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Bitcoin is a popular cryptocurrency chosen for trading and is a fancy investment and trading trend that traders gravitate to in the crypto market. Like other financial markets, cryptocurrencies are the new financial instruments that emerged over the last decade, and Bitcoin trading Platform is a part of it. Bitcoin is a digital currency that is traded via an internet network. Bitcoin was the first cryptocurrency to decentralize in the crypto market in 2009, and since then, all the young traders have had an eye for it to experiment with.
Bitcoin is popular for its blockchain technology which is capable of maintaining the anonymity of the users, enabling fast bitcoin transactions that make it stand out in the segment. Moreover, trading on bitcoin is as risky as trading on stocks or forex or might even be riskier as it still needs to get more familiar to the commoners.
How does Bitcoin trading work?
Bitcoin trading enables traders to buy or sell bitcoins for the price that it is in the market and later sell it in the future for a better price, and this works just like stocks. Buy for the lowest possible price and sell for the highest possible price. The market price of Bitcoin fluctuates with the demand for it in the market.
Like stocks, Bitcoins do have derivatives, futures, options, contracts for difference (CFD), perpetual swaps, and swaps.
- Options: They have no obligations to perform the task of buying and selling. In simpler words, options trading are the agreement between two speculators on a price of an asset. Where one speculates the price drop and the other speculates the price hike, the difference is paid by the person who speculated it wrong.
- Futures: Futures are contracts between two investors that bet on a future price of cryptos. They allow investors to select cryptocurrencies without owning them and bet on the price trajectory of an underlying asset.
- Contract for difference: A contract for difference is a buyer’s obligation to pay the price difference that occurs over time during the shifting valuation of an asset.
- Swap: Cryptocurrencies are instantly exchanged between two non-native tokens with the help of two unique blockchain protocols without commencing the traditional crypto-to-fiat exchange. Instead, it allows users to swap tokens directly from the official private key wallet or trading account. Here are some benefits of swapping,
- Quickly swap to the best asset.
- Can move to a Stable asset from a volatile asset.
- Hedging risks in trading.
Steps involved in starting Bitcoin trading
- Open an account in a bitcoin trading platform: Check the brokerage fees if it is feasible for you.
- Do your research and wait for the perfect time for your investment.
- Before investing, a weekly analysis of bitcoin’s performance helps you gauge the risk.
- Arrange your funds and wait for the best bid that you can afford to make a purchase.
- Day trading: As the name suggests, day trading is when you buy and sell your positions on the same day. Technical analysis is the key to performing this strategy.
- Range trading: In range trading, resistance and support are the range the traders aim at. Resistance is the point where the price of bitcoin might reach maximum, and support price is the price below the market price of bitcoin. Traders trade for bitcoin within the ranges.
- Scalping: High volumes of bitcoin are used for trading to book profits as the margin increases with the increase in volume.
- Having a nose for crypto news: one must regularly be aware of what’s happening around and within the market. World events and geopolitics influence crypto prices, and so do bitcoin prices.
- Bull call: The bull call is the term used for bitcoin trading options. You’ll make a profit by betting on the price hikes in a bull call spread. The difference between the buy price and the selling price is your leverage.
- Bear put spread: This is opposite to a Bull call spread concept, as you bet that the securities price will decrease.
- It is the most popular cryptocurrency right now.
- It has a market capitalization of 323.72 billion USD, making it highly valued. High volumes reduce volatility by curbing the rush for trading.
- The technology that bitcoin has currently made it a highly advanced cryptocurrency in the market.
- Corporate companies like Tesla, Microsoft, and BMW made Bitcoin legal for transactions and with this, interest among traders has increased.
- Its high popularity made it highly accessible all around the globe for trading.
- Major financial institutes are offering home loans to the crypto users with Bitcoin as collateral.
- High volatility: Several factors influence bitcoin price.
- Independent currency: Since cryptocurrency is independent in nature and does not have the authority to control making, it is less valid.
- Poor tax laws: poor laws on crypto income make it difficult for traders to generate wealth, and they are exposed to the high tax on even small amounts, making it even less profitable.
- There are cheat codes in this advanced technological world. A few crypto scams that have happened earlier discourage aspiring traders.
- Bitcoin is expensive and makes it difficult for small traders to invest in it, restricting it to high-profile traders.
- The lack of popularity of bitcoin among common people is one of the factors that demotivates traders.
World trade, global news, international trade, and all the global financial as well as social aspects, can help speculate the price of bitcoin. Media plays a key role in passing information from one corner of the world to another. People in countries with strong fundamentals in economics, trade, and foreign policy will have an edge over trade.
- Any crypto trader can participate in trading, keeping all the risk factors in mind. People with a strong financial base can experiment with trading.
- Institutions with big capital can trade for the purpose of maintaining liquidity.
- It should be properly planned as it involves risk making every penny count for every trade you do.
- Market trends should be considered and analyzed before hitting the floor.
- All financial instruments in the world are risky, and so is the case with Bitcoin trading. Prices of bitcoin fluctuate with the demand for it in the crypto market.