Bitcoin is still among the top traded cryptocurrencies since its inception. With a 24-hour trading volume frequently exceeding $30 billion, we can see how large of a marketplace Bitcoin truly is.
Therefore, in this article, let`s take a closer look at Bitcoin tradinf basics and what a beginner cryptocurrency trader should know when choosing a cryptocurrency exchange to trade on.
How do I start trading bitcoins?
The first choice you have to make before you start crypto trading is the crypto exchange. Over the past years, the number of exchanges around has increased dramatically. However, key market players with the best trading offers have been well established for the past years.
Based on information from coinmarketcap.com, we can see that Binance, Huobi, Coinbase Pro, FTX, Kucoin, Bitfinex, Kraken are the top exchanges by trading volume. Therefore, choosing any of them as the place for trading Bitcoin and cryptocurrency trading, in general, is the best way to start.
Once you choose which crypto exchange you prefer, it`s time to open an account. Usually, you don’t need to verify your identity until you start trading with large sums and can do a bank account transfer to the exchange rather quickly. However, to further ensure that you comply with the platform, it is recommended to do a full KYC procedure.
The next step is to transfer your deposited fiat currency into a Bitcoin wallet. From there, you can trade crypto with spot or margin trading. However, in case you expect Bitcoin’s future price to drop or don’t want to hold any cryptocurrency yourself, it is best to choose a stablecoin such as USDT to store money on the cryptocurrency exchange.
Once done trading cryptocurrency, you can choose to either withdraw the crypto to your favorite crypto wallet. For a beginner trader, the best option is to choose a software wallet, while the safest option is to use a hardware wallet as it is impossible to be breached without the device itself.
Keep in mind that every crypto trading platform has its own rules and commission on withdrawal for both crypto and fiat. Therefore, you should do some research on whether or not it is worth transferring money in or out of the exchange in the case you are planning to hold your cryptocurrency for a long time.
Another option for withdrawing your cryptocurrency is to choose Bitcoin ATM. Once done trading, transfer money to a private wallet from the exchange. From there locate your closest BTC ATM.
What is the best way to trade bitcoin?
When trading crypto, choosing the best trading strategy is a crucial factor for success. First, you have to decide whether to trade the crypto asset spot or with margin.
Trading spot offers the lowest risk as you can hold the cryptocurrency forever and even transfer it to another exchange. On the other hand, trading margin or Bitcoin futures contracts offer the ability to increase your potential reward. For a relatively calm market such as Bitcoin derivatives, it is a great option. However, for more volatile cryptocurrencies, Bitcoin trading with leverage can lead to massive losses or even a margin call very fast.
Other options include trading CFDs on regular market platforms. CFD trading is also a good option for complete beginners that are only interested in speculating purely on price without the need to set up a cryptocurrency wallet.
Next, choosing the strategy involves deciding the time frame you want to trade-in. Spot trading is the best for a long-term speculator or investor as there are no additional costs for holding your cryptocurrency. Often, you can even earn additional crypto by staking the purchased digital currency on the Bitcoin exchange itself.
However, if you opt for a short-term strategy using technical analysis, margin or futures contract trading, or even trading cryptocurrency CFDs might be the best option for you. Keep in mind, making money trading Bitcoin is not an easy task if you trade frequently as the market is very volatile overall and a sharp move to the opposite side can quickly wipe out your leveraged position.
Once you have decided on the timeframe to trade cryptocurrency on, the crypto trader now should establish clear support and resistance levels, as well as determine the overall market sentiment. From there, you can decide where to enter and exit the market.
Unlike wall street, virtual currency trading does not have breaks and anyone can participate whenever they choose to. Therefore, trading at any time zone is possible at any time of the day. This means there is no pause during holidays or nights, and you need to make sure that your position is not left overnight in case of large leverage use.
An additional thing to consider is your tradestation setup. Make sure it is set up in a safe place and you have two-factor authentification turned on as your Bitcoin broker is not responsible for any losses due to your computer being taken over.
How to trade Bitcoin
Trading Bitcoin is relatively easy. As mentioned before, exchanges that offer Bitcoin future contacts and Bitcoin CFD trading have increased in numbers over the past years. Therefore, the first step to begin trading Bitcoin is to open an exchange account.
As mentioned in our how to invest in Bitcoin guide, choosing a reputable exchange with plenty of market experience is important as it reduces the risk of the exchange being hacked or money disappearing. Therefore, options such as Coinbase, Binance, Huobi, and Kraken are among the best. They offer the lowest trading fees and have a good track record overall.
Cryptocurrency trading on exchanges like these also offers the best variety of cryptocurrencies that have a good track record and are selected to make sure they match each exchange’s listing criteria. Therefore, you can trade and invest knowing that the crypto projects you select will not suddenly lose their value because of exit scams or sudden massive pump and dump.
Once you have selected the exchange you prefer, look at the cryptocurrency market that they offer. Most exchanges offer hundreds on tradable markets, with the most popular being crypto pairs versus fiat or stable currency. Next, are pairs tradable against Bitcoin. Furthermore, exchanges also offer to trade against Bitcoin and other altcoins such as Ethereum and Tron.
One of the most popular exchanges, Binance also offers BNB market trading as Binance Coin is their native cryptocurrency. However, not all altcoins can be traded against it.
Furthermore, when compared to spot market selection, leveraged trading does not have as much variety. Usually, only the most popular and well-established cryptocurrency pairs such as Bitcoin, Ethereum, Bitcoin Cash, Ripple, and Litecoin are available for trading. That being said Bitcoin trading with margin is available on every exchange that offers leverage.
Once you select pair that you want to trade Bitcoin against such as BTC/USDT, you have to choose between limit, market, or stop-limit order.
A limit order means that your order executes automatically as soon as the market drops to your specified price point.
Market order means that your order gets executed immediately based on the best market offer at the current time. This means that you can purchase Bitcoin without any further complications and transfer it to your private BTC wallet immediately.
Further, stop-limit order means that you purchase Bitcoin when a specific market price is reached to the upside. This is useful when you want to set a stop loss or purchase Bitcoin in the case that the market price breaks out of a consolidation of the previous swing high.
Once you have chosen the market and order type, enter the amount of cryptocurrency you want to purchase and in case of a limit or stop-limit order, the market price that you want to purchase cryptocurrency for. From there, you wait until the order is executed and see your new coins in your exchange wallet.
If you want, keep your Bitcoin on the exchange or transfer it to a private wallet. Read our guide on Bitcoin wallets in 2021 to learn more about the best ways to store your cryptocurrency.
Bitcoin trading guide for beginners
Overall, Bitcoin trading is relatively easy, all you have to do is set up your exchange account, transfer fiat currency from your bank account onto the exchange, and find Bitcoin pair to trade against. However, important is also to choose the right strategy.
Since Bitcoin is less volatile when compared to other cryptocurrencies, trading with a margin on short-term time frames is possible if you want the extra risk. However, choosing too much leverage is still not advisable, it is best to not got over 3x when margin trading.
Another thing to keep in mind when Bitcoin trading is to check what the market price action structure is like. Try to determine the appropriate closest support and resistance level from which to enter or exit the market. This can be done by looking at the charting tools that exchanges offer or using an alternative source such as tradingview.com.
Additionally, you can see our daily price prediction articles on Bitcoin and other major altcoins to grasp ideas on how you should trade.
As mentioned before, once you have done the above-mentioned steps, you can enter your first trade. However, important is also to find the discipline to stick to your original trading plan and not risk too much to keep your bank account from further loss.
To trade Bitcoin you only need to have an exchange account and a way to deposit money onto it. Either depositing fiat or crypto is fine as long as you make sure that the exchange you have chosen is reputable and offers good trading conditions.
Choosing one of the largest exchanges is the simplest way to go as they have grown along with the market for several years and there is a reason why they are still here. Usually, Binance and Coinbase is a good place to start.
From there, find Bitcoin tradable pairs either on the spot or margin/futures market. Select the order type that you prefer and you are ready to do your first trade.
Also, keep in mind that your strategy and timeframe is important as it impacts the size of your position while trading.