Table of content

Bitcoin trading: Everything you need to know!

What is bitcoin trading?

Bitcoin trading is a method of investing in bitcoin by speculating on price changes in the cryptocurrency. While buying bitcoin through an exchange in the hope that its price will grow over time has typically been the case, cryptocurrency traders are increasingly utilizing derivatives to speculate on both rising and falling prices — in order to capitalize on bitcoin's volatility. With IG, you may speculate on the price of bitcoin using financial derivatives such as CFDs. This product allows you to profit from price swings in either way without owning the underlying coins, which means you won't have to worry about the security of any bitcoin tokens.

How to Trade bitcoins step by step:

Discover what affects the price of bitcoin:

To capitalize on a rising opportunity or short the next bubble, you must first grasp the variables that influence bitcoin's price: The Bitcoin supply: The current bitcoin supply is limited to 21 million units, which will be depleted by 2140. Because there is a limited supply, the price of bitcoin may climb if demand grows in the coming years. Because there is a limited supply, the price of bitcoin may climb if demand increases in the coming years. Negative Publicity: Any breaking news about bitcoin's security, worth, or lifespan will have a negative impact on the coin's total market price.Integration: Bitcoin's public visibility is dependent on its incorporation into new payment systems and financial institutions. If this is effective, demand may increase, which will boost bitcoin's price. Important events: Regulation changes, security breaches, and macroeconomic bitcoin news may all have an impact on pricing. Any consensus reached by users on how to speed up the network may boost trust in bitcoin, causing the price to climb.

Pick a bitcoin trading style and strategy

How to day trade bitcoin

Day trading bitcoin involves opening and closing a position inside a single trading day, which means you will not have any bitcoin market exposure overnight. This implies you won't have to pay any overnight financing fees on your position. This approach may be for you if you want to benefit from bitcoin's short-term price changes, and it can help you take advantage of the daily volatility in bitcoin's price.

How to trend trade bitcoin

Trend trading involves choosing a position that corresponds to the current trend. For example, if the market is in a bullish trend, you would go long; if the market is in a negative trend, you would go short. If this trend were to slow or reverse, you would consider closing your trade and establishing a new one to follow the new trend.

Bitcoin hedging strategy

Hedging bitcoin involves reducing your exposure to risk by adopting a position that is completely contradictory to one that you currently have open. If you were concerned about the market turning against you, you would do this. For example, if you owned some bitcoins but were concerned about a short-term decline in value, you might use CFDs to establish a short position on bitcoin. If the market price of bitcoin declines, the profits from your short position will cover part or all of the losses on the coins you hold.

HODL bitcoin strategy

The ‘HODL' bitcoin strategy means purchasing and storing bitcoin. Its name is derived from a typo of the word "hold" on a prominent cryptocurrency site, and it is now commonly supposed to stand for "hold on for dear life." This statement, however, should not be taken too literally — you should only buy and retain bitcoin if you believe its long-term price will rise. If your research or trading strategy suggests that you sell your holdings to capture a profit or minimize your losses, you should do so – or you may establish stop losses to terminate your positions automatically.

Choose how you want to get exposure to bitcoin

There are a few different ways that you can get exposure to bitcoin

  • Trading bitcoin derivatives

When you trade bitcoin futures, you will be speculating on the price of bitcoin rather than holding it outright. As a result, you will be able to speculate on the price of bitcoin growing by ‘going long' or decreasing by ‘going short.'

  • Buying bitcoin through an exchange

Those that adopt a buy-and-hold bitcoin strategy should acquire bitcoin through an exchange. This is because purchasing bitcoin through an exchange implies you are acquiring direct ownership of the currency, with the hope that its value would grow. However, there are several drawbacks to purchasing bitcoin through an exchange:

  • Bitcoin exchanges frequently lack adequate regulation as well as the infrastructure required to react to help inquiries swiftly.
  • The matching engines and servers on bitcoin exchanges are frequently faulty, resulting in market suspensions or lower execution accuracy.
  • Bitcoin exchanges frequently impose fees and limitations on financing and withdrawing from your exchange account, and opening an account might take days.
  • Crypto Index

In addition to trading bitcoin futures or purchasing coins directly from an exchange, you may trade the Crypto Index, which provides exposure to ten major cryptocurrencies such as Bitcoin in a single purchase. This index speculates on Cryptocurrencies and closely tracks or mirrors their underlying market price.

Choose whether you want to go long or short

Trading financial derivatives allows you to go long or short based on current market sentiment. Going long implies you anticipate the price of bitcoin to climb, while going short means you expect the price to decrease.

Define your stops and limits

Stops and limits are important risk management tools, and you have numerous options while trading:

  • Normal stops will end your trade at a predetermined level, but they may be vulnerable to slippage if the underlying market price fluctuates rapidly.
  • Trailing stops are used to lock in profits while limiting your negative risk when the market moves in your favor. However, they too, are susceptible to slippage.
  • Guaranteed stops will close your trade at a predetermined level, regardless of slippage. Guaranteed stops are free to establish, but you will be charged if they are activated.

Execute and monitor your trade

To open a bitcoin transaction, you would purchase if you felt the price would climb and sell if you thought the price would decrease. Once your transaction is live, you'll need to keep an eye on the market to ensure that it's moving in the direction you expected. The technical indicators offered on our trading platform might assist you in predicting what the price of bitcoin will do next. Indicators can also assist you in monitoring current market circumstances such as volatility levels or market sentiment.

Close your trade position if you want  to take a profit or cut a loss

You can close your position if you want to capture a profit or minimize a loss that has reached an uncomfortably high level. Profits are deposited immediately into your trading account, while losses are withdrawn from your account balance.

Related Resources:

If you still need assistance, you can refer to the following step-by-step purchasing guides for the various payment methods: