How to Become a Bitcoin Trader in 2020-2021

Posted by Harry Johnson Mar 23, 2021

What is Bitcoin trading?

Bitcoin trading is the act of buying and selling bitcoin through an exchange or via a CFD (contract for difference) trading account. Buying and selling of bitcoin are largely based on speculation due to the volatile nature of bitcoin. In bitcoin trading, traders seek to make a profit by buying bitcoin at a low price and selling when the price spikes. When you buy bitcoin at a low price, it means you’ll get a high amount of bitcoin for a low amount of fiat currency and vice versa.

There’s a difference between bitcoin trading and bitcoin investing. Bitcoin trading involves buying and selling bitcoin in the short-term whereby traders view it as a profit-making instrument. On the other hand, bitcoin investing is done with long term goals in mind. While the price of bitcoin is largely determined by a range of factors outside the control of a trader, one must learn how to trade bitcoins to make profits.

Bitcoin forex trading

Bitcoin forex trading is simply the buying and selling of bitcoin that takes place in forex exchanges. An increasing number of forex brokers are now accepting cryptocurrencies so individuals can buy and sell bitcoins on forex via a bitcoin-based account. To trade bitcoin on forex, you'll have to open a forex trading account with a forex broker who accepts bitcoins and deposit bitcoins in the broker's digital wallet. Some of the benefits of trading bitcoin on forex include—low cost of trading, high leverage for trades, better security, and many more.

Bitcoin price trading

Bitcoin traders leverage the price of bitcoin to determine the best time to buy or sell. The volatility of bitcoin creates a possibility for traders to make a good profit. Traders look for the opportunity to buy bitcoin at a low price and sell at a high price. This is the concept of bitcoin price trading. As a beginner in bitcoin trading, it's in your best interest to learn bitcoin trading so that you're able to take a speculative position on bitcoin's price movements. By learning how bitcoin is traded, you'll be able to manage risk in a better way and increase your chances of making a profit.

Trading Bitcoin and how to earn money on it

How does bitcoin trading work?

Bitcoin trading works in a similar way to trading on an exchange. The only difference is that bitcoin trading is done on a virtual currency. Bitcoin traders evaluate the cryptocurrency industry as a whole as well as price graphs to predict bitcoin’s price movements. To get started with bitcoin trading, you’ll need to open an account with a reputable bitcoin exchange, deposit money in the account to purchase the coins and decide whether to go short or long. Your position in bitcoin trading will be based on your speculation of bitcoin price movements. If you expect bitcoin price to rise in the near future, you can buy and sell it later for a profit. On the other hand, if you anticipate that bitcoin price will fall in the short term, you can sell to buy later when the price falls. Trading on exchanges comes with a host of benefits, including low cost of trading, better financial security, and many more.

Another way to trade bitcoin is through CFD trading. This strategy allows traders to speculate on bitcoin price movements without owning the bitcoins. Basically, CFD bitcoin trading is a contract between a trader and a broker, based on the price movements of bitcoin. This type of trading allows traders to trade without the fear of losing their bitcoins due to hacking. Moreover, CFD bitcoin trading is easy to set up, and some platforms offer advanced instruments that can help you to analyze the bitcoin market and make better buying and selling decisions.

Bitcoin trading techniques

Day bitcoin trading—This technique entails buying and selling bitcoin multiple times over the course of a day, intending to make profits in a short period of time. This strategy is usually used by traders looking to avoid overnight risk.

Scalping—This is a short-term bitcoin trading method whereby traders aim at profiting from minor bitcoin price changes. This is a fast-paced trading technique that requires traders to have a strict exit strategy to avoid huge losses. This bitcoin trading technique is increasingly becoming popular among bitcoin traders as it limits risks and provides advantages for traders.

Swing bitcoin trading—This technique is used by bitcoin traders looking to profit from price swings that take place over a period of days, weeks, or even months. Swing bitcoin traders identify a specific price movement that they could benefit from, they step in and start trading to make a profit from the price movement until it dies out. The main benefit of swing trading is that it allows bitcoin traders to analyze the market and make better decisions without the pressure typical with day trading.

Trading bitcoins for beginners

Bitcoin trading has proven to be a profitable venture for professional traders and beginners alike. That's why it has become a huge market attracting investors from almost all parts of the world. However, bitcoin trading is an industry you'll want to approach with a lot of caution. While you can benefit immensely from bitcoin trading, the industry comes with serious risks. As a beginner, you'll want to tread carefully.

The following are bitcoin trading tips for beginners:

Start small

Start will a small investment and increase gradually as you continue to learn to trade cryptocurrency. Although some beginners have been lucky to make a kill, it's possible to make huge losses when you're starting. There's a huge risk involved in bitcoin trading, so it’s advisable to start trading with a small amount.

Trade with disposable income

As a beginner, you don’t want to trade bitcoin using your rent or borrowed money. Bear in mind that you're a beginner, and you may not have a firm understanding of bitcoin price movements, so you'll want to trade with money you can afford to lose.

Bitcoin trading is not a get rich quick scheme

Although you might have heard of people who became rich overnight from bitcoin trading, it doesn’t happen every day. You may get frustrated big time if you approach bitcoin trading with a get rich quick mentality. It's important to approach bitcoin trading like any other investment knowing that there is a possibility to make profits and losses. Generally, bitcoin trading requires one to understand the basics of bitcoin trading 101, the best place to trade bitcoin, and how to invest in bitcoin stock.

Use a reputable trading exchange

There are countless bitcoin trading platforms you can use to trade bitcoins. However, you need to choose a trusted bitcoin trading platform to ensure your money is safe. A trusted platform should leverage advanced security measures to protect against hacking. You should also check the reputation of the trading platform you’re considering to get an idea of what other bitcoin traders are saying regarding their experience. Other things to consider when choosing a bitcoin trading platform include convenient and secure payment methods, affordable transaction fees, and an intuitive user interface.

Keep a trading diary

Be sure to maintain a trading diary where you'll capture the important details of your trades. This will enable you to keep track of your trading tendencies, so you can identify where you'll need to improve on.

Most relevant currency in the world

What is a bitcoin CFD?

A bitcoin CFD is essentially an agreement between a bitcoin trader and a broker, whereby the seller speculates on a change in the price of bitcoin. A bitcoin CFD allows bitcoin traders to invest in bitcoin without actually owning the coins. For instance, if you speculate an upside momentum for bitcoin prices, you’ll open an account at a bitcoin CFD broker and buy bitcoin CFD. If the price moves in your favor, you win against the broker and vice versa. Bitcoin CFD allows bitcoin traders to magnify their potential gains through the use of margin. Since you don’t actually buy bitcoin when trading bitcoin CFD, this instrument makes it possible to make a profit without owning any bitcoin. For beginners, you’ll want to approach bitcoin CFD with a lot of caution. They are extremely high-risk, so you have to understand the risk related to them before taking a leap.

How to calculate bitcoin CFD margin

Bitcoin CFD margin is calculated as follows:

  • CFD margin= (Contract Size X Market Price) / Leverage).
  • Contract size - The number of bitcoins you’re willing to trade
  • Market price - The price of bitcoin on the market
  • User leverage - The leverage provided by the bitcoin broker

Going long and going short in bitcoin trading

Going long means buying bitcoin anticipating that the prices will go up, so you can sell it later and make a profit. Going short means selling bitcoin anticipating that the price will fall so that you can buy later at a lower price. Short-selling bitcoin requires a good understanding of the bitcoin market and trading strategies. You can either choose traditional short-selling or choose to short bitcoin with CFD. Traditional bitcoin short-selling entails borrowing bitcoin from a bitcoin CFD broker and selling it on the market. If the prices go down, you’ll buy the bitcoins back at a lower price and return them to the bitcoin CFD broker.

With CFD bitcoin trading, a trader doesn't need to borrow bitcoins as they will speculate on the price performance of bitcoin in the future. Bitcoin CFDs are leveraged so you only need to invest a small amount and make a profit if the prices move in your favor. Bitcoin CFDs can be traded on the MT5 platform, which allows for automated trading. MT5 CFD bitcoin trading provides traders the possibility of reflecting all the positions and comes with more advanced features as compared to the MT4 platform.

If you like this article, you might also be interested in this How to create a trading plan

The best bitcoin trading times

Bitcoin markets are most active from 8 a.m. to 4 p.m., so this is arguably the best time to trade. Bitcoin experts have noted that high price volatility occurs at around 2.30 pm in almost all regions, so this could the ideal time to trade. Generally, bitcoin trading can be lucrative for a trader who understands the ins and outs of cryptocurrency trading. I hope this guide helps you to become a successful bitcoin trader?


Harry Johnson

Successfully passed the internship at the United States Department of the Treasury. Discovered trading at the university.