Bitcoin Trading – A Comprehensive Guide for Beginners

Last Updated: December 1, 2022

Trading Bitcoin is all about price speculation. You want to make a profit, so you buy Bitcoin at the current rate and hold your coins until the price increases. So many Bitcoin traders have become rich from their trading activities. Trading Bitcoin is a good decision, and with our help, you will learn to do it correctly.

Bitcoin is the most highly demanded cryptocurrency in the market. That is why it has evolved in many ways since its inception. Bitcoin will be a certain foundational asset for new crypto investors.

Bitcoin trading is not as complex as it may seem to first-time investors. All you need to do is understand the basics, and you can join hundreds of investors from all parts of the country to earn money while trading BTC.

Bitcoin was introduced to us in 2009. It has maintained the largest market capitalization index over the years. The Bitcoin trading volume has also remained consistent, even with so many challenges from the traditional banks and governments in different countries. BTC has created a foundation for alternative digital currencies, which present so much more advantages when compared to fiat currencies such as the USD.

The regulations for trading BTC vary in different countries. The rules are in place to prevent illegal financial activities such as money laundering and illicit purchases on the web. All successful traders have formed the habit of studying the BTC trading regulations in their countries, and they obey these laws.

While trading Bitcoin is profitable in many ways, it is not always a smooth experience. There are risks that BTC traders acknowledge. The crypto market is volatile, which means BTC price fluctuates based on market demand. So you can lose money while trading BTC. However, there are ways to leverage the volatile market condition to earn impressive profits. What you must do is learn how cryptocurrency trading derivatives can be used to monitor BTC prices properly.

Trading Basics for Bitcoin

Trading BTC is a continuous process. You can keep your trading account active day and night. However, a new BTC trader should focus on day trading until you know more about the process.

BTC transactions

The regular BTC transactions include basic deals you can perform on exchange platforms or in-person with a buyer or seller. The exchange platforms offer an opportunity to source or sell BTC in the marketplace. It is best if you always use escrow services when performing any BTC transaction. This means the money is held until the required service is delivered. Such transactions involve exchanging BTC for fiat currencies such as USD, EUR, or if you want to make a purchase with BTC.

Here are some essential things you should know as a first time BTC trader;

BTC Trading structure

Trading BTC is also about negotiations, how well you know the crypto market, and getting the best offer for the digital asset. The trading structure is similar to regular activities, but in this case you are trying to earn a profit after exchanging digital currency, your BTC. The buyer negotiates to get the lowest rate at which exchange is done. On the other hand, the seller wants to make more profit by leveraging demand for BTC.

If you want to make a purchase, the transaction is much easier because it does not involve exchanging two digital currencies. The buyer agrees with the seller on the price of an item and sends the value in BTC. The Blockchain is an open-source, decentralized network that supports transparency and security during BTC transactions.

Bitcoin price movements

You should learn how to accurately follow the BTC price movements at all times, even when you are not trading actively. Over time, you can determine a pattern that will help you make better investment decisions.

BTC price movements reveal that the price can go in either direction. This happens suddenly, and in many cases, predictions are accurate. Because the BTC pricing is volatile, traders use a contract for difference, CFD, agreement during long-term and short-term transactions. This means that during a transaction, the contractor is paid the difference if there is a price change before the deal is completed. For example, an agreement to exchange BTC in milestones, if the BTC price increases after two milestones, the current rate is used for the remaining part of the deal.

CFDs have been described as a type of gambling, but it requires experience and practice. You should learn about CFDs while using simple trading methods during your first months as a BTC trader.

Why do traders use CFDs?

You will observe that some traders prefer to use CFDs while trading BTC. This is a strategy that can be best described as playing safe. In this case, you sign up with an exchange platform, and you can speculate on BTC prices without buying or owning any coins. All you need to do is pay a deposit for the CFD margin and start speculating in a short-term contract. The money earned as profit during the price shift is yours, and you do not pay any commission on most platforms.

If you plan to hedge BTC, you should also consider using CFDs. You can speculate prices on mobile phones, which is convenient, and you can do the longing or shorting Bitcoin trading actions.

Factors influencing BTC price

It is essential to know the different factors that can influence the price of Bitcoins in the market. You can look out for signs and trends that indicate impending price changes when you know these factors.

Here are the factors that can influence the price of BTC;

Market supply

The economic rules apply to BTC; the price will increase if there is a high market supply. That is why the creators managing the BTC network have capped its supply at 21 million. The projection is that this supply cap will be sufficient for the market until the year 2140. However, there have been spikes in BTC price due to sudden demand or when holders start dumping their coins.

Economic regulations

Governments have been struggling to understand digital currency concepts. It has been a challenge because central units cannot control BTC, it is a decentralized Blockchain network. Therefore, economic regulations imposed by governments have influenced the price of BTC.

Clogged Blockchain network

Miners are responsible for validating transactions done on the Bitcoin network. If the miners work too slowly or select transactions with higher commissions, the network can become clogged with pending blocks waiting to be validated. This can also slow the network and affect the market price of BTC.

Rumors about BTC

Rumors spread panic and can cause an increase or decrease in demand for BTC. Sadly, these rumors cause a problem before the truth comes out. As a new BTC investor, it is best if you only act on verifiable information from authentic sources instead of unconfirmed information from online forums or blogs.

Trading strategies

Another important Bitcoin trading activity you should develop is your strategy. There are different trading strategies that you can choose from. It all depends on your resources and preference.

Generally, your trading strategy should be buying BTC at a low price and selling your asset when the price increases. And during purchases, you should aim to pay the lowest rates for products or services. If you are selling, negotiate rates that will give you more profit.

Longing and shorting BTC trading strategy

This is an old strategy used in the traditional stock market and adapted to BTC trading. Longing strategy means you buy coins when the market trends indicate the price will continue rising. Your goal is to sell your Bitcoins when the value increases.

Shorting involves selling your BTC when the price is falling. Your plan is to re-purchase the coins when the price has hit the lowest rate. Then you buy it for a much lower price and wait until the value increases again. During shorting, you make a profit because you get the same value of BTC while gaining the price difference.

Buy and Hodl strategy

‘Don’t be alarmed at the spelling ‘Hodl,’ it was formed on a crypto forum during a time when the members were encouraging each other to hold their digital assets instead of selling. The trading strategy is all about buying BTC and holding the coins in a wallet in the long term. This is price prospecting, with an informed trading plan that suggests the BTC price will increase in the future.

While this is a long-term trading strategy, you can set a stop-loss limit to sell off your coins if the price falls to a level at which you cannot bear the losses anymore.

Trend trading

This is another interesting BTC trading strategy. All you need to do is determine the current market trend for BTC and invest. The market trends could be bullish or bearish, which we will discuss later. You can maintain your investment position until the first signs of price dipping start. Then you sell your coins and repeat the process. Trend trading for BTC can be done in the long and short term.

Day trading

If you have the time during the day, you can start trading from dusk till dawn. Daytime trading means you close your trading positions before nightfall. It is profitable based on the price shifts during active trading periods when the market is most volatile.

Bitcoin market trends

Two concepts you need to understand about BTC market trends are the Bullish and Bearish market trends. Your ability to spot the trends will give you leverage to make more profits over time.

Bullish market trend

The BTC marketplace is said to be bullish when the price of BTC is on a steady rise. This trend influences market activities whether you exchange crypto, purchase products or services, or hold your coins in a wallet.

A bullish market trend is caused by a sudden increase in demand to buy BTC.

Bearish market trend

On the other hand, the BTC marketplace is bearish when there is a steady drop in the price of the coins. The price dip is consistent because more investors continue dumping their coins in the market, due to panic. Bearish market conditions can be leveraged; it is a great time to buy BTC at a low price. During bearish market trends, you can use free money that you can afford to lose, buy BTC low, and hopefully sell high.

The two market trends can happen at the same time. For example, during a bullish trend, you may witness a bearish trend suddenly, which can happen for a few minutes or hours before the bullish trend continues.

How to buy Bitcoin

You can buy Bitcoin from an exchange platform or directly from investors. The use of smart contracts eliminates trading risks when you buy Bitcoin. The process is usually transparent and fast.

Buying Bitcoin from exchange platforms

This is a good idea if you plan to speculate BTC prices in the long term. What you need to do is register on the exchange. You will be given a wallet where your BTC is sent after payment. You can move your BTC to soft wallets or a hardware wallet.

Buying BTC from an exchange is a direct process. However, there have been complaints such as slow transactions, poor customer service, and high fees for transactions. Also, some exchanges do not permit transferring coins to other wallets. This means you have to use their wallets which is not very secure.

Peer to peer purchase

Another way to buy BTC is by joining peer-to-peer marketplaces. The members agree to meet at a physical location, or online, and deals are completed through smart contracts.

Ways to forecast BTC prices

It may take a while to master the best ways to forecast BTC prices, but it’s worth the effort. The best BTC trading sessions happen when you have a good idea of the direction of BTC price. There are different ways to predict future BTC prices. Please read more about it below.

Using technical analytics tools

You can use technical software to examine different market indicators that determine the Bitcoin price. These indicators use current rates, trading volume, and investor behavior to predict future price shifts.

Analyzing market structure

The cryptocurrency market structure is vast. You will need to practice how to analyze the market structure properly. Over time, it becomes an easy task. The goal is to identify recurring patterns that can help you predict the price trends.

To study the market structure, you need to know the four stages of its cycle. The stages are as follows; purchasing and holding, sales, distribution, and dumping.

At each point, the investors perform actions that push the market trends. Your goal is to observe the predominant patterns in different cycles, and you can change your trading position based on the trends in different cycles.

You can use technical analytics tools to study the market structure and trends.

Observe the whales

An excellent strategy to help you predict BTC prices is by observing the whales. In the crypto industry, the whales are those influential investors who can be wealthy people or investment groups. These influential investors influence market trends and earn significant profits from trading BTC.

While observing the whales, find out the market indicators they focus on and observe investment moves. By copying the investment practices used by whales, you can make better trading decisions and more profits.

Understanding the market cycle psychology

There is always a psychological play in the BTC market. Many traders decide actions based on sentiments. You should avoid sentiments instead focus on getting accurate information about the market. Also, most decisions are made because the investors are afraid they could miss good opportunities to earn higher profits from the market.

You can avoid general mistakes by understanding the market psychology trends and follow the best ideas. For example, it is best to focus on buying when the price of BTC is low and selling high. Another good strategy is entering the market during bullish trends and exiting your position before the market trend becomes bearish.

There are bound to be rumors about market decisions and the whales, but you shouldn’t be distracted—only act based on confirmed information.

Trading Bitcoin

Below, we have written about some of the events that happen while you trade BTC. These events may not happen all the time, but you should know what they imply.

Support and resistance levels while trading

When you use technical trading indicators, you will observe the support and resistance levels for BTC during a trading session.

The support level is the point where the BTC price stops falling. It happens when there is an increase in demand for BTC. The plateau in the graph shows the increase in buyers interested in securing more coins at a lower price.

Resistance level is the point at which there is a pause after BTC price rises steadily over a period. At this time, many investors decide to sell off to make a profit, which causes the resistance point in trading.

The support and resistance trading level form a price barrier in the Bitcoin trading graph. They are normal crypto trading trends that prevent the price of BTC from rising too high or falling too low.

While trading BTC, you should learn to identify the support and resistance level during the trading session. With this knowledge, you can enter and exit the market strategically to make an impressive profit. It is also a good idea if you plan to buy low at the support level.

Every BTC trading session features a support and resistance level, so it is a crucial part of your BTC trading experience.

Trendlines during Bitcoin trading

After trading BTC for a day, you will observe that the price barrier formed during the support and resistance level moves from one point to another. It is a representation of different price barriers as observed from long-term trades. The collective barrier levels on the graph indicate the trendlines. Trendlines are important. You can use the information to predict market trends and pricing directions in the future because the sequence of trendlines are usually repeated.

Trading BTC with round numbers

You may also observe that many BTC investors trade with round number investments such as $10,000 OR $20,000. This trend affects the price direction during trading sessions because the final prices hover around the round numbers.

Moving averages

We know it already seems like there is too much data to monitor while trading BTC. To make it simpler, you can focus on the moving average. It is the average points for trendlines and price barriers during a trading session. The moving averages reveal important information about the market trends at a glance.

Candlestick chart patterns

A typical BTC trading chart features candlesticks. These features are called candlesticks because of their rectangular shape. The candlesticks represent the market trends on a chart, which makes it easy to identify high, low, open, or close price points.

On a regular chart, the candlesticks can be green or red. You should look forward to seeing green candlesticks on your chart because it means the opening price is higher than the closing price. While a red candlestick means the closing price is higher than the opening price. The candlesticks have a wick, which indicates the point at which prices changed during the opening or closing period.

Also, green candlesticks indicate a bullish market trend, while purple candlesticks indicates a bearish market trend.

Buying and selling Bitcoin for starters

To conclude, you should consider registering an account with an exchange to buy and sell Bitcoin. Exchange platforms provide the easiest way to trade Bitcoins. And it is safer to use smart contracts for all your transactions.

After securing your Bitcoin, the next step is to use any of the trading methods, trend trading, buy and hold, longing or shorting, and day trading, to increase the value of your investment.

Impact of the Bitcoin community

The Bitcoin community plays an important role in promoting the coin and its Blockchain network. The community is growing, which is good news. It is made up of investors, traders, and other people interested in cryptocurrency. The online community is dispersed across different social media platforms, such as Telegram, Twitter, Facebook, and Instagram. It is a place where trust is built, and people get to meet others who have similar interests.

The Bitcoin community promotes trading and offers guidance to new investors. People ask questions, exchange ideas, and attend physical meetings where Bitcoin is sold. You can get more information about how the Bitcoin marketplace work from people who have real-life experiences. You can leverage the online Bitcoin community to get useful information about the market, so find a good group to join.

Bitcoin Blockchain is evolving

Since it was introduced, we have observed how the Bitcoin Blockchain has evolved to accommodate many new applications. It was first intended for use as a digital currency only. Over time, we have seen new platforms thriving on the Blockchain network, which also gives the market a boost.

Applications that require subscriptions contribute to Bitcoin trading volume. You can sell your coins to people who need to subscribe to these applications and make a profit from the sale.

Assessing the strength of the Bitcoin network

Currently, the best way to determine the strength of the Bitcoin network is by doing an On Chain analysis. This is an evaluation of the quantitative and qualitative features of the Bitcoin Blockchain to determine its strengths. On-Chain analysis reveals information about the price trends in different markets, and you can find useful information about the community’s trading behavior and investor psychology while trading BTC. Information needed for extensive On Chain analysis is available on the open-source Blockchain network. It is best if you learn how to read the analysis report independently. Alternatively, you can rely on interpretations from other members of the Bitcoin community. Monitoring Bitcoin trade

You should always monitor your trading sessions regardless of the type of Bitcoin trading you choose. Monitoring trades involves using the technical indicators discussed above to predict the direction of Bitcoin price. The goal here is to ensure the market trends and price shift is in the direction you want.

You can also get information about investor sentiments and price volatility while monitoring trade. If the market condition is not in your favor, close the trade and study the trends before you open trading again.

Deciding to take a profit or loss

You have control over Bitcoin trading. You can decide to close the session when the market trend is not looking good. Sometimes you make a profit, and other times, you should cut your loss and close your position. This is what the stop-loss limit is for. You can set your trading session to work with normal stops, trailing, or guaranteed stops.

Normal stops end your trading position when there is a series of sudden price changes. The trailing stops are programmed to monitor the market for favorable trends to make you richer from higher profits. It ends your trading position when the positive market trend stops. You can set guaranteed stops when you know the trading level you would like to close your position.

You can leverage these protective features to lock in profits or to prevent further losses.

In conclusion, it is best if you develop a unique Bitcoin trading strategy instead of following others. Everyone has a different approach to trading Bitcoins. Find out what works for you and improve it over time.


  • James Brown

    James Brown worked as a senior market reporter located in London. James has previously worked for FXStreet. He holds a Master's education in Finance. James is a small holder in Bitcoin and Ethereum.

  • Joseph Campbell

    Joseph Campbell is a tech protocols reporter for CoinDesk and other tech websites. He is a graduate of Claremont McKenna College, where he double majored in Economics and Philosophy with a concentration in Data Science. He holds BTC, ETH, DOGE and a few NFTs.

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