How to Trade Bitcoin – A Getting Started Guide

The cryptocurrencies are here to stay, that’s for sure! Here is our detailed guide on how to trade bitcoin, the world’s most prominent cryptocurrency. Follow this guide for information and tips on bitcoin trading principles and techniques, profit and loss calculation, bitcoin correlation, and key events that affect your profits during bitcoin trading. Start your bitcoin trading journey today.

Bitcoin signs and valuable trading information

Trading cryptocurrencies was never wanted to be easy. Volatility is huge and movements are often unexpected, so many Bitcoin traders, especially new, professional traders, use analysis or bitcoin signals such as our forex signals, which you can find on the signals page, and try our free or premium trading signals! Our trading experts perform thorough technical and basic analysis before issuing trading signals on Bitcoin. 

Currency money is usually quite volatile, so Bitcoin’s most successful trade is usually long-term trading. Therefore, our Bitcoin signals are long-term signals. This is to avoid jigsaws from fluctuating. So stop loss and profit profit targets are usually quite large compared to normal forex large corporations. As a result, we advise followers of our Bitcoin signals to reduce leverage when following them on live accounts and other signal providers. Our trading techniques are usually based on a number of technical and fundamental indicators, such as moving averages, support and resistance levels, the mood of the cryptoparket as a whole, and most importantly, the trend.   

What is Bitcoin (BTC, XBT) and how does it work?

In January 2009, the financial world changed forever when the “genetic block” of bitcoins was mined by an anonymous person (or persons) under the pseudonym Satoshi Nakamoto. That was it, the first decentralized cryptocurrency was created.

Bitcoin is created in such a way that computers carefully perform mathematical calculations, thereby converting electricity into long lines of code that have monetary value. This calculation is done in a distributed network and is called bitcoin mining.

Bitcoins can be transferred between individuals ’cryptocurrency wallets or used to purchase goods or services online.

Each transaction made with bitcoin is recorded in a massive data book called a block chain.

This complete bitcoin system-based blockchain technology combines the resources of all the machines that mine bitcoins and process transactions on the network.

This decentralized, collaborative effort ensures that no central authority can fully control bitcoins.

Bitcoin market capitalization

Bitcoin (BTC, XBT) is the cryptocurrency with the largest market capitalization. As of November 2019, the market cap has exceeded $ 171 billion and remains by far the best altcoin. 

The limited supply of Bitcoin makes it difficult for me

It can have up to 21 million bitcoins. The reason for this supply constraint is the decreasing supply algorithm used in the mining process.

The bitcoin mining process will become exponentially slower, and it is estimated that the last bitcoin will not be extracted until May 2140.

How to trade Bitcoin

Bitcoin (BTC, XBT) CFDs can be traded on the eToro trading platform. EToro offers leveraged trading in bitcoins (and othercryptocurrencies) that do not charge a commission or bridging fee. Of course, there are other brokers that offer leverage in bitcoin trading.

Because of the volatility of bitcoin, it is not wise to trade with high leverage. Leveraged trading is the safest way to trade bitcoin, of course. In addition, the huge volatility of bitcoin may in some cases necessitate the use of wider stop losses than are commonly used when trading assets such as currency pairs.

When trading bitcoin, traders can generally use the same trading principles and techniques that are used to trade traditional financial instruments such as forex currency pairs or stocks.

Buy and hold strategies have yielded phenomenal results with bitcoin trading. For example, many investors who have used “buy and hold” strategies have performed well. There were also many swing trades and breakout trading opportunities in this incredible digital currency.

BTC – Bitcoin Daily Chart – Part of the 2019 exchange rate

Bitcoin profit and loss calculation

Calculating the gains and losses of bitcoin trading is fairly straightforward, especially if the base currency of the trading account is the U.S. dollar.

If a trader buys a bitcin and the price goes up by $ 100, the trader earns $ 100. Of course, this does not count towards the margin. Here is a screenshot showing the spread of eToro bitcoin CFDs:

Here, the surcharge is $ 2274.55 minus $ 2258.93 = $ 15.62. This is quite expensive compared to the premiums of the major currency pairs, but keep in mind that this is not a currency pair.

The price of bitcoin moves much faster than any currency pair and is also much less liquid than the major currency pairs in particular.

Example of profit and loss calculation

Here is an example of a simple profit calculation for bitcoin trading on eToro’s community trading platform:

Bitcoin can be traded in smaller quantities than a unit. For example, traders can speculate using 0.14 bitcoin, as in the screenshot below:

Bitcoin Trading (BTC) on the eToro trading platform

The entry price (open price) was $ 1839.89. The take profit order was completed for $ 2173.27. That translates to a profit of $ 333.38 per bitcoin.

As you can see in this screenshot, the amount invested was $ 250, which was 0.1358776 bitcoin at that stage. There is a small difference between this amount (0.1358776 bitcoin) and the actual position size (0.135491 bitcoin). There is no logical explanation for this, but there was probably a slippage that affected the calculation of the executive algorithm.

The actual profit of $ 45.17 is obtained by multiplying the actual position size of 0.135491 bitcoin by the profit of $ 333.38 per bitcoin: $ 0.135491 X $ 333.38 = $ 45.17 profit.

It should be borne in mind that the position size displayed on the eToro terminal is a rounded number, so the position size of 0.135491 is displayed as 0.14 in this case.

Instruments correlated with Bitcoin

Other prominent cryptocurrencies, such as ether (ETH) and litecoin (LTC), are positively correlated with bitcoin. However, this relationship has changed from time to time.

* For traders who want to learn more about trading ethereum, here’s a link to an article dedicated specifically to this phenomenal cryptocurrency: How to Trade Ether (Ethereum) – A Getting Started Guide.

There have been cases where ether (ETH) and litecoin (LTC) have moved in opposite directions relative to bitcoin. However, these two cryptocurrencies tend to move parallel to their brother’s bitcoin because bitcoin usually sets the tone in the cryptocurrency market.

When bitcoin performs well, it sends a message to the investment community that everything is fine in the cryptocurrency market. Consequently, ether and litecoin are generally preferred in a rosier bitcoin. Ether and litecoin are the largest cryptocurrencies.

In contrast, a bitcoin crash is likely to put pressure on litecoin and ether, depending, of course, on what caused the accident.

Sometimes other cryptocurrencies can also benefit from weaker bitcoin. This is usually an exception to the rule.

Major events that may affect Bitcoin

Aspects related to the development of the Bitcoin system

Although bitcoin is the most established cryptocurrency, it is still very young against fiat currencies such as the US dollar and the British pound. Because of this, events related to its development and operation can drastically move its price.

Such events can be “hard forks” that change the internal structure of bitcoin operation. Bitcoin faces an ever-increasing scale issue that needs to be addressed one way or another.

Increasing the size of the bitcoin block is one way to solve the serious blockchain congestion problem that the bitcoin community is currently facing. To achieve this, however, a “hard fork” is inevitable.

Global financial crisis

Something else that could significantly affect the price of bitcoin is a global financial crisis.

If confidence in large central banks and governments fails, one can move toward security, which can increase the attractiveness of alternative custodians, of which bitcoin can be important.

State intervention

On December 5, 2013, the People’s Bank of China entered and banned Chinese mainland financial institutions from trading bitcoin.

This intervention by the Chinese government has led to huge sales and bitcoin has lost more than 50% of its value these days.

After this initial fall, the bitcoin price continued to fall for more than a year before reaching a low point.

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