How To Trade Bitcoin: The Ultimate Guide For Profit

how to trade bitcoin

Are you interested in delving into the world of Bitcoin trading? Perhaps you’re already gambling and are seeking a comprehensive refresher on the intricacies of how to trade Bitcoin. You’ve come to the right place.

In this article, we will explore the fundamental concepts of BTC trading, various strategies, and the accessible paths for individuals to engage in the pioneering digital currency.

Join us on this educational journey as we demystify the world of how to trade Bitcoin!

What is Bitcoin trading?

Bitcoin trading is when people try to guess what the price of the largest cryptocurrency, BTC, will be in the future so they can make money from it. It’s kind of like buying something cheap and then selling it for more money later, which is something we do in regular business. When the price of BTC goes up, traders make a profit.

BTC was made by someone named Satoshi Nakamoto in 2009, and since then, people have been trying to build an economy around it. This is how to trade Bitcoin. The future of Bitcoin looks promising, so let’s learn more about it.

How does Bitcoin trading work?

trading bitcoin for beginners

As I mentioned before, how to trade Bitcoin is a bit like buying and selling other things, but BTC is different in its own way. First, you should know what is Bitcoin. Especially, because BTC can change in price a lot very quickly, going up or down by a lot in just a few minutes or days.

So, it’s important to learn how to trade Bitcoin if you want to make money with it.

Most common methods of trading Bitcoin

To earn money by trading Bitcoins, there are two primary methods, each with its own approach. Let’s explore them:

  1. Buying and Holding BTC: One way to profit from BTC involves purchasing the digital currency on a cryptocurrency exchange or trading platform. The idea is to buy BTC with the hope that its value will increase over time, allowing you to sell it later at a higher price. This approach is commonly followed by individual investors or those who are not professional Bitcoin traders.
  2. Speculating on BTC’s Price with Contracts for Difference (CFD): The second option entails speculating on the price of BTC using a financial instrument known as a Contract for Difference (CFD). Instead of actually owning BTC, you open an account with a CFD brokerage or trading platform. Through this method, you can profit from price fluctuations in BTC without owning the cryptocurrency itself.

These two methods are among the most popular ways, how to trade Bitcoin today. We will provide more details about these methods below.

Bitcoin exchanges

Bitcoin exchanges are online platforms designed for trading digital currencies like BTC, Ethereum (ETH), Litecoin (LTC), and other similar cryptocurrencies. To get started, users need to create an account on these platforms and set up a digital wallet, such as a Bitcoin wallet, to store their digital assets, including BTC. This typically involves providing personal information to meet Know-Your-Customer (KYC) requirements.

There are different types of cryptocurrency exchanges, but the most popular ones are the centralized exchanges such as Binance, Gemini, Coinbase, and Kraken. These platforms offer features similar to traditional financial markets, although they often operate with less regulatory oversight. On these exchanges, users can buy BTC by using payment methods like credit cards linked to fiat currencies such as the US Dollar (USD) or the British Pound (GBP). They can place various types of orders, like limit orders or market orders, to buy or sell BTC based on their preferences. If you are interested in day trading crypto, you can use one of these exchanges to start buying and selling cryptocurrencies on a daily basis.

Over the years, cryptocurrency exchanges have improved their liquidity, making it easier for users to execute orders quickly. However, it’s important to note that the cryptocurrency markets still lack the extensive regulatory framework seen in traditional financial markets, which can be a disadvantage for investors and traders.

In the past, early Bitcoin exchanges were vulnerable to hacking incidents. While the risk of hacking remains, many exchanges have implemented enhanced security measures to protect user accounts and assets. Two-factor authentication (2FA) is now a common requirement to access these platforms, whether through a web browser or a mobile app. This extra layer of security helps prevent unauthorized access and account ownership fraud.

Overall, cryptocurrency exchanges provide a convenient way for individuals. They also provide tutorials on how to trade Bitcoin and other cryptocurrencies, but users should remain vigilant about security and stay informed about the evolving regulatory landscape in this rapidly changing market.

Bitcoin contracts for difference (CFDs)

Bitcoin contracts for difference (CFDs) are a type of financial product based on defined leverage. These products are available worldwide and have some regulations in place to reduce risks when trading on mainstream cryptocurrency exchanges. One key advantage is that users don’t need to actually own BTC, which means they aren’t exposed to the security risks associated with holding the cryptocurrency. Additionally, CFDs allow traders to speculate on the price movements of Bitcoin without owning any underlying coins.

As a financial product, BTC-based CFDs rely on the difference between the price when you enter a trade and the price when you close it. If the closing price is higher than the opening price, the seller pays the buyer the difference, and that’s the buyer’s profit. On the other hand, if the closing price is lower than the opening price, the seller benefits from the difference.

It’s important to note that CFDs are not allowed in some places. In the United States, for example, the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) prohibit residents and citizens from trading CFDs on domestic or foreign platforms. This is because these products are often not regulated through known exchanges and there is no solicitation or offer to buy or sell any currency, equity, or other financial instruments or services.

However, users have the freedom to choose the option that best suits their needs. There are many exchanges and CFD platforms available, and users should consider factors like transaction fees, the availability of cryptocurrency resources and guides, and customer support when making their choices.

Where to trade Bitcoin

An important question that new traders often ask is where they can start buying and selling their BTC. As mentioned before, cryptocurrency exchanges are commonly used by most regular traders, while those who are more willing to take risks opt for CFD options. There are specific platforms designed for these kinds of transactions, as mentioned earlier. As a next step, it is important to put money into your account once you have chosen a suitable platform for trading Bitcoin.

Trading platforms typically utilize specialized websites with advanced algorithms to match orders. Trading apps are frequently provided by exchanges and companies involved in cryptocurrency, offering convenient mobile interfaces for traders. Both platforms and apps come with built-in digital wallets.

Bitcoin trading platforms

These are special platforms where you can purchase and trade. You should also watch their tutorials on how to trade Bitcoin. After signing up, anyone can buy or sell BTC using well-known exchanges like Binance and Coinbase.

Bitcoin trading apps

Bitcoin trading apps are accessible for Android (Google Play Store) or iOS (Apple Store) devices. To engage in cryptocurrency, like BTC, you must first add traditional currency (FIAT funds) to your account. Most apps provide multiple payment options, including bank account wire transfers, debit card payments, or credit card transactions.

These platforms include payment apps from major financial institutions such as Paypal, Robinhood, and other brokerage account providers. They function as simplified versions of trading interfaces, making it easier to buy and sell digital assets.

The following Bitcoin trading apps are highly reputable and widely used today:

  1. Binance – Considered the most trustworthy option overall
  2. Coinbase – A highly popular and user-friendly wallet app
  3. Huobi – A well-regarded app, especially in Asia
  4. Kraken – A versatile crypto exchange app suitable for all users
  5. Coinmama – An ideal choice for beginners due to its user-friendliness

Furthermore, non-native cryptocurrency platforms like Paypal, Robinhood, eToro, and others are also introducing support for Bitcoin trading apps. Users in regions without restrictions can leverage these apps to gain exposure to cryptocurrencies like BTC, Ethereum, Bitcoin Cash, and more.

How to trade bitcoin for profit strategically

best bitcoin trading platform

Preparing to buy and sell Bitcoin for profit requires careful planning and strategy development. BTC stands apart from most other tradable assets because of its unpredictable price swings, making it essential for aspiring BTC traders to consolidate multiple skills into a well-thought-out approach. Without a solid trading plan, individuals may find themselves taking unnecessary risks, potentially hindering their ability to effectively manage those associated risks, including bitcoin’s price.

While the optimal approach for BTC traders typically involves selecting a single, well-defined strategy, experienced traders may choose to blend multiple strategies, as long as they adhere to their chosen principles. In the following section, we will explore some commonly used strategies.

Top 5 Bitcoin trading strategies used by investors

Bitcoin trading strategies can vary widely depending on an investor’s risk tolerance, style, strategy, and market conditions. Here are five popular strategies that traders commonly use:

1. Bitcoin day trading – How to day trade Bitcoin

How to day trade Bitcoin? This is when someone buys and sells Bitcoin within one day to avoid the risks of prices changing a lot overnight. You can do Bitcoin day trading on an exchange or a CFD platform. It’s like making bets on whether the price of BTC will go up or down.

Bitcoin day trading is great if you want to be a full-time trader and actively trade Bitcoin. But it’s not easy to learn. You’ll need to get good at it, and that can be tough. Sometimes, you might even need special training. In daily selling and buying cryptocurrencies, you have to look at charts from time to time and use technical indicators to make quick decisions.

2. Swing-trading BTC

Swing trading is a strategy that involves making predictions about observable trends in the Bitcoin or broader crypto market, including bitcoin swing trading. These trends can go in two directions: bullish, meaning they are moving upward, or bearish, indicating a downward movement. When using these crypto strategies, traders hang on to their positions until the trend reaches its peak and begins to show signs of reversing.

To become a successful swing trader, you need to be patient because you might need to hold onto a particular position for weeks or even months. Various factors in the market can either boost or hinder a trend, either positively or negatively. For example, in the early part of 2021, Tesla Inc., an electric car manufacturer, invested $1.5 billion in BTC as a way to store value. This move caused the price of BTC to shoot up to a new record high of $44,801, as reported by Coindesk at that time. While this is generally a positive development, negative news like the Chinese government’s ban on Bitcoin and other cryptocurrencies can also lead to a downward trend.

Unlike day trading, swing strategy relies on charts to help identify the beginning and end of a cycle. However, it doesn’t require as frequent monitoring as day selling does. Nevertheless, this doesn’t mean it’s less risky. In fact, swing trading carries more risk because positions are held for a longer period of time. Candlestick patterns are often used by swing traders to analyze market price action and anticipate possible trends.

3. Hedging trading BTC

Hedge trading is a strategy where you open a different position in addition to your current trade. Let’s say you’re a trader with BTC assets, and you think that some important news could cause the price of BTC to go down. To protect yourself, you can use a financial tool called CFDs (Contracts for Difference) offered by platforms. If you’re worried about the market going down, you can open a short position, and if you think prices will go up, you can open a long position based on the current market trends. This strategy could be for you if you’re looking to profit from Bitcoin’s short-term price movements, and it can enable you to make the most of daily volatility in BTC’s price.

The purpose of hedging is to reduce potential losses. When used effectively, it can help a trader minimize their losses. It’s important to note that CFDs don’t involve owning the actual underlying asset.

4. Scalping trading – Gain Crypto liquidity

In scalping trading, traders make bets on and take advantage of short-term movements in BTC prices, which can occur over just a few minutes or hours. Think of it as a quicker version of day selling, where positions are opened and closed in a relatively short amount of time. Scalp trading carries a high level of risk and should be approached with confidence, using a combination of both fundamental and technical analysis.

Having a clear exit plan is crucial when scalping BTC because the asset’s high volatility can lead to position liquidation regardless of the direction of the price at any moment. It’s advisable to engage in scalping with a small amount of capital that you can spread across multiple trades. While this approach does come with risks, spreading your capital across different trades can help reduce significant losses over time. By choosing coins with high volatility and high liquidity, such as Bitcoin, you can increase your chances of successful scalp trading.

5. HODL strategy – Hold Cryptocurrencies

HODL is a widely used term in the world of cryptocurrency that means “Hold On for Dear Life.” Originally, it was a misspelled version of the word “HOLD,” but it has since become a common term in the crypto space. HODLing refers to taking a long-term position in BTC or any other investment. When you buy BTC with the intention of holding onto it for several months or even years, you can be described as “HODLing.”

The concept of HODLing doesn’t come with a set timeframe, but according to on-chain data, long-term holds are typically digital assets that have been held for more than a year. HODLing is a strategy that helps protect investors from the short-term and unpredictable price swings of Bitcoin. It allows held assets to withstand the ups and downs of the market and achieve stability over time. While HODLing doesn’t usually require extensive technical analysis, it does require careful storage of the coins in a secure Bitcoin hardware wallet.

Trading Bitcoins for beginners: Become a BTC Trader

When newcomers enter the world of Bitcoin and crypto trading, they often feel a sense of excitement. They are drawn to the potential for profitable opportunities due to the impressive technology behind cryptocurrencies. However, it’s important to note that not every trade will be successful, and losses can be a harsh reality. To increase your chances of success in the crypto market, it is crucial to understand how to trade crypto effectively. By learning the ins and outs of day trading cryptocurrencies, you can develop an effective strategy and minimize unnecessary losses.

BTC trading differs from traditional markets like forex, requiring guidance from experienced experts to navigate effectively. This is where iMi Academy can be of assistance. At iMi, we have knowledgeable professionals who can teach you how to begin trading BTC. As you learn how to trade Bitcoin, you’ll also gain insights into other aspects of the crypto world.

If you’re eager to start your journey into how to trade Bitcoin, take a courageous step forward by enrolling in our user-friendly cryptocurrency trading classes today.

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Key takeaways on how to trade Bitcoin

BTC trading involves buying and selling BTC, a digital asset. People do this on special websites or apps made for cryptocurrency trading. These websites use computer programs to help traders make the most of changing BTC prices.

Trading Bitcoin can be a way to make money if you have a good plan and manage the risks carefully. If you’re new to this, you can start by learning from experts. You can find useful information at iMi Blockchain. By following their advice and learning different strategies on how to trade Bitcoin, you can turn your interest in Bitcoin into a job and join the group of people who are making a lot of money from BTC.

If you’re not sure how to start, you can schedule a first meeting with one of our experts who can help you get going.

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Marcel Isler

Marcel Isler

Marcel is a Business Economist and founder of iMi Blockchain. A Consultant and international Keynote Speaker. He studied at the University of Oxford. He helps enterprises to implement Blockchain applications. On our blog, he writes about distributed ledger technology, smart contracts, cryptocurrencies, industry news, and future trends.