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In the world of global currency trading, bitcoin trading has become the biggest subject of discussion due to its novelty. For a long time, investors interested in financial markets would naturally start with stocks, contracts for difference (CFD), foreign exchange, options, or exchange-traded funds. The advent of bitcoin trading has added another exciting element to a trader’s portfolio.
As a beginner trader, you have multiple questions about this new trading option. After all, the most successful traders adopt trends and movements early to excel in the forex markets.
Whatever questions you might have, you can find out more about bitcoin trading here. Keep reading to get the answers.
Reasons to Consider Bitcoin Trading
Bitcoin has started a revolution in the traditional financial markets by breaking down global barriers in the exchange of value. This cryptocurrency continues opening up the global economy, and therein lies its potential.
It is this potential that drives interest in bitcoin trading. Still not convinced about bitcoin trading? Here are some reasons experts think it’s a good idea.
- 24/7 trading opportunities: The cryptocurrency market is open around the clock. You can now trade 24/7, 7 days a week, 365 days a year, giving you more opportunities to make money.
- Decentralized currency: Bitcoin is a non-fiat currency without any centralized regulatory authority. It is safer than fiat currency pairs in trading as no government actions, political crises, or economic shocks can affect it.
- High volatility: While this might look like a disadvantage, it’s what makes bitcoin trading so popular. Prices can double overnight, and for traders, this is great news. The high volatility makes bitcoin a popular asset in the trading world.
- Easy to trade: If you have some background in other trades, you can easily start trading in bitcoin. It’s not complicated to learn and you can easily guess the bitcoin price movements.
- Investment in bitcoin: Bitcoin exploded in 2017 with the value of 1 BTC reaching over $20,000. Many industries have continued embracing it and this makes it a great asset for your trading portfolio.
Using a Forex Broker for Bitcoin Trading
Cryptocurrency exchanges allow traders to buy the cryptocurrency from or sell it to one another, but they are not the only option you have. The best forex brokers now include crypto pairs on their platforms, and you have two trading options:
- You can either trade in pairs such as BTC/USD which works just like traditional currency pairs such as EUR/USD. You have the option of going long or short, just like with normal currency pairs trading. In this type of trade, you have to keep track of both the bitcoin price and fit currency price.
- The other option is to trade bitcoin CFDs (trading on bitcoin price movement). This option allows you to take advantage of bitcoin volatility without owning any cryptocurrency. You can still go short or long. You only have to pay attention to the price of bitcoin.
It’s important to distinguish between buying bitcoin and trading bitcoin. People buy bitcoin as an investment but bitcoin traders make a profit from speculating price movements. In bitcoin trading, you don’t own the asset but you profit from speculating whether the price will rise or fall.
Getting Started in Bitcoin Trading
While bitcoin trading has become very popular, you need to get the right information to get started. Here are a few steps to follow to start trading in bitcoin:
Understand Bitcoin Trading Strategies
There are four main bitcoin trading strategies you should understand.
- Swing trading: Where you catch trends the moment they form and hold on until the trend runs its course or there are signs of reversal.
- Day trading: A strategy where you don’t hold a trade for more than a day.
- Scalping: A strategy where you open and close frequent, intraday trades on minor price movements.
- Automated trading: It’s possible to use AI software to trade on your behalf by setting out what profits you want.
Open An Account With A Bitcoin Forex Broker
Find a reputable bitcoin brokerage, preferably licensed by highly respected bodies, such as the FCA and CySEC, and set up a trading account.
Build a Trading Plan
This plan ensures you make objective decisions even when the stakes are high. Short and long-term goals, define a trading budget, decide your acceptable risk from each trade, set a risk-reward ratio, set realistic profit expectations, and choose a trading style.
Do Your Research
Get to speed with the latest bitcoin news from multiple sources, analyze the news. You should also leverage all research and analysis tools and features on your forex bitcoin platform to understand how the market is moving.
Place a Trade
For a start, place a trade with a demo account on your forex broker’s platform. Enter the amount, define your close conditions to manage the risks. You are now ready to start learning and trading.
Understanding Bitcoin Price Movements
To become a good bitcoin trader, you have to understand how bitcoin prices move. Unlike traditional currencies, bitcoin isn’t affected by politics or social factors.
Some factors that affect bitcoin prices include bitcoin supply, BTC market cap, and negative cryptocurrency news. Others are new cryptocurrency laws and regulations and the rate of bitcoin adoption.
What about Bitcoin Mining?
Bitcoin mining is an integral component of the bitcoin ecosystem. Bitcoin miners get rewarded with bitcoins for completing complex computational problems that secure the network. However, it is a process that requires massive investment in hardware and software running into thousands of dollars.
With bitcoin’s coins volatility, trading in this cryptocurrency is a much more viable way to return a profit compared to bitcoin mining.