A Comprehensive Guide to Trading Bitcoin in the Year 2024
A Comprehensive Guide to Trading Bitcoin in the Year 2024. Trading cryptocurrencies like Bitcoin is all about capitalising on price changes in the short to medium term. Its capacity to achieve new price peaks has made the flagship cryptocurrency appealing.
Trading is the means by which tens of thousands of individuals across the globe profit from the extraordinary price fluctuation of Bitcoin. How to trade Bitcoin is covered in detail on this page. Learn the ropes with these easy-to-follow instructions, find out where to trade Bitcoin, and get the hang of trading methods.
You should be able to register an account, add funds, develop your trading strategy, and place orders by the time you reach the bottom of this page. Stay on the road, because making money trading Bitcoin is no picnic. Mastery is a process that requires both time and effort.
How to Trade Bitcoin – Quick Guide
To immediately begin trading Bitcoin, you’ll need to first sign up for a broker or exchange.
1. Sign up with a broker or exchange
Finding a reliable broker or exchange to join is essential. Verify if your prospective broker is regulated in your area and uses a standard trading platform for order placement and prediction-making. A viable alternative would be a regulated broker with a wide variety of coins, such as eToro, which is available in many countries.
2. Fund your account
It is necessary to fund your account after account creation and Know Your Customer verification. Make a mental note of the ways your site accepts payments and funds. Bank transfers, electronic wallets (such as PayPal), and most brokers accept these methods.
3. Start trading
Go to your broker’s trading terminal once your account is funded. You can place buy and sell orders through the terminal’s order book, which acts as an interface with a chart that follows price changes, indicators that help you estimate future price movements, and so on.
What is Bitcoin Trading?
Trading is buying and selling an asset to profit from its price fluctuation. This is about Bitcoin’s ascent and fall.
Since both entail buying and selling assets, trading and investing are commonly misunderstood. They differ in execution, timeframe, and mindsets needed to succeed. Trading is about large price movements (volatility). The larger the movement, the more profitable. Traders earn from both sides of these swings. However, price drops do not benefit investors. While price swings are significant to investors, they only profit when their asset rises. So, they focus on items they think will rise in value. This shift in focus changes what both people value in assets. Second, traders want volume and liquidity, while investors expect a return on equity and good cash flow. Investors focus on the company, project, or market behind an asset, while traders only watch its price.
Traders may just care about Bitcoin market volume and liquidity, while investors may focus on mainstream adoption, market mood, and crypto legislation. The trader focuses on how Bitcoin moves, whereas the investor concentrates on its value. Third, traders aim for short-medium terms. Traders never keep assets long. Anything longer is an investment, from 5 minutes to 1 year—always close transactions. Investors buy to hold for years. Fourthly, traders can profit from asset volatility without owning them because trading relies only on price changes. Derivatives let traders profit from price changes without owning the assets. However, investing includes asset ownership. An investor must purchase Bitcoin to benefit. Crypto investors typically acquire crypto from exchanges, while traders utilise brokers to trade derivatives.
Some crypto exchanges offer derivatives, and some brokers, like eToro, sell cryptocurrencies, but the former deals with real assets while the latter deals with derivatives.
There are three major types of crypto derivatives. They include:
- CFDs: a Contract for Difference (CFD) is a product that only reflects the ever-changing value of Bitcoin as the underlying asset without the trader needing to buy the digital currency. Buying CFDs when Bitcoin is dipping and selling when its value is high lets the trader profit by pocketing the difference.
- Futures: Futures are time-bound trades that the investor is obliged to close at a predetermined time. Like CFDs, the price difference can potentially generate profits.
- Options: Unlike Futures, a trader has the right to close the contract at any time. This can help in profiting when the trader is comfortable with the value increase or closing if the contract is starting to build losses.
Traders can instantly buy and sell these derivatives, allowing for a much faster way to make profits than holding Bitcoin.
What is Bitcoin Trading?
Trading involves buying and selling assets to profit from price changes. BTC volatility.
Some confuse trade and investing because both involve buying and selling assets. Different execution, timing, and success approaches exist. Trading entails huge price swings. Profitable moves are bigger. These moves help both sides. Price drops anger investors. Although price movements matter to investors, they only profit when their asset appreciates. Liked items rank higher. This emphasis changes asset values. Traders want ROI, cash flow, and liquidity. A company, initiative, or market is assessed by investors and priced by traders.
Investors may research mainstream adoption, market attitude, and crypto legislation; traders may check Bitcoin volume and liquidity.
Investors and traders value Bitcoin. Dealers prefer Short-Medium. No trader hoards. Secure 5-minute to 1-year investments. Long-term investors hold. Fourth, price-based trading lets traders profit from asset volatility without owning. Derivatives let traders profit from price changes without owning assets. We own assets when investing. Benefiting investors must buy Bitcoin: crypto exchanges and brokers service derivative traders.
EToro sells cryptocurrency, not derivatives.
There are three major types of crypto derivatives. They include:
- CFDs: Contracts for Difference (CFDs) reflect Bitcoin’s ever-changing value without requiring the trader to buy it. Buying CFDs when Bitcoin is falling and selling them when it’s rising allows traders to profit.
- Futures: Investors must close futures trades at a certain time. Like CFDs, price differences can yield gains.
- Options: Unlike Futures, a trader has the right to close the contract at any time. This can help in profiting when the trader is comfortable with the value increase or closing if the contract is starting to build losses.
Traders can instantly buy and sell these derivatives, allowing for a much faster way to make profits than holding Bitcoin.
Bitcoin Trading vs Investing
Bitcoin Trading
BTC trading involves profiting from Bitcoin’s price movements either by buying and selling the coin itself or using derivatives like CFDs, futures, and options. Brokers that offer these derivatives usually provide leverage facilities.
Leverage is a credit facility that brokers extend to traders to help them increase the size of their position and the potential profit.
Pros of Bitcoin Trading
- Access to leverage
- Highly liquid. You can easily open and close trades.
- 24/7 trading. Unlike traditional markets, crypto markets are always open
- Not affected by market direction. You can profit when Bitcoin rises and falls
- Need to handle Bitcoin directly or manage wallets
- Major brokers are usually regulated
Cons of Bitcoin trading
- Lack of proper regulation
- Volatility. While volatility can also be an asset, the crypto market is known for violent swings
- Geographical restrictions. Crypto CFDs are not authorised in certain countries like the UK.
Bitcoin Investing
Bitcoin investing involves buying Bitcoin, usually in exchange, with the goal of profiting from long-term value appreciation.
Pros of Bitcoin investing
- Ownership of the underlying asset
- Ability to use Bitcoin as collateral for loans
- Potential long-term wealth source
- Total control over the asset
Cons of Bitcoin investing
- Cannot benefit from price declines
- Market prone to significant losses
- Some exchanges aren’t regulated
Where Can I Trade Bitcoin?
Start with our preferred brokers. It combines online brokers with crypto derivative exchanges. Both platforms are ideal for Bitcoin trading and have comparable steps. However, they differ and offer distinct benefits.
Some of the Top Platforms for trading Bitcoin
Online Brokers
Brokers let you buy Bitcoin when it’s low and sell it when it’s high. Instead of buying Bitcoin through online brokers, traders buy contracts that give them their original money plus any profit/loss when the contract expires or closes. Except for a few brokers, most trading platforms provide Bitcoin derivatives, which are contracts that follow Bitcoin and include intricate rights and duties on both sides.
Benefits of Using a Broker to Trade Bitcoin
- There’s no need to buy Bitcoins. You can buy any of the available contracts and then sell them off when sufficient profits are made.
- You can determine your level of exposure to the underlying asset and increase profitability through leveraged trading. Some brokers offer as much as 100x leverage.
- Since Bitcoin is a cost-effective digital asset, traders can start with a very low amount, with some exchanges offering as low as $100 for derivatives.
- Reputable Bitcoin brokers are compliant with regulatory authorities in the United States, so they offer greater security.
- With clarity on the different fees they take on bitcoin trading, brokers can be very transparent in their dealings with traders.
- Brokers also tend to attract experienced traders and offer a variety of trading tools that make it easier to make trades and the trading decisions themselves.
Derivative Exchanges
In their early days, Bitcoin exchanges were simple buying and selling platforms with easy onboarding. Over time, trading platforms have included features like derivatives. Trading on several exchanges no longer requires broker registration.
Bitcoin exchanges like Binance and OKEx fall under derivative exchanges. Both offer Futures, Options, and 100x leverage.
Benefits of Using an Exchange to Trade Bitcoin
Though the end game of using a broker or a crypto exchange is to trade Bitcoins and generate profits, there are some advantages of using an exchange.
- Bitcoin exchanges allow their users to buy Bitcoins and hold the digital coins as opposed to a broker firm in which traders only buy or sell contracts that follow BTC price movements. The users can withdraw their BTC from the exchange at any time.
- Exchanges have wider support for deposits and withdrawals, with peer-to-peer (p2p) markets often supporting tens of payment methods and fiat currencies.
- This also translates into a greater selection of Bitcoin trading pairs and more flexibility for users to buy or sell Bitcoin against different currencies.
- Exchanges also offer a much-simplified experience, letting novice users execute trades more easily than the complex contracts brokers offer.
- Many exchanges have also started offering derivatives, including leverages, meaning a user can avail of both types of services with one platform.
