain level. However, Bitstamp is not designed for advanced day trading. Other exchanges and platforms have more advanced tools that allow you to use more sophisticated trading techniques and amplify your gains – and your losses. Use them with caution!
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High Risk Investment Trading foreign exchange carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts
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