“I’m in the market for BTC. But there are so many choices and I don’t know how to trade bitcoin?” Are you itching to jump on the BTC bandwagon, but not sure how? Or maybe you just want to learn more about the new technology?
Bitcoin blockchain technology is transforming the world in ways not yet seen. This guide will explain how to trade bitcoin by setting up your first account and by learning about the key concepts of trading and investing in bitcoin.
Summary On “Bitcoin Trading”
If you’re interested in joining the crypto trading market, you’ll need to get familiar with some basic concepts of the industry. Bitcoin sports betting trading is not just about buying low and selling high, but it’s also about studying trends and getting an understanding of how Bitcoin works on a macro scale.
Two methods are used to analyze Bitcoin’s price. Technical trading relies on trends to predict the price of Bitcoin, whereas fundamental analysis consists of examining macroeconomic factors.
Trading can be intimidating, especially for beginners. Successful traders aren’t born that way, but rather made over time through time, fear, and money.
If you want to trade in Bitcoins or any other cryptocurrency, you’ll need to open an account with a Bitcoin exchange.
- Simply create an account.
- Verify your ID.
- Connect your bank account or credit card, and then make a deposit using fiat currency.
- From there, you can start trading.
Bitcoin Trading vs. Investing
Bitcoin trading is the process of buying and selling Bitcoin in an attempt to generate profits. This can either be done by day trading – where you buy and sell the cryptocurrency repeatedly throughout the day, or on a longer-term scale.
When it comes to Bitcoin trading, you must understand how the market works and what tools are available to help you make money.
On the other hand, investing in Bitcoin is a long-term play that many investors believe will pay off. Bitcoin investors feel if they buy Bitcoin today, the expectation is that it will be worth more than what they paid for it when they sell it in the future.
Investors who purchase bitcoin, tend to HODL the currency for the long run and are not interested in selling it for a profit. HODL (a typo of ‘hold’) is popularly used when describing the investment habits of investors who prefer holding onto their bitcoin for extended periods.
Traders are different from investors in that they focus on price fluctuations rather than the underlying product.
Bitcoin traders often hold positions for a short period and make money off small moves in the price of Bitcoin. They look for quick flips, where they can make a smaller profit by buying low and selling high.
Some have said that Bitcoin is simply a bubble waiting to burst. While it’s true that you cannot trade bitcoin without dealing with its underlying technology, some people are willing to team up, trade, and invest it alongside other altcoins.
But Why Is Bitcoin Trading So Popular?
First of all, Bitcoin is an extremely volatile best cryptocurrency and its price can fluctuate widely in a very short time span. This volatility makes it possible to make large profits if you know how to trade correctly.
Another important distinction with Bitcoin is that it trades 24/7. Most traditional markets, such as stocks and commodities, are open during only specific parts of the day, giving traders little control over their investment activity.
Besides, Bitcoin is a relatively unregulated ecosystem. The lack of lengthy identity verification processes, coupled with the anonymity offered by trading Bitcoin, make it an attractive option for those looking to trade without being monitored.
Different Trading Bitcoin Methods
One major similarity among all traders is the desire to generate profit. Therefore, traders need to find a style that works for them.
Some of the methods employed to generate profits include:
Day trading is a high-risk way to make money. It involves investing in the Bitcoin market and buying and selling BTC within a single day.
Such traders have the goal of making money from small movements in the market and do not hold positions overnight.
Day traders typically have several positions open at once and make several trades to try to catch moves in the market.
Scalping is a day-trading strategy that involves surveying the market and taking quick, small profits from rapid price moves.
In this trading style, a trader looks for extremely short-term price movements, usually using technical analysis, to make small profits repeatedly.
The goal is for each trade to be a small winner so that in aggregate there is an overall large profit.
It has been criticized as an unrealistic strategy employed by traders with limited capital who hope to earn profits on the smallest price differences in the market.
Swing trading is a much more passive form of trading than any other type of active trading.
By taking advantage of the natural cycles in the market, swing traders try to predict short-term price movements, and wait for the right moment to enter Bitcoin trades.
Swing traders tend to hold on to their positions for larger periods than scalpers, who are looking for quick gains but also like to get in and out quickly when they sense a change in direction.
Analysis Methods: Fundamental vs. Technical
Can One Predict Bitcoin’s Price Movement?
The price of Bitcoin can fluctuate wildly, so it’s difficult to predict with any degree of certainty what the price will be in the near future.
However, traders have developed several methods to try and predict its price direction.
Everyone can’t make profitable trades all the time. But you should not measure a profitable day in terms of just if you make a profit or loss. At the end of the day, what’s important is that your balance is positive.
When trading Bitcoin (or anything else), there are two main methods you can use to analyze the market. These are fundamental analysis and technical analysis.
Fundamental analysis is the study of a cryptocurrency’s underlying value. This includes technical aspects and external influences, such as publicity, social media activity, and governmental affairs.
This analysis aims to predict what will happen to the price based on these outside forces.
For example, you can look at how the currency has been used in real-world transactions on the Bitcoin blockchain. Or evaluate whether or not businesses are accepting bitcoin payments as a form of payment.
You will also need to consider factors like industry growth, regulations in countries around the world, and technical developments like the lightning network.
Besides, you can consider this an “investor” approach, whereby an investor is more interested in what will happen to the price after they buy, rather than their actual buying price.
Technical analysis is a popular method to predict the price of a security or market.
It focuses on analyzing past price trends and patterns to identify patterns. Based on these patterns, traders make their investment decisions.
The charts can either be simple line graphs or complex moving averages with many lines displaying different market prices over different time periods.
Technical analysis is based on the assumption that crypto market prices move in waves. So it looks for repetitive price patterns and uses them to predict future activity.
Then, Which Analysis Methodology Is Better?
There is no size-fit strategy when it comes to cryptocurrency. Both methodologies have their own set of strengths and weaknesses, but can often be complementary.
Building a solid, sustainable and profitable trading strategy is a challenge. That’s why it is important to use an approach that combines fundamental analysis with technical analysis.
Remember that a truly successful trader balances the edge between technical and fundamental analysis.
What Is Stock-To-Flow?
The Stock-to-Flow model tells you how much the price of Bitcoin will increase or decrease based on the relative rate of new supply. This helps you predict how much new Bitcoin has entered the market compared to how many already exist.
The model is based on the scarcity of a resource, which makes it different from other valuation models. The stock-to-flow model was originally used to predict the prices of precious metals like silver and gold.
In the stock-to-flow model, ‘stock’ is a resource that already exists, while ‘flow’ is a new supply entering the market.
For Bitcoin, there is a stock-to-flow ratio that tells us how long it would take to replace all units of the asset already in circulation.
This makes estimating the price of Bitcoin far simpler than it would be otherwise because we can predict what percentage of BTC will ever exist at any point in time.
Stock-To-Flow In Market
The Bitcoin network has a total of 21 million Bitcoins that will ever be available. The current circulating supply of Bitcoin is around 19.2 million coins.
If the market’s new supply rate stays consistent at around 900 BTC per day, it would take an estimated 58 years to replace all of the existing 19.2 million Bitcoins available currently.
So, inspired by the supply-and-demand model, one can create a formula that estimates the future price of Bitcoin using the stock-to-flow ratio of its historical prices.
PlanB, a famous crypto analyst and a highly-experienced former Dutch institutional trader, published this crypto model for predicting Bitcoin price trends.
Does The S2F Model Actually Work?
The S2F model provides a relatively accurate estimation of Bitcoin market price trends. When looking at the actual price alongside the model, however, there are periods where it diverges quite strongly from our predictions.
Still, if you want a general idea of where Bitcoin prices should be in the future based on historical trends, this model is a good place to start.
The difference between the predicted price and the actual price is known as the “error.” This measure of error can be used to decide whether to buy or sell.
When the actual Bitcoin price is much higher than the model price, this may be a good time to sell. However, if the actual price is much below the predicted price, it may be a good time to buy.
Praise And Criticism
The model has been subject to a great deal of positive, negative, and neutral reactions from the community. Vitalik Buterin, the founder of Ethereum, is against this model because it gives people a false sense of predestination and certainty that the number will eventually increase.
Indeed, the price curve of the stock-to-flow model does not decrease over time. This means that it cannot account for external factors and is considered by some to be a useful tool for pricing, but not as a model for future value.
Is The S2F Model Worth Using?
The S2F model is a great guide for understanding the dynamics of BTC price fluctuations over time, but it does not allow for the impact of external factors.
At its best, S2F may be most useful as a barometer of market sentiment, indicating whether Bitcoin is over- or underpriced about the prevailing market price.
Understanding Terms Related To Bitcoin Trading
You’ll see all kinds of terms and statistics when trading Bitcoin or other cryptocurrencies. Therefore, this guide will help break down the jargon for you.
Trading Platforms vs. Brokers vs. Marketplace
Bitcoin trading platforms are websites that match buyers and sellers for Bitcoin. The buyer simply transfers funds to their crypto exchange account, then the site automatically matches him with a seller who wishes to sell the same amount of Bitcoin. The buyer then receives the equivalent amount in Bitcoin transferred directly to their wallet.
A broker is a middleman, not a trading platform. They can be individuals, platforms, or websites that are not responsible for the execution of trades, and they don’t hold any of your money.
Brokers act as intermediaries between you and the exchange or market you’re trading in. They take a fee for their services, which can vary depending on your broker.
A marketplace is where buyers and sellers can communicate directly with each other to negotiate trade terms or negotiate prices.
The Order Book
The Order Book is a real-time list of all bids and asks for prices for given products on a particular exchange. All exchanges have order books. Buy and sell orders are posted on the order book.
Each side of the book contains bids and asks. A bid is a buy order, while an ask is a sell order. The price of a bid or ask is the price at which someone is willing to buy or sell.
The difference between the highest bid and lowest ask is known as the “spread”.
Overall, the difference between an ordinary bookseller’s shelf and an order book is that the latter lists bid and ask prices while the former only has published retail prices.
Bitcoin’s price is a highly volatile number, unlike stocks and most other financial assets, Bitcoin does not have a fixed price.
Bitcoin’s price isn’t set by any single exchange, so there is no one place to find the current Bitcoin price.
The value of Bitcoin is determined by the market, with the most popular exchanges being online sites where people buy and sell Bitcoins using their digital wallets.
In particular, the price of bitcoin in some countries may be different from its price in the United States as there are certain exchanges where it is traded at a discount or premium.
It happens because of the macroeconomic influence on the exchanges depending on the country and market.
You’ll often see “high” and “low” prices listed on exchanges. This means that Bitcoin traded at its highest and lowest price within the last 24 hours.
The volume is a measure of the total number of coins traded during a specific period in time.
Volume is a key factor in identifying whether a trend in the cryptocurrency market is significant or not.
At any given time, price is influenced by supply and demand – but only one can hold its ground. Pro traders use this signal as a measure for identifying how prominent a trend is.
If the trend is significant, you will usually see a large trading volume – which means many people are buying and selling that particular crypto e.g bitcoin. If the trend is weak, investors are less likely to buy or sell as frequently.
At times, when the price of Bitcoin moves in a certain direction, it’s not easy to tell if it’s going to continue or reverse.
The volume indicator contains this information, allowing you to foresee the future direction of a given crypto pair by taking into account the trading volume.
Market orders are the most common type of order and you can use them to buy or sell a set amount of cryptocurrency at the best available price.
It’s not like setting a limit price for your order – which would only match the limit price or better (i.e. if a buyer/seller does not fulfill immediately).
Unlike those, market orders are executed immediately as long as there is sufficient liquidity in the market to fill your order at that price.
A market order is executed immediately when you set the amount of Bitcoins you want to trade, and your exchange matches buyers or sellers to meet that demand.
Multiple individuals are likely to match the orders you place on the platform at different prices. Some of them may have a better offer than yours, and some may be willing to let you buy/sell at a lower/higher price.
For example, If you place a market order to buy five Bitcoins, the trading platform will now seek out the lowest prices on the market from sellers offering those coins.
Once the order has enough sellers to hand over five Bitcoins, it is completed.
You cannot be sure you will get all five of your Bitcoin orders at the same price. The price could change between each order and the seller may not have enough Bitcoin to fulfill all of your orders at once.
If you choose to buy more than the order size, it will continue to add sellers until your desired number of Bitcoins is purchased.
With a market order, you may end up selling or buying at a worse price than you expected. Market orders can be risky, so be careful.
Limit Trading is where you place an order to buy or sell at a set price. You can decide how much Bitcoin you can buy or sell, and the price of your order.
With a limited order, your interest in buying or selling is at the mercy of the market. Limit orders may remain unfilled/partially filled. So, the order will remain open until it gains a buyer or seller.
For example, if you wanted to buy two Bitcoins and the current price was $10,000, but you only had $9,500 to spend, you could place a limit order for $9,500.
Your order will be partially filled if only one seller was willing to buy Bitcoin at your set price. So the order will remain open until a buyer agrees on your limit price.
When you buy or sell a stock, there’s always a chance it could go down. But what if you could limit your losses?
A stop-loss order is an order you place with a broker to buy or sell the stock after the occurrence of a set price movement.
For example, let’s say you’re trading Bitcoin and the price moves up to $10,000. You know it’s going to come back down eventually, but you don’t know when or how much it will drop. So, you place a stop-loss order for $9,500 (the point where you want your position closed).
If the price of Bitcoin drops below $9,500 at any point during the day, then it will trigger your stop-loss order and close your position out automatically. Thus, you’d never have to worry about losing more than $500.
Maker And Taker Fees
The “maker”, or trader, is the one who adds liquidity to the market. The “taker” takes liquidity away from the market by removing an order from the order book.
The amount of the fee is calculated as a percentage of your trade’s total bitcoin volume. It is based on whether your trade attracts liquidity or removes it from the market.
Platforms charge maker fees when you place a limit order that executes against an order already on the order book. Your limit order will only execute if it can do so at a price that is equal to or better than the price of the resting order on the book.
Since the unfulfilled limit orders remain on the order book, a trader of such an order is a “market maker”. Contrastingly, a “market taker” is one whose orders are instantly executed.
For market makers, if you place a limit order to buy one Bitcoin at $10,000 (at least), and the lowest seller is offering one Bitcoin at $10,300, you have increased the liquidity of the market for sellers.
For market takers, if you want to buy at $10,000 per coin and the lowest seller is selling at $9,900 then your order will be placed in the exchange’s book and filled instantly. This way, you will be removing orders from the exchanges order book, thus called a market taker.
In bitcoin markets, these fees are charged per trade and not per transaction (e.g., when you buy or sell bitcoins). The fee amount depends on the market you’re trading on and your trading volume over a specific period.
Reading Price Charts
Price charts are a visual representation of market history, and traders use them to make decisions on when to buy or sell according to changing conditions.
We’re going to give you a quick introduction to reading price charts and the basic patterns they show.
The Japanese Candlesticks chart is used to track the price movements of stocks and futures. The Japanese Candlesticks chart looks like a bar chart (vertical) with an extra line that indicates the opening, high, low, and closes for each period of trading.
Therefore, traders also call it OHLC (opening, high, low, and close).
The color of a candlestick indicates the direction of a market; whether it’s surging or plunging. To determine if the closing price of a candle was higher or lower than the opening price, you can look at the color of the candle.
If a candle is green, it means that the closing price was higher than its opening. If it’s red, then the closing price is lower than its opening.
Whereas bar charts are a way to show how cryptocurrencies are trading at any point in time, Japanese Candlesticks show trends over a shorter period by including information about sentiment and market mood.
Bull And Bear Markets
Bull and bear are terms traders use to describe the two opposite sides of a market. The animals’ names act as metaphors using the way they attack.
A bull moves its horns upward when attacking. Thus, a bull market means things are going up. While a bear uses its paws downward during an attack, thus, a bear market is defined as downward trending.
Most markets move in waves and follow this trend; prices will go up for some time, but not forever. Eventually, there’s a correction, where prices level out and flip in the opposite direction.
Resistance And Support Levels
Support and resistance levels are price zones with many buy and sell orders, respectively. If a support level is broken, it becomes a new resistance level, and vice versa.
The longer a support or resistance level is in place and the more frequently it holds, the more significant it becomes.
It is not uncommon to see resistance and support levels set around round numbers e.g. 10,000 or 15,000. This is because the tendency for traders to fulfill their buy or sell Bitcoin orders at these round points proves a strong price barrier that prevents prices from moving beyond them.
It’s a common misconception that support and resistance levels predict where the price will go.
They actually predict where the trading volume of buyers has been strong enough to prevent the price from moving lower. Also, at what level there is enough selling pressure to prevent the price from moving higher?
Support and resistance levels are important areas in which one makes trading decisions. These levels help traders decide whether or not to open and close their trades, as well as manage their risk exposure. The more times these levels are tested, the more reliable they become.
Common Trading Mistakes To Avoid While Performing Bitcoin Trading
Congratulations! You’ve made it to the end of our beginner’s guide to trading.
Now that you know the basics, it’s time to get some field experience. The most important thing to keep in mind when you are first starting is that trading is a risky business.
Mistakes will happen—but by following the tips and tricks you’ve learned in this guide; you can minimize those mistakes.
Trading More Than You Can Accept To Lose
When you approach trading with the mindset that “I have to make this trade or I’ll lose all my money,” you’re setting yourself up for failure.
That’s because if you have a winning streak, your position size will grow and grow, eventually making it so that even a small loss will wipe out all your profits.
Instead, try thinking of trading as a long-term strategy. If you’re going to make money long-term, you need to be able to weather short-term losses while still keeping your eyes on the prize.
This means keeping your position sizes small and making sure that if things don’t go your way in one trade, it won’t have too much of an impact on your overall portfolio performance.
Trading Without A Plan
Trading without a plan is the most common mistake that new traders make. You see, trading is a lot like playing chess. You need to know what you’re doing and get ready before you even make your first move.
To trade successfully, you need to have something in place that helps you stay on track with your goals. If you don’t have a plan, then it’s easy to get distracted.
Minor things like price fluctuations or news headlines could change the direction of your trades. Having a plan helps keep you focused on what matters most: making good trades!
Leaving Trade Money On Cryptocurrency Exchanges
If you’re new to the world of cryptocurrency trading, understanding how to keep your money safe can be tricky. But it’s important to get this right—security is one of the biggest challenges in the crypto space right now.
The most common mistake traders make is leaving money on crypto exchanges they don’t trade with. This is a huge security risk.
It’s because even if you trust the company with your money, there’s no way to guarantee that hackers won’t be able to break in and steal it from them.
Most recently, the Binance exchange was hacked in October 2022, resulting in $570 million worth of digital currency being stolen.
The best way to avoid losing money from an exchange is by withdrawing all of your funds immediately after purchasing bitcoin or other cryptocurrencies.
This ensures that no one can take your money without your knowledge. It also ensures that your assets are safe from hackers who want to steal them!
Giving Way To Greed Or Fear
If you’ve ever been to the casino, you know that it’s easy to get caught up in the thrill of online gambling. It’s what makes them so popular—but it’s also what makes them so dangerous. The same thing happens when you’re trading Bitcoin.
Greed is a powerful motivator. While it can be a positive force in your life, greed can also lead you to make rash decisions. It can make you do things that are ultimately harmful to your trading strategy.
Fear is another strong motivator—and fear can cause us to make decisions that we regret later. You may be afraid of losing money or afraid of missing out on an opportunity.
Those fears can cause you to make poor decisions about how much risk you take or how much money you invest in one cryptocurrency versus another.
The key to avoiding these common mistakes is having patience and sticking with your strategy until the market settles down again.
Not Learning The Lesson
The biggest mistake you can make with Bitcoin or other crypto is not learning from your mistakes.
If you’ve ever lost money on a trade, you know how important it is to learn from those experiences. The same goes for Bitcoin trading.
If you’re going to be trading cryptocurrency, you must learn from your mistakes so that you can avoid making them again in the future.
The best way to do this is by learning from other people’s mistakes as well. And there are plenty of people out there who have made some pretty big ones!
FAQs On Bitcoin Trading
How Do I Trade Bitcoin?
To trade bitcoin, you need to set up a bitcoin wallet. Exchanges have their wallets, so find the one that offers the features you want. Then follow the instructions for trading your bitcoins.
Is Day Trading A Good Way To Make Money?
Day trading is a great way to make money, but it’s not for everyone. If you are willing to invest time and energy into learning the skills necessary, then this is a great option.
Should A Beginner Invest In Bitcoin?
If you’re just starting out, a low-risk investment is the best way to start. By working with experienced professionals, a beginner can easily learn how to navigate the digital currencies markets.
How Do You Trade Bitcoins For Beginners?
You can start trading bitcoin today in three simple steps: Decide how you want to trade, learn factors that move bitcoins price, choose a strategy, and make the move.
How To Make Money Trading Bitcoin?
Bitcoin’s price has been roller-coasting, but that doesn’t mean you can’t make money or even kill. You can trade Bitcoin, lend it or buy it, hold it and sell it when the time is right.
Is Bitcoin Easy To Trade?
Bitcoin is a digital asset that is not easy to trade. You must consider many factors before you purchase bitcoin. Bitcoin investment involves great risks of loss.
How Much Does It Cost To Trade 1 Bitcoin?
0% to 1.5% is the range of fees you can expect to pay when buying or selling Bitcoin. Fees will vary between exchanges.
Do BTC Wallets Hold Your Bitcoins?
No, they do not. BTC stays on the blockchain. Your bitcoin wallet only holds secure digital keys that give you access to the public address and private key linked to any given bitcoin balance.
Conclusion: How Do I Start Trading Bitcoins?
Although Bitcoin is a great investment opportunity, it is also a very risky one. The price of Bitcoin can be volatile and outside factors can affect it such as government regulations or market manipulation. Therefore, if you invest in Bitcoin, you should always keep in mind that you may lose all your money.
To avoid losing your money, you should never invest more than you can afford to lose. If you are not sure about the future of best Bitcoin casinos, it might be better for you to wait until the market stabilizes before investing any money in it.
Bitcoin trading can be quite profitable when done correctly. But there are also several mistakes that traders often make when trading Bitcoins on exchange platforms.
Remember, trading Bitcoin successfully is an art, so if you’re looking to master it, don’t ignore these basics.