How to trade BTC

Introduction: what is Bitcoin?

Welcome to Currency.com’s guide on how to trade bitcoin. After a brief introduction explaining what bitcoin is, we’ll go through some common bitcoin trading strategies and share tips on keeping your capital safe. Let’s learn bitcoin trading.

Bitcoin (BTC) has been around since 2009 when it initially traded at around $0.0008. The coin passed the $1 to 1BTC mark in 2011. It then went on a wild journey.

When you learn how to trade bitcoin, the first thing to remember is that prices can go down as well as up. Thankfully, there are bitcoin trading strategies for both scenarios. To increase your chances of successful trading, you should understand the factors that drive the BTC price.

Things that can drive prices up

Things that can drive prices down include

Bitcoin trading lessons help you know the difference between bitcoin investing and bitcoin trading. This comes down to how long someone holds a coin. For instance, buying bitcoin in 2011 and holding it until November 2021 – when its value rose from $0.68 to just under $68,500 – was a long-term investment. (On the downside, between 15 April 2021 and 21 June 2021, BTC fell from an all-time high of $63,233 to $31,653.)

You can buy bitcoin for investment via online exchanges. Read more about that here.

What is bitcoin trading? It’s buying BTC with a view to selling it within a short period of time, perhaps days, hours or even minutes. BTC’s high volatility makes it possible to achieve a favourable return in a very short space of time. Of course, you can lose just as quickly.

Another key attraction is that bitcoin can be traded 24 hours a day, 365 days a year.

You can trade BTC by scalping and swing trading. Scalping is when traders buy and sell to maximise revenue on relatively small price movements. Scalping involves watching prices very closely.

For most non-professional traders, the preferred method is swing trading. This involves trying to anticipate the market. Traders hold an asset until they feel it’s hit an optimum price before selling. This could be days, weeks or months after any purchase.

How to start trading Bitcoin

So how to trade bitcoin? The first step is to convert your fiat currency into cryptocurrency, which you can do via an exchange. Here are three top things to look for when choosing an exchange platform.

Choosing an exchange platform

Be prepared to go through Know Your Customer checks. These can involve verifying your identity with a passport photo, for example. In some countries, exchanges are legally obligated to do this. If you don’t complete the process, there may be limits on how much capital you can deposit and withdraw.

You’re now ready to trade. Do you have a plan? In many respects, Bitcoin trading is no different from trading in other markets. You need to ask yourself a lot of questions. How much money are you prepared to lose? How often do you intend to trade? How long are you prepared to trade for?

You also need to decide whether to use leverage. In a traditional exchange, you pay the full amount of your trade, buying 10 Bitcoins at $68,500 would cost you $685,000, for example. In a 1:100 leverage trade, however, you pay 1% of that $685,000, so just $6,850.

Should the price of bitcoin rise by 10%, you’d make the same $68,500 profit in both cases. But through leverage, you can make significant returns for a limited upfront investment. But if BTC’s price falls by 10%, you lose $68,500. Both profits and losses are amplified through leveraging. It’s a strategy best left to experienced traders.

You can limit the downside with a stop-loss. These orders enable traders to automatically offer their bitcoin for sale if the price falls below a certain level. This can help prevent losses should bitcoin begin to decline quickly.

Stop-loss orders allow investors to consider the price at which they would want to sell their bitcoin in advance, reducing the risk of making rash and potentially costly decisions. Traders don’t need to constantly watch market movements because they know the action will be automatic if a price dips to the predetermined point.

It’s time to learn how to trade bitcoin. The most common strategy is to HODL (the phrase originated on a forum where someone repeatedly misspelled the word HOLD). HODL involves acquiring BTC at a reasonable price and attempting to cash out when the cryptocurrency has appreciated substantially. Timing such a transaction is challenging because the market can fall sharply without warning. Some experts who discuss how to trade bitcoin often recommend “buying the dips”. This involves gradually accumulating BTC whenever the price slips.

Discovering how to trade bitcoin depends on your level of commitment. For instance, you may wish to consider HODLing if you don’t want to watch charts all day. Other bitcoin trading strategies, such as day trading, are more involved, as you’re always on the lookout for opportunities.

Trend trading involves technical analysis to see when bitcoin prices reach higher highs or lower lows. These trends can be detected over the course of a few hours or days. You can zoom out and spot recurring themes over weeks and months.

Higher highs and lower lows

How to trade Bitcoin safely

We hope this guide to bitcoin trading has offered a valuable insight into how bitcoin trading works. Cryptocurrencies are high-risk assets. You should diversify any portfolio with lower-risk assets.

When trading bitcoin, seek a platform that offers deep liquidity, as this means that you’ll be able to connect with buyers and sellers quickly. The exchange should offer a diverse range of trading pairs that link bitcoin with major fiat currencies, such as sterling (GBP) and the US dollar (USD), and rival cryptos, such as ether (ETH). One good example of this is currency.com.

Think about your goals, and what you want to achieve with your bitcoin investment. Calculating your targets in advance could mean you’re a lot less likely to make rash decisions. 

Trade Bitcoin to US Dollar - BTC/USD chart

Bitcoin to US Dollar
Daily change
23193
Low: 23165.5
High: 23326

How to trade BTC: 9 steps

The newbies often wonder how to start investing in the crypto market. We have compiled for you a simple instruction of nine clear steps on how trading works in this market, how to buy Bitcoin and then sell it, and also reduce the possible risks of investing.

Nine steps

Step 1: Explore the crypto market

So far, the crypto market is only developing, and quite a lot of various events are taking place on it, primarily increasing volatility - rate jumps. For example, in November 2022, the large crypto exchange FTX collapsed, as a result, investors lost quite a lot of money, and cryptocurrencies, including Bitcoin and Ethereum, moved to an even greater decline. Such events occur in the crypto market quite often and are due to the fact that this market is decentralised and not regulated in any way.

The largest Cryptocurrency, Bitcoin, is mined through the Proof-of-Work protocol. Moreover, the process is designed in such a way that every year the extraction of a new block becomes more difficult, and therefore the number of bitcoins that can be mined is significantly reduced. In total, as of November 18, 2022, 19.21 million BTC were mined on the market. Given that the release of the main Cryptocurrency in the world is limited to 21 million coins. This means that almost all bitcoins have already been mined. Therefore, the course of the main Cryptocurrency depends mainly on market news.

Bitcoin supply chart

Step 2: Try trading on your own

One can invest in the crypto market independently, as well as through a broker. In the stock market, investors mostly prefer to turn to intermediaries, but the crypto is structured differently - anyone can start trading. At the same time, the interface of most crypto exchanges is intuitive even for the most novice investor. Moreover, the cost of a broker's services is usually up to 15% of the profit received. Trading on your own helps to avoid these additional costs, as well as making trades much faster.

Step 3: Choose a reliable trading platform

If one decides to trade cryptocurrencies independently, then it is most convenient to do this on a platform. In order to choose a reliable exchange, look at the list of the largest platforms and read reviews about the selected sites. It is crucial to pay attention to the fact that the selected exchange should work with the fiat currency that suits you and allow you to withdraw the funds.

Trading platforms are either centralised or decentralised. On a centralised exchange, each investor is usually forced to go through a verification procedure and upload their documents. This is a requirement in accordance with the KYC (Know Your Customer) policy, which reduces the risk of fraud and helps exchanges fight money laundering through virtual assets.

Step 4: Develop a trading strategy

A strategy is a set of basic rules and guidelines that one will use in his investments in the crypto market. Strategies are divided into three types: long-term (from a year), medium-term (from a month to a year) and short-term (less than a month). Each of these strategies determines how long one plans to hold a particular coin.

Crypto trading strategies

A long-term strategy means that a trader is confident in the future of the crypto market. In many ways, this strategy is close to hodling, when investors hold their coins for several years in the hope of a fabulous profit. This approach is due to the explosive growth of the crypto market over the past few years, as well as the fact that early investors in Bitcoin managed to increase their fortune.

A medium-term strategy is an approach in which an investor holds the coins for a period of a month to a year. In many ways, this strategy is used by most investors who are interested in making a profit due to the volatility of the crypto market, that is, constant fluctuations in the exchange rate. This also includes the so-called trend trading, when the investor follows the mood of the majority of crypto market participants.

Finally, a short-term strategy allows to invest in crypto for a short period of time - up to a month. Separately, it is worth highlighting intraday trading, as well as scalping, when an investor buys and sells the coins literally at minute intervals. For such a strategy, a trader must have a good command of technical analysis skills and understand in which direction the crypto market will go in the future. Moreover, in short-term trading, investors actively use leverage, which allows to increase profits, as well as automated orders that will be executed if certain conditions are met.

Step 5: Use stock instruments

Modern exchanges are very technological platforms. They allow the trader not to be constantly at the monitor, but, in fact, to set up the robot using automated orders. A market order is simply an order to enter into a buy/sell transaction, such as buying three BTC at a price of $15,000.

Unlike a market order, a limit order involves the conclusion of a transaction if the price of the coin reaches a certain level. For example, if BTC rises to $20,000, then an order to sell the crypto will be executed. This type of order is called a take profit order. Conversely, if Bitcoin drops to $10,000, then a sell order will also be executed. This type of order is called a stop loss because it allows an investor to avoid the additional losses.

Another popular tool is leverage. This method means conducting transactions with a coefficient, that is, as if the investor multiplies the number of assets he owns, which allows to increase profits if the price rises. However, in the event of a fall in value, losses also multiply in the same way. Therefore, this tool is not recommended for novice investors.

Step 6: Take a close look at the risks

The crypto market is only developing and remains quite volatile. Therefore, experienced traders advise the newbies to beware of fraud. First of all, use only trusted links or applications to go to the platform, avoid the so-called “mirrors” - fraudulent sites that only pretend to be exchanges. Do not store a large amount of the coins on a platform, especially if you do not plan to conduct any transactions with it in the near future - it is better to withdraw your assets to a secure external wallet.

In addition, experienced traders recommend not paying attention to the market noise - conduct your own analysis of the cryptocurrencies that interest you, try to master the basics of fundamental and technical analysis.

Step 7: Don't invest more than you're ready to lose

All experienced traders repeat like a mantra that investors in the crypto market should be prepared for the fact that their assets may depreciate. It is still a very volatile market that lacks full regulation and rules. Moreover, rate fluctuations can be such that the value of a particular cryptocurrency can drop to almost zero.

This is especially true for the so-called shitcoins - coins that have no real value and can collapse literally in one moment. Some investors may also deliberately create a buzz around such a coin in order to sell it later and bring down the rate. This strategy is called Pump and Dump.

Step 8: Start small

In reality, no previous experience means that the market will behave in a similar way in the future. Indeed, forecasts periodically appear on the market that Bitcoin will reach $100,000 or even $1 million in value, but there is no real confirmation of this. Therefore, experienced traders are advised to start investing in the crypto market with small amounts.

Step 9: Diversify your investment portfolio

Until now, Bitcoin remains the most popular cryptocurrency, which accounts for about 40% of the entire crypto market, but experienced investors advise not to concentrate on only one coin, even the most popular one. Much more effective is to make your investment portfolio from different cryptocurrencies.

Despite the general mood in the crypto market, different coins can behave differently at certain time periods. Therefore, if the Bitcoin rate suddenly goes down, one can diversify the risks by growing Altcoins. This will reduce potential losses and not lose everything in the event of a sharp jump in the crypto market.

FAQs

When is the best time to trade bitcoin?

It depends on many things. Do you prefer to wait for the price to go as low as possible and buy in the dip? Or do you like to see a crypto doing well and hope the market's bullishness continues? There’s no right and wrong answer. It’s up to you. Just never invest more than you can afford to lose. And always do your own research – expert analysts can often get things wrong.

Is bitcoin trading safe?

It depends on what you mean by safe. No investment, not least one in a market as volatile as cryptocurrency, is 100% risk-free. But you can minimise the risk of losing money to a scam exchange by investing with a reputable company, like currency.com.

Is bitcoin trading profitable?

It can be. Although high volatility means that you can incur heavy losses, too. You should do your own research, remember that prices can go down as well as up and never invest more than you can afford to lose.

Where to buy bitcoin?

You can buy bitcoin on most currency exchanges. It’s available to both buy and trade through currency.com.