All about bitcoin trading

How to trade bitcoin

Bitcoin is a popular and highly volatile cryptocurrency. Discover everything you need to know about trading bitcoin with the the No.1 CFD trading provider. 1

Call +61 3 9860 1799 or email helpdesk.en@ig.com to talk about opening a trading account. We’re here 24 hours a day, from 8am Saturday to 10pm Friday (UK time).

What is bitcoin trading?

Bitcoin trading is how you can speculate on movements in the cryptocurrency’s price. While this has traditionally involved buying bitcoin through an exchange, hoping that its price will rise in time, cryptocurrency traders are increasingly using derivatives to speculate on both rising and falling prices – in order to make the most of bitcoin’s volatility.

With IG, you can take a position on the price of bitcoin with financial derivatives like CFDs. This product can enable you to take advantage of price movements in either direction without taking ownership of the underlying coins – meaning you won’t need to take responsibility for the security of any bitcoin tokens.

Steps to trading bitcoin

Learn what moves bitcoin’s price

To get in on a surging opportunity or short the latest bubble, you first need to understand the factors that have an impact on bitcoin’s price:

• Bitcoin supply. The current bitcoin supply is capped at 21 million, which is expected to be exhausted by 2140. A finite supply means that the price of bitcoin could increase if demand rises in the coming years
• Bad press. Any breaking news which concerns bitcoin’s security, value and longevity will have a negative effect o n the coin’s overall market price
• Integration. Bitcoin’s public profile depends on its integration into new payment systems and banking frameworks. If this is carried out successfully, demand might rise which will have a positive effect on bitcoin’s price
• Key events. Regulation changes, security breaches and macroeconomic bitcoin announcements can all affect prices. Any agreement between users on how to speed the network up could also see confidence in bitcoin rise – pushing the price up

Pick a bitcoin trading style and strategy

How to day trade bitcoin

Day trading bitcoin means that you’ll open and close a position within one single trading day – so you won’t have any bitcoin market exposure overnight. This means that you’ll avoid overnight funding charges on your position. 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 bitcoin’s price.

How to trend trade bitcoin

Trend trading means taking a position which matches the current trend. For example, if the market is in a bullish trend, you’d go long and if the trend was bearish, you’d go short. If this trend started to slow or reverse, you’d think about closing your position and opening a new one to match the emerging trend.

Bitcoin hedging strategy

Hedging bitcoin means mitigating your exposure to risk by taking an opposing position to one you already have open. You’d do this if you were concerned about the market moving against you. For example, if you owned some bitcoins but were concerned about a short-term drop in their value, you could open a short position on bitcoin with CFDs. If the market price of bitcoin falls, the gains on your short position would offset some or all of the losses on the coins you own.

HODL bitcoin strategy

The ‘HODL’ bitcoin strategy involves buying and holding bitcoin. Its name derives from a misspelling of ‘hold’ on a popular cryptocurrency forum, and it is now often said to stand for ‘hold on for dear life’. However, this phrase shouldn’t be taken too seriously – you should only buy and hold bitcoin if you’ve got a positive outlook on its long-term price. If your research or trading plan indicates that you should sell your positions to take profit or limit loss, you should – or you could set stop losses to close your positions automatically.

Choose how you want to get exposure to bitcoin

There are a few different ways that you can get exposure to bitcoin:

Trading bitcoin derivatives with IG	Buying bitcoin through an exchange
Cost to get exposure to 1 bitcoin	Margin for retail clients is 50% of the total value of the coin	Full cost of the coin
Short selling	Yes	No – unless there is a willing counterparty
Regulation	IG Group is a FTSE 250 company, and IG international is licensed by the Bermuda Monetary Authority	No dedicated regulatory body in place
Execution	0.0014 second execution speed and access our unique deep liquidity	Dependent on exchange liquidity levels
Restrictions on funding and withdrawing	None, withdrawing or adding funds is free and instant	You may be charged fees and encounter restrictions on adding or withdrawing funds
Overnight funding charge	Yes	No

Trading bitcoin derivatives

Trading bitcoin derivatives with us means that instead of owning bitcoin outright, you’ll be speculating on its price with CFDs. As a result, you’ll be able to take a position on bitcoin’s price rising by ‘going long’ or falling by ‘going short’. Here are other benefits of trading bitcoin derivatives with us:

• Leverage and margin: CFDs are always traded with leverage, which means you’ll only have to put up a deposit – known as margin – to get full market exposure
• Deep liquidity: thanks to our large client base, our bitcoin market is very liquid. This means you’re more likely to have your orders filled at your desired price – even if you deal in large sizes
• Hedging: shorting with derivatives can be an effective way to hedge your portfolio and protect against market declines

The table below highlights the main benefits of CFD trading.

CFD trading
Main benefits	Ability to go long or short and is useful for hedging
Accessible to	All clients
Traded in	Contracts worth one bitcoin
Commission	Commission-free
Platforms	Web platform, mobile trading app and MT4

Buying bitcoin through an exchange

Buying bitcoin through an exchange is mainly for those who use a buy-and-hold bitcoin strategy. This is because buying through an exchange means that you’re taking direct ownership of bitcoin – with the expectation that its price will rise.

That said, there are some problems with buying bitcoin through an exchange:

• Bitcoin exchanges often lack proper regulation and the infrastructure needed to respond quickly to support requests
• The matching engines and servers on bitcoin exchanges are often unreliable, which can result in the suspension of markets or reduced execution accuracy
• Bitcoin exchanges often impose fees and restrictions on funding and withdrawing from your exchange account, while accounts themselves can take days to open

Crypto 10 Index

As well as trading bitcoin derivatives or buying coins directly from an exchange, you can trade Crypto 10 Index that gives you exposure to 10 major cryptocurrencies like Bitcoin in one single trade. This index speculates on these Cryptocurrencies and closely tracks or mirrors the underlying market price of them.

Decide whether to go long or short

Trading financial derivatives makes it possible to go both long or short, depending on the current market sentiment. Going long means that you expect bitcoin’s price to rise, and going short means that you expect the price to fall.

Set your stops and limits

Stops and limits are crucial risk management tools – and you have several to choose from when you trade with us:

• Normal stops will close out your position at a set level, but they could be liable to slippage if the underlying market price changes quickly
• Trailing stops follow favourable market movements to lock in profits, while capping your downside risk. However, they too can be subject to slippage
• Guaranteed stops will close out your position at a set level, regardless of any slippage. Guaranteed stops are free to set, but you’ll be charged a fee if your guaranteed stop is triggered

These tools are all available to select via the deal ticket on our trading platform.

Open and monitor your trade

To open a bitcoin trade, you’d buy if you thought that the price was going to rise or sell if you thought the price was going to fall. Once your trade is open, you’ll need to monitor the market to make sure that it’s moving in the way you anticipated.

The technical indicators available on our trading platform can help you to determine what bitcoin’s price might do next. Indicators can also help you monitor current market conditions like volatility levels or market sentiment.

Close your position to take a profit or cut a loss

You can close your position whenever you like to take a profit, or to cut a loss that has reached a level that makes you uncomfortable. Your profits will be paid directly into your trading account, while your losses will be deducted from your account balance.

You certainly can profit from bitcoin trading, and your ability to achieve a profit will depend on the depth of your market analysis, your market knowledge and the underlying market conditions.

Trading bitcoin works by enabling you to take a speculative position on bitcoin’s price movements with financial derivatives such as CFDs.

These will enable you to go long and speculate on the price rising, as well as short and speculate on the price falling. The accuracy of your prediction and the size of the market movement will determine your profit or loss.

Trading bitcoin can be risky due to volatility in the market. However, when you open an account with us, you’ll get access to all of our risk management and educational tools. These include in-platform stops and limits, and the educational resources available on IG Academy – so you can take control of your trading.

We are licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority, so any capital in your account is held separately to our company funds – which means that even if we go bust, your money is protected.

Although cryptocurrency is a 24 hour a day, seven day a week market, some hours will see increased volatility and liquidity. For example, 12pm UK time can see some increased volatility as both the UK and US markets are getting into their stride for the day.

Our market hours for bitcoin are from 8am Saturday until 10pm Friday (UK time).

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The risks of loss from investing in CFDs can be substantial and the value of your investments may fluctuate. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how this product works, and whether you can afford to take the high risk of losing your money.

CFD Accounts provided by IG International Limited. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority.

IG provides an execution-only service. The information in this site does not contain (and should not be construed as containing) investment advice or an investment recommendation, or an offer of or solicitation for transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result.

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The Complete Guide for Trading Bitcoin for Beginners

Bitcoin is one of the time-tested cryptocurrencies and has over time proven to be quite profitable for both professionals and beginners. This digital currency has a huge market and is traded on all the exchanges you may ever come across, making it highly liquid.

But perhaps what contributed greatly to its ability to attract many investors is its history of volatility and bubbles. Bitcoin has created a lot of hype around itself to the extent that if anyone thinks about cryptocurrency, they’re most probably thinking or talking about Bitcoin.

The coin is quite popular in the crypto space and often records the highest trading volumes in almost all the exchanges it’s listed on.

If you’re looking to trade Bitcoin, you’ve come to the right place. In this guide on trading Bitcoin for beginners, I will share with you everything you need to know about trading the coin to enable you to trade like a pro.

Why You Need To Be Trading Bitcoin Today

It is essential to learn why you should be trading Bitcoin prior to investing in it – below are some of the reasons why Bitcoin trading is important.

Enjoys a Good Rapport

Bitcoin was the first cryptocurrency to be established back in 2009. The coin has been around for close to a decade now. One wouldn’t be mistaken to think that trust is almost inevitable for the pioneers of anything good; but for Bitcoin, the journey has been all about upgrading their security measures, improving their transactions speeds, trading on as many exchanges as possible, among other things. In short, they’ve worked their way up, and that’s the plain truth.

More recently, various government agencies are beginning to be keen on incorporating Bitcoin and Blockchain in their operations. You can find more details about this in the video below:

Trades 24/7

Bitcoin operates on a market where trading takes place at any time of the day regardless of where you are. Bitcoin exchanges are web-based; this means that you don’t have to physically visit a market for you to purchase an asset. However, the same can’t be said about the stock markets which open and close at specified times, with some transactions requiring one to appear physically.

Bitcoin is Global

At the moment, Bitcoin operates in more than 90% of countries around the world – this means that almost anyone can have a chance to invest in it. Unlike most other digital currencies, Bitcoin is acceptable in most parts of the world as a medium of exchange in various establishments, such as restaurants, transport companies, investment vehicles, and so on.

Highly Volatile

The price pattern of Bitcoin has always been shifty. In 2018 especially, Bitcoin has experienced some of the major shifts in its prices, both upwards and downwards as may be seen below:

Image courtesy of www.statistica.com

From the table above, you can see how volatile Bitcoin’s price is, making it a great investment for speculative purposes.

Identify A Bitcoin Trading Exchange

This is the first step when looking to invest in Bitcoin to enable you to buy or sell your digital assets.

At the moment, Bitcoin does not have an official trading platform; however, as I mentioned earlier, you will find it on almost any exchange you can ever think of.

Think of Bitcoin as the backbone of any cryptocurrency exchange and it would probably be insane for any to miss it.

Due to not having an official exchange, a lot of users find it difficult to identify the right platform for trading Bitcoin.

But over time, we picked up a pattern in some of the great exchanges around the world; here’s what to look out for in a Bitcoin trading platform:

Safety standards: It goes with saying that safety is a fundamental ingredient in the cryptocurrency space. Many users lose money every day due to coin burglars; be sure to research the level of safety in a platform using online reviews. Look out for any cases of a security breach in the recent past. You want to avoid exchanges with hacking histories or system failure. Be aware of the platform’s security measures, such as whether it uses two-factor authentication and user data encryption, what is its privacy policies, does it have an SSL certificate (look out for the “HTTP//” on a site’s URL), and if there are bug bounties for any vulnerabilities on a platform.

Reputation: A good exchange has its users speak for it – check out various forums such as Quora, Reddit, BitcoinTalk, and more to find out more about an exchange that you wish to sign up on. You should be keen on finding out how efficient their customer support is, the experiences of other users, as well as the pros and cons of the platform. Of course, you should expect to find some flaws with every exchange, but you want to settle for something that is almost negligible.

Payment methods: The last thing you want to do is to sign up on a platform that offers payment methods that are not supported in your locality or, if supported, you have to travel miles to access an agent or a dealership. The time and resources used to access such payment services will be eating into your profit margins, and even if you don’t wish to put a price tag on your time, you’ll find it inconvenient to travel miles just to access a payment service anytime you wish to transact.

Transaction fees: Yup, you guessed it right! After talking about payment methods, it’s only fair for us to know what we’re being charged for deposits, withdrawals, and trading. Some exchanges offer free deposits and withdrawals, while others charge for all other transactions except for trading. Whatever the case, do a thorough research of some of the lowest if not nil-charging platforms for user transactions.

User interface: This ought to have been among the first things to look out for in a good exchange because there won’t be any Bitcoin trading if you’re going to sign up on a platform that relays its information in what seems like rocket science to you (well, not unless you’re indeed a rocket scientist). The point is, signing up on a platform that is easy to navigate will save you tons of trouble if you ask me.

From our checklist above, below are some of the platforms that pass the set standards of a great exchange. What’s more, these platforms allow for day trading bitcoin for beginners and experts.

Top Exchanges for Bitcoin Trading

Coinbase

Coinbase is among the top-rated exchanges globally. They have some of the bests security measures and trade only a few selected coins (Bitcoin obviously included). Due to their quality and security standards, their expansion to many countries has been quite slow. At the time of writing this post, the exchange operates in 33 countries around the world.

Coinbase is said to be the first regulated exchange to start trading Bitcoin, an asset that now forms the biggest chunk of their daily trading volumes.

Binance

This is another popular platform that trades Bitcoin and other digital assets. Binance originated in China but moved its headquarters to Malta, which is one of the crypto-friendly countries.

This platform is fairly new in the market, having only been launched in 2017, but they have managed to match up to the safety, trading, and customer support standards that have only been achieved by platforms that have been around for close to a decade.

In terms of trading, Binance has consistently remained among the top five highest trading exchanges globally.

Kriptomat

Kriptomat is a product of Slovenian crypto expertise and it offers an extremely user-friendly experience.

Kriptomat was established in Estonia, one of the most progressive tech regulators. They have been issued operating licenses by the Financial Intelligence Unit for Providing services of exchanging a virtual currency against a fiat currency and for Providing a virtual currency wallet service. This regulatory compliance, along with KYC and AML procedures, makes them one of the most trusted new platforms.

The service currently allows you to exchange 17 cryptocurrencies and tokens to and from Euros. It is also available in 20 languages, making it a great choice for people who want to use their native language.

In addition, their blog offers educational content, mostly geared towards beginners, but also useful for people wanting to remain informed about the crypto industry.

Cex.io

Cex.io is one of the oldest Bitcoin trading platforms today. It currently operates in 99% of the countries around the world, including 44 states in the U.S.

Established in 2013, Cex.io is registered in FINCEN and prides itself in applying the KYC (Know Your Customer) standards and the AML (Anti Money Laundering) policies, both of which qualify the platform as one of the safest and the most trusted in the cryptocurrency space.

Bitstamp

Just like Cex.io, Bitstamp has been around for a while now and was established in 2011. The exchange initially had most of its operations limited to Europe but has over time spread its wings to 78 countries around the world.

Bitstamp is popularly known for its ability to cater for beginner and advanced users through its two sets of interfaces: beginner and advanced.

The platform is among the highest trading exchanges globally with an average daily volume of $700 million.

Kraken

Kraken is an exchange that operates globally and has been around for five years now. Based in Europe, the exchange offers a range of fiat to Bitcoin trading pairs, including BTC/USD, BTC/GBP, BTC/EUR, and BTC/JPY.

In addition, Kraken offers a variety of crypto-to-crypto trading pairs, such as BTC/ETH, BTC/XRP, BTC/LTE, among others.

When it comes to security matters, Kraken boasts some of the high-tech security controls such as two-factor authentication and PGP/GPG encryption.

The list goes on and on, but hopefully, you can now be able to choose from the five listed exchanges or use the checklist above to identify a suitable Bitcoin trading platform for you.

Bitcoin Trading Or Investing: What’s the Difference?

A lot of people tend to think that the two terms mean one and the same thing; well, they don’t.

Investing in Bitcoin denotes that one buys the coin and holds it for the long-term. The fundamental strategy behind investing in Bitcoin is that such investors believe that despite market corrections, the price of their assets will ultimately go up.

Bitcoin investors prefer to HODL ( yes , this is spelled correctly; this is a popular term in the crypto community that resulted from a 2013 typo for of the word “hold” in the BitcoinTalk forum) the currency for the long-run because they believe in the ideology, technology, and the team steering it.

On the other hand, trading Bitcoin means that an investor purchases the coin and sells it after a short period of time, a duration normally occasioned by small moves in market prices.

So, really the difference lies in the duration of holding your Bitcoin; investors hold their assets longer while traders hold theirs for a shorter period of time.

Types of Traders

All Bitcoin traders have one thing on their minds when buying the coin: making profits. But that is as far as their goals align, how they achieve this differs from one category of traders to the other.

There are typically three types of traders in the cryptocurrency markets; whichever one you choose to become or already are is really a matter of personal preference.

Day traders: Contrary to what I imagined when I first came across this phrase, there are no “night traders”. Day traders are people who execute several trades during the daytime, trying to mint as much profit as possible with fairly short moves that could last seconds, minutes, or hours.

If you’ve seen individuals staring at a couple of screens in any exchange, then you’ve probably met a day trader.

Scalp traders: Scalp traders are almost similar to day traders, but they don’t just trade during the day; they do it all the time. These traders spend a lot of time making dozens if not hundreds of trading moves within the 24 hours of a day.

The idea behind this type of trading is to sell out as fast as possible by locking in any small profits that are generated.

Swing Traders: This category of traders profit from the slight swing in the prices of assets. Swingers study the trend of prices and try to enter into a market at the start of a price movement and stay on until the movement stops, then get out with profits.

Unlike their day trader and scalp counterparts, they try to see the bigger picture in the market; they could hold on to assets for weeks as they monitor the movement in prices before bouncing off the market with profits.

Market Analysis Techniques

There is no perfect way of predicting the market price of Bitcoin or any other asset. However, you can develop a set of rules, formulas, and predictions to help you trade profitably even in the most volatile markets (or use existing and proven ones).

Of course, even with the best of scientific formulas, you can’t exclusively make profits in the cryptocurrency market. The most important thing is to always trade in such as way that your closing balance remains on the positive side.

There are two methodologies that are commonly used in analyzing any asset traded in an exchange: the fundamental or the technical point of analysis.

The fundamental point of view focuses on the bigger picture when predicting an asset’s price; the technical one, on the other hand, relies on a statistical approach to analyzing market prices. This technique uses the trends in price movements and trading volumes to try and establish a common pattern in all the possible scenarios.

To help you understand how each of these techniques work, let’s try to analyze market prices using both techniques:

Analyzing prices using the fundamental approach: This approach would analyze Bitcoin prices using influencers such as news about the coin, latest technological developments such as the lightning network, regulations affecting the currency, among other issues.

Analyzing prices using the technical approach: As the name suggests, this approach tends to rely more on the past data about Bitcoin. Regardless of what is going on around the world, the technical approach will use verifiable data to predict the price of an asset.

Any idea by now which one you prefer?

Well, if you asked me, I’d say ‘don’t prefer’ any; rather, find a way of working with both or remain as neutral as possible so that you can take advantage of any of them whenever it suits you. For instance, when there are no new or latest happenings around the world, you may opt to lean towards the fundamental approach; but when things are stable, I recommend going with the technical approach.

I sure do hope so because you can’t afford to trade without one or both of these strategies; if the worst comes to the worst, choose one that you feel comfortable going with.

Now that you understand how to trade Bitcoin using two of the widely used price analysis techniques, let’s become familiar with some common terms in this space.

Common Terms in Bitcoin Trading

The order book: This is a market register of all the buy and sell orders. Buy orders represent bids by the respective purchasers of coins while sell orders are also referred to as “asks” since they reflect the asking price of the seller for the assets they are disposing of in the market.

Bitcoin price: The term “price” may sound obvious to you but, in a real sense, it’s deeper than its plain meaning in this context. Bitcoin price is the price of the last trade that occurred on a specific exchange. It is essential to understand that as opposed to fiat currencies, there is no standard price for Bitcoin; prices may vary from one exchange to another or in different countries.

In addition, you may also notice some terms next to Bitcoin prices indicated as “low” and “high”, they essentially reflect the highest and the lowest prices of Bitcoin over the past 24 hours.

Volume: This represents the amount of Bitcoin that has been traded within a certain period of time, usually 24 hours, a week, a month, or a year.

Limit order: This is a market order that allows you to buy or sell Bitcoin and other cryptos at a specified price. That is to say, if the requirements for your order are not met, your order will remain unfulfilled until such a time that they shall be met.

Stop loss order: Stop loss orders are sell orders that restrict your selling price from falling below a limit specified by you. This type of order shields sellers from incurring losses resulting from negative fluctuations in the prices of their assets.

Instant (or market) order: Unlike a limit or a stop order, this is an order with no conditions that need to be met prior to being executed. Market orders allow buyers or sellers to set the amount of Bitcoin they wish to dispose or acquire and the exchange matches them with the corresponding order.

Maker and Taker fees: These are also some of the common terms you’re likely to come across when trading Bitcoin.

A maker is pretty much a seller of an asset in an exchange; however, this is a different kind of seller. A maker places an order that goes to the order book partially or fully like in the case of limit orders; subsequent sales from such an order are referred to as “makers”. Since makers help to make the market, they are charged lower fees by the exchange.

Maker orders add volume to the order book; they are, therefore “market makers” – thus, the name ‘maker’.

A taker, on the other hand, places a market order for an asset that has already been placed by the maker; therefore, their orders are fulfilled instantly. Takers take away business from the market, thus paying more fees as compared to makers who bring business to the market.

These two terms are always a bit complex, but they’ll probably make more sense when you apply them when trading.

Interpreting the Price Candles

This beginners guide to Bitcoin trading wouldn’t be complete without touching on price charts. A good number of people have no idea what those complex charts on the home pages of various exchanges mean.

But interpreting these charts is never that hard; here is what you need to know about price charts.

Candlesticks

Candles sticks are an ancient Japanese way of conducting a price analysis and originated in the 1600s when trading rice.

Every “candle” reflects the opening, lowest, highest, and closing price of an asset. Depending on the color of a candle, you will be able to tell whether the opening price or the closing price was high or low.

Generally, a green candle signifies an opening price that was lower than the closing price while a red candle shows that the opening price was higher than the closing price.

Green candles show a rise in the price of an asset during a certain period, while the red ones show a fall in the price of an asset in the same period.

Tips for Trading Bitcoin Profitably

Below are some of the time-tested tips for both beginners and advanced traders; try as many as possible to apply them when trading.

• Never invest more than you’re willing to lose
• Just like any other business, establish a trading plan
• Never leave your coins on an exchange; transfer and store them in an offline wallet
• Don’t let emotions drive your trading decisions; remain firm and neutral even in the face of adversity
• Keep growing your knowledge through constant learning

Conclusion

Trading Bitcoin profitably can be difficult especially when the market keeps correcting – however, if you develop a solid plan and familiarize yourself with the things discussed in this guide, you should be able to trade more profitably than an averagely experienced trader even as a beginner.

Finally, as we come to the end of this guide on trading Bitcoin for beginners, we have covered most of the areas in this trade that you can start trading today. But if you still have any questions, feel free to drop them below and we’ll be happy to help out.

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