As Bitcoin is the world’s No. 1 cryptocurrency, many see it as the most challenging currency for traditional currencies. However, when looking at Bitcoin’s history, it appears that a lot of volatility awaits trade bitcoin.
There are two ways to trade bitcoin: either by buying the currency itself in hopes of selling it and making a profit by that, or speculating on its value without owning the symbol, and that is how the contracts for difference (CFDs) work.
A CFD enables you to trade the contract based on prices in the underlying market. CFDs are considered leveraged products, meaning that you can place a small initial deposit and get more exposure. This may magnify your profits, and it may have the same effect on your losses.
Should I use an exchange to trade bitcoin?
Bitcoin exchanges operate in the same way as traditional exchanges, allowing customers to buy currency from them or sell it to one another. However, a set of features are completely absent in this case:
- These exchanges lack adequate regulation, public records, and the infrastructure to respond quickly to requests for support.
- The compatibility drivers and servers in use cannot be trusted, which could lead to market disruptions or low implementation accuracy
- These exchanges impose fees and restrictions on the financing and withdrawing from your account with them, while the funds themselves may take days to obtain these balances.
By trading Bitcoin CFDs, you get a significant improvement in liquidity, at the rate you choose. When you buy and sell directly from the stock exchange, you often have to accept several prices to be able to complete your order.
What drives Bitcoin’s price?
While bitcoin volatility makes this hypothetical currency an attractive opportunity to trade, it also makes it a risky market to speculate in. Bitcoin prices may change dramatically and suddenly, and since the Bitcoin market is operating around the clock, it could happen at any time of the day.
Fluctuations in Bitcoin price are driven by several external factors, including:
Trade Bitcoin – Supply
There may be a limited supply of bitcoin, 21 million, all expected to be “mined” by 2040. However, currency abundance fluctuates depending on the rate at which it enters the market and the activity of the bitcoin holders.
The value of the bitcoin market is affected by how the currency is perceived as valuable to customers and whether they are looking to buy it as soon as they get the opportunity or sell it as quickly as possible.
Trade Bitcoin – Negative press material
All currencies are affected by public opinion, but Bitcoin is considered the most currency affected by it, as the age, value, and security of this cryptocurrency are considered questionable even in good times in the life of Bitcoin
Bitcoin’s characterization and confidence in traditional currencies will depend on integrating Bitcoin into new payment systems, crowdfunding platforms, and more.
Trade Bitcoin – Industry adoption of Bitcoin
Most companies worldwide will adopt Bitcoin, and it is not yet clear what impact this will have on it.
Any major event will significantly impact the cryptocurrency, including regulatory changes, security holes, setbacks on the macroeconomic level, and more.
Bitcoin trading strategies
Open a position based on expected short-term moves, and close it when the trading day is ending.
This strategy works for you if you want to respond to short-term opportunities in the bitcoin market due to developing news or emerging patterns.
Trade volatility or price swing
Grab trends as they form, and hold the center until the trend runs its course or shows signs of reversal.
This strategy suits you if you want to take advantage of opportunities based on the strength of market activity and its trends.
Trade Bitcoin – Lightning speculation
Make frequent intraday trades on small price movements.
This strategy works for you if you want to position yourself to get continuous small profits, rather than waiting for a fake breakout or significant downtime.
Automate your trading operations to respond to changing market conditions on your behalf.
This strategy works for you in case you want to be a passive trader.
Steps in Trade Bitcoin Process
Set up a trading plan
After you’ve chosen a trading strategy, it may help prepare a trading plan if you are new to the markets. A trading plan may help you make objective decisions even if the stakes are high; thus, you will not leave the trades open for a long time or close them prematurely.
Here are some tips for preparing a trading plan:
- Define the goals you want to achieve, and divide them into short-term and long-term goals.
- Decide on the risk acceptable in each trade, and the amount of risk you are willing to take as a whole.
- Choose your risk-reward ratio to find out what potential profits you need to cover potential losses.
- Choose the markets you want to trade. Do you want to trade bitcoin only or try other cryptocurrencies?
Trade Bitcoin – Do your research
Before you start trading, you should be aware of the latest bitcoin news to have a good understanding of what will happen to the price of the cryptocurrency in the future.
When interpreting Bitcoin’s behavior, charts can be a valuable tool. Past data may help you understand how the market is moving, while a time frame comparison gives a closer insight into trends and patterns.
Make a trade
Once your position is stabilized, you will need to place a trade using a platform.
If you believe that the value of Bitcoin will rise, then you will buy, and you will sell if you think that the value will decrease.
To close your position, you have to reverse what you did when opening the position. If you bought at the beginning of trading, you would have to sell the same amount; If you sell, you will have to buy this time.