How to Start Trading Bitcoins
Cryptocurrencies have exploded in 2017, with Bitcoin gaining the most popularity.
The price of one Bitcoin has increased over 195% in just the first seven months of the year.
With all of the fluctuations in Bitcoin, many people have started to wonder how to start trading bitcoins more actively.
Before we can discuss how to find trading opportunities in the market, let’s begin with the basics.
1. How to Start Trading Bitcoins – Understand Cryptocurrencies
One of the first thing to understand is that Bitcoins, or BTC, are used as an alternative to money.
Bitcoins are not a stock or a company, rather, it is a system of creating and exchanging money.
In order to own Bitcoins, you need to open an account with a company that does business in your country. This gives you something called a “wallet”, which is a digital place to store your money.
The trading opportunity occurs when the price of Bitcoin increases while you own it, similar to a stock.
Buying the cryptocurrency at a cheaper price and selling it higher would create a profit.
The industry is very complex and works on a technology called the block chain, which has huge potential to revolutionize digital transactions.
One important thing to note is that Bitcoin does not own the blockchain technology.
In fact, no one owns it and that is part of the appeal.
Let’s look at the next step of how to start trading Bitcoins.
2. How to Start Trading Bitcoins – Where to Find the Price of Bitcoin
The price of a single Bitcoin varies depending on which currency you compare it to.
Most exchanges will quote the Bitcoin price in comparison to the US dollar.
As of August 7th, 2017, one Bitcoin costs $3,220.21 US dollars.
The table below shows the value in comparison to other major currencies across the world.
If you want to keep track of these prices you can get a free live quote on TradingView.
The trading symbol on the platform is “BTCUSD”.
Here is an example of a Bitcoin chart in USD on TradingView:
3. How to Start Trading Bitcoins – Analysis Process
Analyzing Bitcoin is very similar to any other security.
We focus on technical analysis concepts, including volume and price action. Visit our beginners course page to learn more about technical analysis.
There are also some key differences you need to remember:
- The Bitcoin and cryptocurrency market is unregulated (which is both a benefit and a major risk)
- Bitcoin is more similar to trading patterns of a currency than a stock
- There are a limited amount of Bitcoins which can exist (21 million bitcoins)
- Reliable valuation models do not exist at this point
- Major and unpredictable moves can happen sporadically
The best way to learn how the cryptocurrency markets move is to watch them and observe their characteristics.
Start following daily price action and make observations about the patterns that take place. Note them down in your trading journal.
The more familiar you become with Bitcoin or any other cryptocurrency, the more intuitive and easier the technical analysis will become.
4. How to Start Trading Bitcoins – Fees for Trading Cryptocurrencies
There are many places to buy cryptocurrencies and Bitcoins. The best one for you will depend on the country you live in.
One common concept across all of them is the cost of purchasing and selling the currencies. However, coins are always free to send and receive.
These fees will directly eat into your profits, so it’s important to know how they work intricately.
Let’s look at one of the most popular services in the United States, a company called Coinbase.
According to their website, if you want to purchase $100 USD of Bitcoin, the fee will be $1.49 or 1.49%.
This means your local bank account will be charged a total of $101.49 and you will officially own $100 of Bitcoin.
When it comes time to selling, you will be charged the same amount as a fee. The fee is subtracted from your total proceeds.
Overall, this means that you will be paying a total of 2.98% per trade for a round trip.
The bottom line is that you want to avoid over-trading Cryptocurrencies and focus on swing trading opportunities.
Despite the high transaction fees, Bitcoin has moved 236% in 218 days in 2017 for an average of 1.09% daily gain.
There are dozens of exchanges and hundreds of companies that have emerged in the industry.
Therefore, before you make a choice for which company to use make sure to understand the full fee schedule and all costs involved.
5. How to Start Trading Bitcoins – Risk Management
Just because the market is new and exciting, it does not mean that your money management strategy has to change.
If you want to learn how to create a money management strategy read here.
One of the big benefits of trading cryptocurrencies is also the biggest risk. Price movement.
Bitcoin in particular can fluctuate in value very quickly, potentially causing big losses.
You need to factor this into your strategy and create a money management plan specific to cryptocurrencies.
Identify how much you wish to risk per trade and stick to your plan.
How to Start Trading Bitcoins – Conclusion
There is a lot of trading opportunities in Bitcoin and the cryptocurrency market overall.
The industry is technology driven and has a lot of opportunity. At the same time, there is also a lot of uncertainty and risk.
At any given moment, the price of Bitcoin can change dramatically and could lead to significant gains or losses.
Despite the product being new and exciting, be sure to use a calm and disciplined approach to trading the cryptocurrencies market.
Learn how to apply technical analysis concepts on securities and find high probability trade setups, checkout our Foundations Course here.
Join us for live trading and analysis in our community, find out more about our subscription services.
Good luck and good trading.
The information contained in this presentation is solely for educational purposes, and does not constitute investment advice. The risk of trading in securities markets can be substantial. You should carefully consider if engaging in such activity is suitable to your own financial situation. TRADEPRO Academy is not responsible for any liabilities arising as a result of your market involvement or individual trade activities.