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5 Easy Steps For Bitcoin Trading For Profit and Beginners
Bitcoin trading can be extremely profitable for professionals or beginners. The market is new, highly fragmented with huge spreads. Arbitrage and margin trading are widely available. Therefore, many people can make money trading bitcoins.
Bitcoin’s history of bubbles and volatility has perhaps done more to bring in new users and investors than any other aspect of the crpytocurrency.
Compared to other financial instruments, Bitcoin trading has very little barrier to entry. If you already own bitcoins, you can start trading almost instantly. In many cases, verification isn’t even required in order to trade.
If you are interested in trading Bitcoin then there are many online trading companies offering this product usually as a contract for difference or CFD.
Avatrade offers 20 to 1 leverage and good trading conditions on its Bitcoin CFD trading program.
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 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.
Bitcoin Trades 24/7
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 Volatile
Bitcoin is known for its rapid and frequent price movements. Looking at this daily chart from the CoinDesk BPI, it’s easy to spot multiple days with swings of 5% or more:
Bitcoin’s volatility creates exciting opportunities for traders who can reap quick benefits at anytime.
Find an Exchange
As mentioned earlier, there is no official Bitcoin exchange. Users have many choices and should consider the following factors when deciding on an exchange:
Regulation & Trust – Is the exchange trustworthy? Could the exchange run away with customer funds?
Location – If you must deposit fiat currency, and exchange that accepts payments from your country is required.
Fees - What percent of each trade is charged?
Liquidity – Large traders will need a Bitcoin exchange with high liquidity and good market depth.
Based on the factors above, the following exchanges dominate the Bitcoin exchange market:
Bitfinex - Bitfinex is the world’s #1 Bitcoin exchange in terms of USD trading volume, with about 25,000 BTC traded per day. Customers can trade with no verification if cryptocurrency is used as the deposit method.
Bitstamp - Bitstamp was founded in 2011 making it one of Bitcoin’s oldest exchanges. It’s currently the world’s second largest exchange based on USD volume, with a little under 10,000 BTC traded per day.
OKCoin - Bitcoin exchange based in China but trades in USD.
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Coinbase - Coinbase Exchange was the first regulated Bitcoin exchange in the United States. With about 8,000 BTC traded daily, it’s the world’s 4th largest exchange based on USD volume.
Kraken - Kraken is the #1 exchange in terms of EUR trading volume at ~6,000 BTC per day. It’s currently a top-15 exchange in terms of USD volume.
Bitcoin Trading in China
Global Bitcoin trading data shows that a very large percent of the global price trading volume comes from China. It’s important to understand that the Chinese exchanges lead the market, while the exchanges above simply follow China’s lead.
The main reason China dominates Bitcoin trading is because financial regulations in China are less strict than in other countries. Therefor, Chinese exchanges can offer leverage, lending, and futures options that exchanges in other countries can’t. Additionally, Chinese exchanges charge no fees so bots are free to trade back and forth to create volume.
If you’d like to learn more about Bitcoin trading in China, this video from Bitmain’s Jihan Wu provides additional insight.