A Guide for Trading Bitcoin
When trading Bitcoin, you can use a crypto exchange to store and own this cryptocurrency. Alternatively, you can use price movements when trading this virtual currency for profits through CFD trading. That means you take your position on Bitcoin price in the market, depending on whether you expect it to fall or rise, based on the purchase and sale process.
Most cryptocurrencies available today emerged after Bitcoin. That’s why Bitcoin is the go-to cryptocurrency for most people. However, some people don’t understand it and how it works. What’s more, Bitcoin is a volatile cryptocurrency with massive price shifts. And this contributes to Bitcoin's risk and appeal.
Before they start trading Bitcoin, many people have several questions for which they seek answers. That’s why sites like Crypto Genius try to answer some questions about Bitcoin trading. Perhaps, you can visit this site to get answers to some questions about this activity. In this article, you will learn more about Bitcoin trading and the steps to follow.
Bitcoin Trading Definition
Bitcoin trading refers to speculating on Bitcoin’s price movements. Traditionally, this has entailed purchasing the cryptocurrency via an exchange, hoping that the price will increase in time. However, cryptocurrency traders now use derivatives when speculating on the falling and rising costs to benefit from Bitcoin’s volatility.
Ways to Trade Bitcoin
People trade Bitcoin in two significant ways. One way to exchange this cryptocurrency for a profit entails purchasing Bitcoin units on a crypto exchange, hoping to sell them at a higher price to make a profit. With this approach, you depend on the matching servers of the Bitcoin exchange, and these are sometimes unreliable. The other method relies on price movements’ speculation without owning the virtual currency. Traders practice this method through their CFD trading accounts.
Bitcoin exchanges that hold the traders’ Bitcoin units store Bitcoin in large amounts. Some platforms also keep other cryptocurrencies. Unfortunately, this can make them prime targets for thieves. Theft and hacking from crypto exchanges are common, and it leads to severe losses.
Thus, keeping Bitcoin in a crypto exchange can be risky. Cryptocurrencies have fewer regulations. That’s why they don’t have a lot of support from the other parties. This support could be necessary because matching servers on the exchanges could be unreliable. And this can lead to inaccurate trade execution since service providers do not update their systems promptly.
CFD trading refers to a derivative product whose basis is the globally available financial leverage. Some people use CFDs as their hedging tool. That means they can offset losses from a physical trade in a market by opening their “sell” CFD position. And this can be helpful when the market is volatile since prices depend on sudden and regular movements. Depending on your situation, you can offset losses made against profit for taxation purposes.
Strategies for Trading Bitcoin
Bitcoin traders implement different strategies. The suitability of a trading strategy depends on your experience level, invested capital, daily discipline, and free time. Your goals should also dictate the plan you implement when trading Bitcoin.
Here are common Bitcoin trading strategies you can try.
- Swing-trading Bitcoin
- Day-trading Bitcoin
- Scalping Bitcoin
Traders use trading automation or algorithmic trading in forex markets. When trading Bitcoin, you can use crypto trading software to optimize your activity. Today, Bitcoin traders can choose from a wide range of trading software. Some software available allows traders to instruct them to select and execute trades on their behalf. Thus, traders don’t have to spend hours studying price charts and analyzing market trends because the software does everything for them. Nevertheless, you should pick the software to use carefully to get one that suits your Bitcoin trading strategy and goals.