Bitcoin trading is under the eyes of traders worldwide due to its recent boom and the many advantages for investors. The cryptocurrency first came into existence in 2009 when Satoshi Nakamoto introduced it as an open-source code. Since then, it has reached new highs and has gone into the portfolio of Billionaires worldwide.
Bitcoin is a digital currency that does not come under the moderation of any central bank or financial regulator. Traders can send the coin from one wallet to another at low costs and high speed. Today we will discuss how traders can trade cryptocurrency by detailing its essential characteristics.
Using a Broker
A cryptocurrency broker is where traders can carry out their buy and sell transactions on Bitcoin and other cryptocurrencies. All the transactions are tracked in the blockchain, and therefore, it is impossible to cheat the system. Opening an account with a broker is simple. It requires a few steps detailed below:
- Opening an account. Sign up on a cryptocurrency broker by using your email id. Provide your verification documents if needed.
- Deposit. Use the available methods at your disposal to deposit the amount of cash you plan to trade with.
- Trading. Employ the strategy that you like on the charts.
Characteristics of Bitcoin Trading
Before attempting to place any trades, traders have to understand some essential characteristics of bitcoin trading.
Duration
Bitcoin is available to trade 24/7. Unlike other financial instruments that close on weekends or at the end of the day, there is no closing for digital currency.
Mining Process
Bitcoin mining is a process to earn cryptocurrency by using a portion of your Graphics Processing Unit to solve a puzzle. This can generate a passive income provided the cost of electricity is suitable, and the hardware is powerful. Some investors combine multiple GPUs and special systems to build a rig or a farm.
There are 21 million BTC in the jargon, and the current mined value is 19 million. As the participation in mining is high, it can be difficult to get profits.
Trading Volume
There is plenty of volumes available in Bitcoin, allowing traders to enter and exit our of their positions quickly. This also reduces latency on trades and helps run high-frequency trading algorithms.
Volatility is the measure of price movements that helps investors make money. With huge participation in the coin, the high volatility is high. This can also posses a risk for new investors who do not know how to handle big movements.
Image 1. The daily chart of Bitcoin shows how the price fluctuates constantly. Traders can trade the asset on both the long and short sides.
Bitcoin Trading Strategies
Traders can use technical techniques similar to forex or stock trading in Bitcoin. A few general strategies to trade BTC are:
- The moving averages are used to determine the over trend of the instrument. For purposes 9 and 21, EMA can be employed. The cross-over between the two can tell us when the market’s overall direction is shifting.
- MACD and RSI indicators are available to know when the market is overbought or sold. This is especially helpful for those who like to trade reversals.
- Algorithms are a common choice for traders who wish to trade automatically. These expert advisors scan the market constantly and provide a good passive income if appropriately coded. Arbitrage and HFTs are popular in this regard.
Image 2. The 9 and 21 EMAs on the daily chart shift their direction and cross over whenever there is a potential change in trend. Traders can also employ a 200-period moving average, which acts as support and resistance in many cases.
