Unless you come from a different planet, you must have come across the word Bitcoin. Now and then, the coin has made its way into the news headlines and social media with people confessing of making massive amounts of money over there. Such headlines have left most people asking, what is this Bitcoin? How do I join the trade? Well, Bitcoin is a form of digital crypto currency that has been trending recently for good reasons. Bitcoin trading has seen professionals, and even beginners become incredibly profitable.
The Bitcoin market is diversified and new. By now, most likely, you’re looking forward to trying your luck in the crypto exchange. But, you’re not sure where to begin. Well, I will go ahead and give a step-by-step guide on how to succeed in this digital currency. But it would be best if you first had an in-depth understanding of Bitcoin before you begin the trade.
Where did Bitcoin cryptocurrency originate?
The name Bitcoin came into existence in 2008 after a war between financial institutions and Occupy Wall Street. Occupy Wall Street argued that financial institutions were stealing from their clientele by changing the interest rates often. The mastermind behind Bitcoin aimed at establishing an idea that would cut off the interest rates, the middlemen, while making the transactions transparent. In the process, blockchain was born, a decentralized system that would allow one to control the funds and know everything that goes in and out.
Blockchain is simply a list of records, termed as blocks. The file is usually linked together using cryptography. Every block in the file usually has a cryptographic hash from the previous block, a transaction data, and a timestamp. The records can’t be modified once the transaction is over. It’s for this reason that Bitcoin has been taking over the world of business with a bang. Currently, renowned companies, hospitals, corporations, institutions, and individuals have adopted this digital currency. With large companies such as Microsoft accepting Bitcoins, who are you to be left behind?
Unfortunately, even with all the hype, you have heard of people complain about the use of this digital currency. Well, the fact that its digital means that, as a user, you stand the chance of being hacked. Many people around the world have lost their coins to ruthless hackers. The guys hack people’s wallets, and then send the Bitcoins, in there, to their wallets. Remember, you can’t reverse a transaction once it’s over. That’s one feature of Bitcoin that makes it extra special, especially when you’re doing business. However, the same functionality can hit you big when your wallet gets hacked as you can’t recover what’s gone.
In late 2009, when the first batch of Bitcoins was released, the currency had no value at all. During this period, some users had even tried to auction 10000 BTC for around $50 cumulatively. Surprisingly, no one thought that Bitcoin would turn out to be what it’s today. Currently, the price of a particular Bitcoin is about $8248, a good thing for individuals who happened to own the currency. Often, these volatile prices make it challenging for beginners to join the Bitcoin trade.
As opposed to the currencies that you receive at the bank, you must know that Bitcoin has no monetary authority. The coin is usually regulated by the network of computers. Unlike the banks where you use an ATM, in Bitcoin, you generate Bitcoins through a process called mining. The mining process involves the computers within the network, executing a challenging mathematical task to earn the currency. The jobs are usually challenging and hence, tricky to mine all the available 21 million Bitcoins.
Why should you and how to trade Bitcoin?
Before placing your hard-earned money on any investment platform, one question that you should ask yourself is, is the investment worth chasing? Well, if the answer is yes, it should give you the go-ahead to stake your savings. When dealing with Bitcoin, the case is no way exceptional. You need to understand the benefits that come along.
It’s a 24-hour market
Financial markets are known to open and close at specific hours. For instance, most markets remain closed over the weekends. For Bitcoin, you don’t need to worry about the official working days as the trade is usually open 24 hours daily. This feature makes it a perfect platform for individuals looking forward to growing their fortunes.
The price of a Bitcoin is prone to frequent changes
If you’re a keen follower of the stock market, you can attest that Bitcoin prices never settle at one point. The prices are prone to sudden and rapid movements. The fast changes provide exciting opportunities for traders who are willing to risk earning quick benefits. By analyzing the the chart with Tradingview, like the one integrated on BtcPremium, you can easily predict the price movements.
The trade isn’t affected by external factors
Bitcoin is a digital currency, and that means that all the transactions are performed online. The online platform means that no external factor can interfere directly with the prices over there. By analyzing the price changes since the coin’s establishment, you will learn that its prices have never been influenced by any significant event taking place. On many occasions, events such as political panic and economic uncertainty have instead triggered a rise in the prices. Say, for example, Cyprus’s capital control that took place in 2013. If you check carefully, the prices of Bitcoin shot up during that period.
Step-by-step guide on how to trade Bitcoin
By now, you know a little history about Bitcoin. Also, you understand why it’s essential to trade in Bitcoin. The remaining part is for you to join the world of Bitcoin traders. As stated earlier, Bitcoin isn’t issued on any bank or institution. Therefore, you will need the internet and a bitcoin market to proceed. Without saying much, here is a guide to get you started. So how to trade Bitcoin? Let’s get into it.
- Find a perfect exchange market
You have to be careful when picking an exchange market. Now and then, you’ve heard of people losing huge sums of money after picking the wrong exchange market. Well, with the growing number of markets offering Bitcoin trade, choosing the ideal market can be challenging. However, there are various tips you can use to narrow down your options and arrive at the correct choice.
First thing first, the location of the exchange market is vital. According to successful traders, you need to pick a market that is near you to deposit fiat cash. Also, the market you choose should accept Bitcoin within your place of residence. Trust is also essential here. Remember, the prices of a single unit can be a bit high. Therefore, you will need to work with an exchange market that can be trusted with your money.
It would be best if you went for a market that has been in the industry for an extended period. Bitfinex, Bitstamp or even a new licenced exchange like BtcPremium, are some of the markets you can involve in your dealings. Therefore, by engaging them, you can be sure that there won’t be any major surprises along the way.
Choosing renowned exchange markets also helps to reduce the chances of falling victim to fraud. Most of these markets usually have strict regulations that help protect both the buyer and the seller. Therefore, always ensure that your preferred market has rules in place meant to protect you from the hands of criminals. Lastly, you must consider a market that has an in-depth penetration over the market. Going with such a market guarantees a better chance of finding better deals, which can mean significant results.
- Confirm and create an account with the exchange market you pick
After weighing your options, you will finally arrive at your preferred choice of market. Please confirm if your choice is perfect for your trade. Thanks to the internet, you can easily find customer reviews about the exchange markets you intend to use. Often, the internet gives reviews from clients, both negative and positive. Such reports can help you conclude if the market is worth chasing or not.
Also, you can ask around from friends who have been trading in Bitcoin. Word of mouth is essential when it comes to making such significant decisions. Your friend can honestly give you first-hand info on their encounter with the market you intend to utilize.
Once you’re sure about the market, you should proceed and open an account there. Currently, almost every platform has a unique guide on how to create an account with them. However, they all follow a similar procedure which includes;
- Registering an account with the exchange market
- Verifying your profile using your email
- Once the email is confirmed, you can sign in and give your info.
- Once the account is verified, you can go ahead and top up the funds
- With the funds in place, you can start buying and selling the coin.
- Start trading Bitcoin
Trading in Bitcoin is a straightforward task. It entails buying the unit to sell it in the future at a higher price. Say, for instance, your exchange market charges $3 for Bitcoin worth $200. Your local bank will charge $203, and you will have $200 worth of Bitcoin to trade. If the price moves high after some time, you can choose to sell the Bitcoin or wait for a better deal.
- Analyze the Bitcoin market
When it comes to trading in Bitcoin, understanding the market is non-negotiable. Although you can predict the next shift in the online charts, knowing Bitcoin in detail is helpful. Say, for instance, a sudden change in price may scare you to sell your Bitcoin at a loss. By understanding the market, you can quickly tell when it’s time to sell the currency and when to hold on. Now and then, the prices usually go extremely down and then shoot up again. Therefore, it would be best if you didn’t allow such down prices to intimidate you into making a stupid move.
Often, experienced traders insist that one should buy Bitcoin when the price is low and forget if it ever existed. Well, the idea may seem crazy, especially when the price is nose-diving. But, you never know, you may end up earning a profit that is thrice your investment, within a year. The good thing is that you can easily find info about Bitcoin for beginners out there. Today, there are countless blogs, magazines, and even channels that specialize in the currency, even BtcPremium has it’s own blog and YouTube channel about how to trade Bitcoin. By following these platforms, you will be equipped with all the skills needed to analyze the Bitcoin market trends like a profession.
- Risk management
Often, many people buy Bitcoin after hearing new of people making millions from the platform. If you are in this category, you have got to slow down and get your facts right. You must know that trading in Bitcoins is like the stock market. A stock may work right for you and earn losses for a friend. The same way, Bitcoin may make a profit for someone else only to disappoint you.
When joining the list of traders, it would be best if you didn’t let the incredible prices excite you. You should consider the risk factors associated with trading on this currency. Also, experts always insist that one should stake the amount of money that can’t suffer much once it’s gone. Also, it’s advisable not to use cash that you intend to use any time soon. As stated earlier, blockchain trading is mostly about holding onto the currency until it’s the perfect time to sell. The waiting time can even take a decade. Therefore, you should use money that can stay on hold for that long without affecting your usual schedules. Also, the game is about how to trade Bitcoin is an endless story, as there is always some new functionality or trend comes out.
- Watch out for scams
As stated earlier, Bitcoin is prone to price changes. Some prices are usually extra high, and that’s what sees many individuals fall victim to scams. For instance, you may come across platforms offering high-interest rates as opposed to the prevailing rates. If not careful, the excitement can see you direct your money to their wallets. In the end, you may end losing your hard-earned money to such platforms. The funny thing is that such platforms keep changing their names, and thus, tracking them can be a bit hectic.
While researching about the Bitcoin trade, you are likely to encounter platforms that claim to offer Bitcoin mining service. As a beginner, you should desist from involving such platforms because most of them are a scam. Most of them end up blacklisting you once you’re done with the payments. Therefore, if you come across a platform offering such high earning offers, you should run for your dear life. You may end falling prey, and your bank accounts emptied. It’s better to be safe than sorry. Most of these scams have ruined many people’s financial status.
Types of Bitcoin traders
Trading in Bitcoin is a trade like any other. The fellows on the exchange markets are all there to make a profit, whether small or big. The amount of profit earned is dependent on the method of trade you intend to use. In Bitcoin, there are three types of traders based on their mode of operation. They include;
Day traders
As the name implies, day traders are individuals who try their luck during the day. They perform several trades during the day, intending to make a profit. The moves may bring small results and could last even seconds. The small gains are what accumulate into their daily benefits. If you’ve seen fellows staring at screens in an exchange market, then you already have an idea of who is a day trader.
Scalp traders
Often, scalp traders are usually mistaken for day traders. Well, the fact that they operate similarly can see the newbies, especially confused. The only difference is that scalp traders don’t stop making trade when it’s night time. They operate on a 24-hour basis making hundreds of trading moves within the 24-hour timeframe.
Swing traders
Swing traders are way much different from the day and scalp traders. Their trading moves aren’t focused on the short term. They study price trends before entering the market. These kinds of traders then enter the market at the start of the pattern and stay on board and get out when the trend stops. Most Bitcoin traders are swing traders as they buy the currency and forget if it ever existed.
Bitcoin terminologies
Bitcoin is a broad platform, and that has plenty of opportunities. As said earlier, the secret to achieving this trade is researching a lot. It’s like any other market which requires one to understand the market to be able to analyze and explain the trends. When researching about the trade, you will come across some terms, some of which you already know. Without saying much, here are the common terminologies that you should know to make your journey as a beginner smooth.
- The order book
As the name implies, the order book is usually a register of the entire sell and buy orders of the purchasers and sellers. The asks/ sell orders usually indicate the asking price of the seller. Buy orders, on the other end, typically reflect the bids placed by the coin purchasers.
- Bitcoin price
Many people find it hard to understand the Bitcoin price. As to what many people assume, the Bitcoin price is usually the price of the final trade that happened on a specific exchange. You have to understand that Bitcoin prices are prone to fluctuations and may vary from one exchange to another. Also, the price may vary depending on your country. On top of the Bitcoin prices, you may notice some terms such as ‘low’ and ‘high.’ These terms usually depict the lowest and the highest rates within the last 24 hours. You can view statistics on Coinmarketcap for example.
- Bagholder – Hodler
A bagholder or hodler is someone who is still holding onto the currency despite its price depreciating. The holder does so with an eye for the future, hoping that the price will bounce back.
- Wallet
Like a typical wallet, the wallet in this context is usually the secure storage for your Bitcoin. It can be a piece of paper, locked in a safe deposit box, an online or an offline hardware wallet. Read more about how to store bitcoin here.
- Volume
Volume in this context often represents the amount of Bitcoin that has been exchanged over a given period, say a day, for instance. Bitcoinity.org can give you a deeper insight about volume frequency and changes over time.
- Instant buy
Newbies can buy their Bitcoins with instant buy function, which is based on market price and easy to use with a one click process.
- Limit order
When it comes to trading in Bitcoin, there are limitations, which allow a trader to sell or buy Bitcoin at a specified price. Limit order helps keep order in the Bitcoin market. As a trader, you have to operate as per the limit order; otherwise, your transaction won’t succeed.
- Stop-loss order
As you’re aware, the Bitcoin prices are prone to sudden rise and fall. The stop-loss order helps the trader prevent their selling price from falling below a specified limit. The rule helps save one from incurring losses that may arise from the Bitcoin price depreciating.
- Market order
Market or instant orders are different from stop and limit orders because there are no set conditions that have to be met before the rules are executed.
Interpreting the Bitcoin price charts
The Bitcoin for beginners’ guide will always sound incomplete without a paragraph or two about the price charts. If you are looking forward to joining the trade, you have to be in a position to explain what the various charts on the homepages of the exchange market mean.
The charts you find in the Bitcoin market are no way different from the ones you see on the stock markets.
Therefore, it can’t be challenging to study them if you’re used to the stock exchange.
It’s at this point that the term candlesticks come in the picture. The term was coined by the Japanese in the 1600s when trading was picking momentum. The candlesticks were a way of the ancient Japanese conducting market analysis. Every ‘candle’ usually dictates the opening, lowest, and closing price of the stock.
On the other end, the color of the candle should tell whether the prices were low or high. For instance, the green candles signify a rise in the cost of the Bitcoin, while the red ones indicate a drop in the price. Understanding these colors and how they apply to the chart can help you a lot, especially if you’re a day or scalp Bitcoin trader.
Tips on how to trade Bitcoin
Never stop reading about Bitcoin trading
Bitcoin trading is like any other type of trading where information is vital. It’s recommended that you keep yourself posted with every piece of info that you can lay your hands. The extensive reading helps boost one’s skills in the trade, which are essential when it comes to succeeding. Therefore, you should make use of the available content out there dealing with the business.
Never invest more than you can afford to lose
The excited prices of Bitcoin can tempt you to place all your savings in the trade, which is never recommended. You must know that the activity is a trade like any other, and that means that there are a lot of risks involved. Therefore, it would be best if you never invested more than what you’re willing to lose. By investing everything on the platform, you may end up losing everything that ever earned when the price of Bitcoin nose dives.
Don’t let your emotions get on the trade
Successful investors will always tell you that you shouldn’t let your emotions drive you through the deal. If you allow emotions to take control, you may end making a stupid decision that may end up costing your investments.
Never leave your coins on a market
Like the typical streets, the exchange market platforms aren’t that safe for the investors. Hackers are always looking for opportunities to steal from innocent fellows. You may end falling prey to the hackers by leaving your coins on the exchange market. It would be best if you ensured that your coins are transferred to your offline wallet, once you’re done with the exchanges. Offline wallets are considered to be much safer as opposed to storing your coins on an online platform.
Be ready to handle FOMO
As a Bitcoin trader, you’re most likely to find yourself holding onto the coin even when the price is going below your buying price. Bagholder do so with an eye for a better price in the future. Therefore, when starting as a trader, you should be prepared to handle the fear of missing out (FOMO). It will help if you don’t the price fall intimidate you.
Conclusion
In the recent past, Bitcoin has been making it to the newsrooms with reports of people earning vast fortunes from the platform. The truth is that the trade offers an opportunity for every investor out there, whether amateur or pro. This article contains a guide on the start of how to trade Bitcoin. However, as explained in the piece, you have got to understand in detail about Bitcoin before investing your hard-earned money. Read through the entire article as it contains every bit of info you ought to know.
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