Want to learn how to trade bitcoin as a beginner?
Bitcoin is the first-ever cryptocurrency to hit the mainstream. As at the time this article is being written, the current USD price of 1 volume of bitcoin is $23, 738. Flashback to July 2010, a volume of bitcoin was worth $0.008.
Yes, bitcoin is that volatile (in fact, it’s the most circulated digital currency right now after Etherum). And it only makes sense that you’re here, wanting to join the over 1 million global bitcoin traders who are making a profit consistently trading the “digital gold”. To know how to trade bitcoin as a beginner below is everything you need to get started to profitability with bitcoin.
To start trading bitcoin right away, you need to;
- Have a good bitcoin trading strategy
- Backtest your strategy for, at least, a period of 2 months on a demo account
- Choose the best broker in your country
- Open a live account with your broker
- Get verified and fund your account
- Execute your first-ever trade and keep going
As easy as that may sound, you’re never making it past the first step without the detailed bitcoin trading guide of how to trade bitcoin as a beginner shared below.
Know The Difference Between Bitcoin Trading and Bitcoin Investment
Before you learn how to trade bitcoin as a beginner, get this straight first; being a bitcoin trader is different from a bitcoin investor. As a trader, you are making short term investments by either selling at a high to buy at a low or buying at a low to sell when the price of bitcoin rises, every day.
- You fund your account in USD, say $41, 000
- And you enter a buy-trade when bitcoin is at $20, 500
- You wait for the next 30 minutes and the price rises to $21, 500
- You close that trade
- You have just made a profit of $2000
On the flip side, as a bitcoin investor, you’re making a long-term investment that could last years or months.
- It is July 2010
- You hoard 20 volumes of bitcoin at the price of $0.010
- You wait till this very moment in 2020 when a volume of bitcoin is $23, 738
- In just 10years, your $0.2 investment maximized to 20 ✕ 23, 738 = $474, 760
Still a bitcoin trader? Great. Let’s get started with the basic terminologies of bitcoin trading below.
Getting Familiar With Bitcoin Trading Terminologies
- Broker; bitcoin brokers are the institutions through which you can execute trading orders on bitcoin.
- Trading platform; a trading platform is either an app-based system or a website-based one that provides you with the needed trading tools and a trading facility that merges you with other traders as a bitcoin trader.
- Volatility; this is the measurement of how rapidly or slowly prices change. Low volatility means there are fewer price movements while high volatility signals high trading actions.
- Order book; it is a list on your broker’s platform that shows the current bid and ask prices of bitcoin.
- Bid price; also called buy orders, the bid prices of bitcoin are the prices available to buy bitcoin.
- Ask price; also called sell orders, the ask prices of bitcoin are the princess available to sell bitcoin.
- Volume; this is the amount of bitcoin that is being traded in a given timeframe on the trading chart.
- Trends; a trend is price in a directional movement. Bitcoin price can be on an uptrend, a downtrend, or a range (sideways movement).
- Order; it is your chosen mode of executing your trade. There are 4 types of orders namely instant order, stop-loss order, limit order, and maker order.
- Take profit; this is the price point where you want your profit exit to be triggered.
- Stop-loss; it is the price point where your loss exit is triggered automatically. Using stop-loss is an option but it is a smart way to minimize risks.
Now, to the next step.
Have A Trading Strategy
There are hundreds of crypto trading strategies out there right now. But they are all grouped in two; price action strategies and indicator strategies.
- Price action strategies; bitcoin trading strategies in this category are used by technical analysts who trade based on the present price behavior. As a price action trader, you will be executing your trades on trendlines, support zones, and resistance zones. You can also trade based on patterns such as double-top, double-bottom, butterfly, and so on.
- Indicator strategies; as an indicator trader, you will be relying on moving averages, average true range, Bollinger Bands, and other indicators to execute your trade.
How To Choose The Best Bitcoin Broker/Exchange
- Make sure the Exchange is either based in your country or accepts deposits with the currency you’re holding.
- Locate that they allow deposits through the payment gateway available to you.
- Compare their exchange fees with those of other Exchanges to make sure you’re not getting ripped off.
- Find out if the site is secured. Exchanges using HTTPS sites are more secure than their HTTP counterparts.
- Know how fast their executions are.
- Make sure their order book has a high volume. This only means that more people are trading through them.
- Make sure they are reputable.
- Finally, choose only an Exchange that is approved for legal operation in your country.
Backtest Your Strategy
After choosing your strategy group and now have at least 3 bitcoin trading strategies in that group, open a demo account with your chosen broker to backtest your strategy for at least 3 months. Once you start getting results with all or some of the strategies, it’s time to go live.
Open A Live Account
Bitcoin trading account opening processes vary from broker to broker. But here’s the most common step-by-step process.
- Register with your Exchange
- Create a bitcoin account
Get Verified And Fund Your Account
Most Exchanges will reach back to you after 5-6 business days or after 24hours to let you know if your account is verified. But once verified, you can go ahead to fund your account with your first capital.
After verification, execute your first trade and make sure you have a risk management strategy that maximizes your profits while minimizing your loss at the same time.