Ever since Bitcoin hit the market in 2009, cryptocurrency trading has become one of the most popular and lucrative investment opportunities. Today, numerous other digital assets, Ethereum, Litecoin, Ripple, Bitcoin Cash, Dogecoin, Stellar, and 4000+ others, have joined the scene.
However, Bitcoin still has the hearts of many. Even though it is the most expensive cryptocurrency, at $55,708 per coin as of May 11, 2021, Bitcoin is the most popular digital currency. This is because it assures decentralized, transparent, and secure transactions thanks to blockchain.
While cryptocurrencies are now more popular than ever, still we cannot deny the fact that Bitcoin is still a nascent asset. And not every interested trader knows their way around this coveted investment option. Generally, there are two ways to go about it:
- Bitcoin mining: Miners use powerful hardware to solve complex mathematical problems and receive new Bitcoin tokens.
- Bitcoin trading: Traders buy Bitcoin on cryptocurrency exchanges to preserve their wealth in a game-changing alternative for fiat money. To increase their Bitcoin, they would have to buy and sell (trade), leveraging the asset price fluctuations.
In this insightful article, we explore Bitcoin trading. With so many technologies, exchanges, wallets, analyses types, and platforms to consider, it is critical that you educate yourself about the intricacies and best practices of trading bitcoin right at the start of your trading journey.
Before you decide to trade Bitcoin
Since 2008 when Satoshi Nakamoto introduced Bitcoin, cryptocurrencies have been making the headlines. Even those who do not own digital currencies follow the price fluctuations and the news about technology solutions implemented in various crypto platforms.
Those who want to own the first-ever digital currency pay attention to Bitcoin mining. This innovative process involves solving complex computational problems to create new tokens. However, the more Bitcoins are mined, the harder it becomes to mine new cryptos. Miners need more powerful hardware and more time to solve complex computational problems. That means you will need to make a more extensive investment right from the start. First, you will need equipment with a high load-bearing capacity. Furthermore, the process also consumes a lot of electricity.
While the results can be rewarding, not everyone can afford to put so much money and effort into cryptocurrency mining. Moreover, there is a finite supply of Bitcoins. There are only 21 million digital currencies that can be mined.
To get started with Bitcoin faster, most people use online cryptocurrency exchanges. These platforms allow traders to buy Bitcoin and sell it once its price goes up. With an exchange account, a trader can access the world of crypto and start trading the first-ever virtual coin.
The upside to Bitcoin is that you can trade it 24/7. Bitcoin trading never stops. Whenever you decide to buy or sell Bitcoin, you can do it right away. The downside is that the cryptocurrency's price is extremely volatile and unpredictable. Thus, you cannot expect the value of Bitcoin to remain constant after buying it.
How does Bitcoin trading work?
The key to Bitcoin's success lies in its security framework. Blockchain technology records every transaction, keeping them secure, inconvertible, and public. The distribution, storage, and validation of the financial deals are done using cryptography. Blockchain also allows the storage of data across a network of computers and does not require the third party to regulate cryptocurrency transactions. Blockchain is an innovative platform in the world of finance.
Cryptocurrency traders who buy and sell Bitcoin on exchanges store their assets in cryptocurrency wallets. Those can be hardware wallets or software programs that store public or private keys for the transactions. Furthermore, some wallets provide signing information and encrypting functionalities. One of the biggest fears of a crypto trader is to forget the password to a cryptocurrency wallet and lose all the money invested in digital currencies. Be sure always to keep your passwords in a safe place.
Traders may also access one of the most popular cryptocurrency markets with contracts for difference (CFDs) on Bitcoin. If you decide to trade Bitcoin CFDs, taking ownership of actual assets is not required. That means you would not have to worry about cryptocurrency wallets. Instead, you can focus on speculating on the direction of Bitcoin price movements.
How do I trade Bitcoin CFDs?
Trading Bitcoin via CFDs is a much more accessible way to buy and sell crypto assets online since you do not necessarily need to own the coin. In other words, Traders do not need to look for a major exchange that deals with cryptocurrencies. Instead, they can find a broker that enables them to trade CFDs on Bitcoins and exploit the price fluctuations.
CFD trading makes it possible to:
- Craft long-term and short-term trading strategies
- Open a trade with short and long positions
- Use Bitcoin CFDs for hedging
- Open Bitcoin trades with CFDs that do not have an expiry date
- Trade with leverage to boost buying power
For those who are wondering how trading Bitcoin works with CFDs, the action plan looks pretty simple. All a trader would need is a Bitcoin trading account (or simply a brokerage account) and a trading platform. MetaTrader 4 is one of the most preferable platforms where you can execute Bitcoin trades. To open a position, you can make predictions on either the rising or falling price of a digital asset. If forecasts turn out to be correct, they receive potential profits. If they are wrong, losses are inevitable.
Although Bitcoin trading via CFDs looks like a straightforward way of chasing financial opportunities, investors should remember that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Leverage in Bitcoin CFD trading means that a trader sets up a financial deal by investing just a fraction of a trading lot's total value. The rest of the price will be financed by a broker. The size of leverage is shown as a ratio. For instance, 1:2, 1:4, 1:10, 1:50, 1:100, 1:500, etc. Depending on the size of the trading lot and the type of trading account, a trader may get access to various proportions of leverage while trading CFDs on Bitcoin.
Leverage functions while trading are the following:
- Increasing buying potential
- Minimization of the amount of capital for opening a trade
Here is how CFD trading with leverage works: If a Bitcoin trader wants to enter a trade position worth $500 with 1:2 leverage, the trader will need to deposit at least $250 to a trading account. A broker will add another $250 so that the trader can place an order.
However, traders should keep in mind that cryptocurrency prices are extremely volatile. If the prediction on price movements does not play out in favor, a trader can lose his initial investment. Besides, the trader might also be asked to pay interest to a broker for the financial services provided.
What should a beginner do before trading Bitcoin CFDs?
Before you start trading Bitcoin CFDs:
- Take your time, gaining more knowledge and insights about the Bitcoin market.
- Practice your skills on free demo platforms.
- Learn about trading strategies, types of market analysis, and how to use a trading platform.
There is no point in diving into the world of trading unprepared and taking a high risk.
Brush up your trading knowledge
CFDs are complex instruments; thus, you must learn about not only Bitcoin but how contracts for difference operate as well. Many online brokers offer educational materials for every trader to enter the Bitcoin market and start exploiting the price fluctuations with confidence.
InvestGlo is one of such brokers that takes care of the trading education of its retail clients. With our trading guides: e-books, VODs, webinars, courses, tutorials, and an economic calendar, every InvestGlo trader can start trading Bitcoin well informed and with confidence. Get ready to explore a plethora of topics, among which are:
- How to make market research
- How market sentiment affects crypto prices
- Why leverage entails the high risk of losing money
- What the difference between market price and intrinsic asset value is
- What trading strategies exist for buying and selling Bitcoin CFDs
You may also seek independent investment advice from an experienced professional before entering the market and executing your trading strategy.
Decide which type of market analysis works for your strategies
There are two types of analysis that traders can use for trading Bitcoin CFDs: fundamental and technical. These analyses will help you evaluate crypto prices, calculate the risks involved, adjust to market behavior, and, most importantly, prepare investment strategies.
- Technical analysis studies past market performance data of a preferred financial instrument, such as trends and patterns, volatility and strength, support and resistance levels, among other factors. With numerous technical indicators (MI, RSI, MACD, Bollinger Bands, Fibonacci retracement), traders can see technical analysis results on charts and forecast future prices.
- Fundamental analysis focuses on micro-and macroeconomic factors as well as political events that can affect market prices. Changes in interest rates, currency exchange rates, GDP, unemployment rates, natural disasters, and many other factors are considered while conducting this type of analysis.
Traders can use both technical and fundamental analyses when designing a trading plan. These two methods help gather data from different perspectives and craft trading strategies based on every available information about factors affecting the Bitcoin price.
Choose your trading platform
Trading platforms vary in their features and functionalities. Traders are free to choose a platform that suits their trading style. One of the most popular trading platforms is MetaTrader 4. It is also represented in a web version – WebTrader, and available for download on mobile applications for iOS and Android. The platform makes trading Bitcoin CFDs flexible, intuitive, and user-friendly.
MT4 provides access to multiple tools, including technical indicators, trading signals, market orders, trade execution modes, interactive charts, timeframes. Traders can perform short-term, mid-term, and long-term strategies for Bitcoin trading via CFDs in the most optimized way.
Open a trading account matching your skills
Cryptocurrency traders would need to have retail investor accounts to access the market. There is no need to find a cryptocurrency exchange to open an account. Instead, you can register your profile at InvestGlo to trade CFDs on Bitcoin or other cryptocurrencies, such as Bitcoin Cash, Litecoin, Ripple, and many others.
If you are willing to start your trading journey with InvestGlo and get one step ahead, you can open an account right now. The process will only take three steps:
- Sign in with your full name, address, and phone number.
- Complete a questionnaire so that we could set optimum trading conditions for your experience level.
- Let us verify your account by providing us with your ID card and proof of residence.
We offer various account types for traders with different experiences. An advanced trader may have access to higher leverage, swap discounts, and more trading options on available CFD assets. In contrast, novice traders could have lighter trading conditions in order to help them gain more experience.
Practice trading on a demo account
Before trading on live retail investor accounts, traders can practice on a demo account, available for every InvestGlo client. To try and avoid the risk of losing money rapidly due to leverage or poorly prepared strategies, you can trade in a risk-free environment with virtual cash.
After practice with the demo account, the CFD investor can implement a trading plan and start trading on the real markets. To achieve this, you will need to make a deposit to a brokerage profile from a bank account, PayPal account, or via other payment methods. Once this is done, you can start with buying Bitcoin CFDs and then sell them to exploit the price fluctuations.
Trading CFDs on Bitcoin in a fast-paced environment
InvestGlo is a popular broker that helps traders keep up with the dynamics of the Bitcoin market. We offer CFDs on various cryptocurrencies, including Bitcoin, so that each of our clients can get closer to innovative products in the world of finance.
We equip our traders with the latest and most innovative resources for conducting Bitcoin trade via CFDs, including:
- Tight spreads
- Dedicated account manager
- Customized investment news
- Different leverage sizes
- Options for hedging
Implement your trading strategy at lightning-fast speed with InvestGlo.
FAQ
How do I start trading Bitcoins?
You can start trading Bitcoin CFDs by finding a broker that offers the right conditions for your particular needs. InvestGlo offers useful educational tools, a demo account, various types of accounts so that you can set up a Bitcoin trade with CFDs in an optimum environment. If you decide to trade CFDs with us, you can open an account here.
Can I buy and sell Bitcoin the same day?
Buying Bitcoin CFDs and then selling them the same day is possible with the day trading strategy. It is a popular approach for Forex traders. However, it works well for cryptocurrency traders as well. The digital currency market is a very dynamic place, so short-term methods like this strategy may help to catch a chunk of favorable price fluctuations by actively trading as often as possible.
What is the minimum amount to start Bitcoin trading?
The minimum deposit for CFD Bitcoin trading at InvestGlo is $250. However, your total trading lot's value can be much higher depending on the size of leverage available for your account.
Every trader should remember that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A trader is always advised not to invest in a Bitcoin trade that he/she cannot afford to lose.
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