Trading digital currencies from the comfort of your home has never been easier for your average Joe investor. The world’s first decentralized cryptocurrency, Bitcoin, remains the world’s most traded digital asset.
In this guide, we will take you through the most important requirements to learn how to trade Bitcoin . We talk about online reseller fees, trading strategies, orders, risk management and more!
Part 1: Understanding the basics of how to trade bitcoins
Largely due to liquidity and volatility, Bitcoin is often referred to as digital gold. As such, the most important thing is to understand the basics of how to trade this cryptocurrency before you go.
In this way, you will give yourself the best possible chances to trade in an incalculable and calculated way.
What are the basics of bitcoin trading?
Simply put, Bitcoin trading involves trying to accurately predict the movement of digital coin prices later down the line. The price of which is dictated by the supply and demand of the market.
See below for a practical example of Bitcoin trading to remove fog:
- Imagine trading Bitcoin against the euro
- This will be displayed as BTC / EUR in the selected online brokerage firm
- At the time of your trade, BTC / EUR is estimated at $ 45,162
- Feeling as if the couple will see a price increase – you decide to act and buy an order worth $ 1,000
- Hours go by, and the value of BTC / EUR grows by 5% – which is equal to the new price of 47,420 USD
- From the initial $ 1,000 you invested – you made a profit of $ 50 ($ 1,000 + 5%)
As you can see, if you buy a pair of Bitcoins and you are in line with your hypothesis, you stand to make money. For those who are not aware, you can also leave Bitcoin – which we will describe later in this guide.
Bitcoin trading pairs
When you are looking to learn how to trade Bitcoin, you will see that there are different trading pairs on the table. If you have ever traded forex before, you will know little about how this works.
For those who have no experience with currencies in any capacity – trading cryptocurrencies is facilitated in pairs. Trading pairs allow you to compare prices between different coins and determine its value.
The most common way to trade Bitcoin, especially for beginners, is through ‘crypto-to-fiat’ pairs. This includes trading Bitcoin against fiat currency. Simply put, a fiat currency is one that is approved and usually produced by the government. Some trading platforms call these pairs ‘currency crosses’.
Another way to trade these volatile assets is to trade another cryptocurrency. This is called a crypto-cross pair (sometimes called a ‘crypto-cross’). For example, if you trade Bitcoin against Ripple – it would be displayed as BTC / KSRP.
Buy and hold Bitcoin
Long-term traders tend to buy Bitcoin and stick to it – hence the name of the strategy called “buy and hold”. In the case of cryptocurrencies, this is specifically called “HODLing”. Ergo, if you bought Bitcoin and stick to it – you are a ‘Hodler’!
Hodlers usually hold on to Bitcoin for years before cashing in on their investment. With the best rated Bitcoin provider eToro, you will be able to buy Bitcoin directly – even though you pay absolutely nothing in commissions. This will be done through the integrated trading package and you will receive a Bitcoin wallet after registration.