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5 Easy Steps For Bitcoin Trading For Profit and
Overview - Table of Contents
Why Trade Bitcoin
Find an Exchange
How to Trade Bitcoin
Bitcoin Trading Tools
Bitcoin trading can be extremely profitable for professionals or beginners. The market is new,
highly fragmented with huge spreads. Arbitrage and margin trading are widely available.
Therefore, many people can make money trading bitcoins.
Bitcoin’s history of bubbles and volatility has perhaps done more to bring in new users and
investors than any other aspect of the crpytocurrency.
Each bitcoin bubble creates hype that puts Bitcoin’s name in the news. The media attention causes
more to become interested, and the price rises until the hype fades.
Avatrade offers 20 to 1 leverage and good trading conditions on its Bitcoin CFD trading program.
Why Trade Bitcoin?
Before we show you how to trade Bitcoin, it’s important to understand why Bitcoin trading is both
exciting and unique.
Bitcoin Is Global
Bitcoin isn’t fiat currency, meaning its price isn’t directly related to the economy or policies of
any single country. Throughout its history, Bitcoin’s price has reacted to a wide range of events,
from China’s devaluation of the Yuan to Greek capital controls.
General economic uncertainty and panic has driven some of Bitcoin’s past price increases. Some
claim, for example, that Cyprus’s capital controls brought attention to Bitcoin and caused the price
to rise during the 2013 bubble.
Bitcoin Trades 24/7
Unlike stock markets, there are no official Bitcoin exchanges. Instead, there are hundreds of
exchanges around the world that operate 24/7. Because there is no official Bitcoin exchange, there
is also no official Bitcoin price. This can create arbitrage opportunities, but most of the time
exchanges stay within the same general price range.
Bitcoin is Volatile
Bitcoin is known for its rapid and frequent price movements. Looking at this daily chart from the
CoinDesk BPI, it’s easy to spot multiple days with swings of 5% or more:
Each time Bitcoin’s price rises, new investors and speculators want their share of profits. Because
Bitcoin is global and easy to send anywhere, trading bitcoin is simple.
Compared to other financial instruments, Bitcoin trading has very little barrier to entry. If you
already own bitcoins, you can start trading almost instantly. In many cases, verification isn’t even
required in order to trade.
If you are interested in trading Bitcoin then there are many online trading companies offering this
product usually as a contract for difference or CFD.
Bitcoin’s volatility creates exciting opportunities for traders who can reap quick benefits at
Find an Exchange
How to Trade Bitcoin
Regulation & Trust – Is the exchange trustworthy? Could the exchange run away with customer
First, create an account on Kraken by clicking the black sign up box in the right corner:
As mentioned earlier, there is no official Bitcoin exchange. Users have many choices and should
consider the following factors when deciding on an exchange:
Location – If you must deposit fiat currency, and exchange that accepts payments from your
country is required.
Fees - What percent of each trade is charged?
Kraken will be used as an example for this guide. The process and basic principles remain the
same across all exchanges.
You’ll have to confirm your account via email. Once your account is confirmed and you’ve logged
in, you must verify your personal information. All Bitcoin exchanges require varying levels of
verification as required by AML and KYC laws. Below you can find the first three verification
Liquidity – Large traders will need a Bitcoin exchange with high liquidity and good market depth.
Based on the factors above, the following exchanges dominate the Bitcoin exchange market:
Bitfinex - Bitfinex is the world’s #1 Bitcoin exchange in terms of USD trading volume, with about
25,000 BTC traded per day. Customers can trade with no verification if cryptocurrency is used as
the deposit method.
Bitstamp - Bitstamp was founded in 2011 making it one of Bitcoin’s oldest exchanges. It’s
currently the world’s second largest exchange based on USD volume, with a little under 10,000
BTC traded per day.
OKCoin - Bitcoin exchange based in China but trades in USD.
Coinbase - </p>
Coinbase - Coinbase Exchange was the first regulated Bitcoin exchange in the United States.
With about 8,000 BTC traded daily, it’s the world’s 4th largest exchange based on USD volume.
Kraken - Kraken is the #1 exchange in terms of EUR trading volume at ~6,000 BTC per day. It’s
currently a top-15 exchange in terms of USD volume.
Bitcoin Trading in China
Global Bitcoin trading data shows that a very large percent of the global price trading volume
comes from China. It’s important to understand that the Chinese exchanges lead the market, while
the exchanges above simply follow China’s lead.
The main reason China dominates Bitcoin trading is because financial regulations in China are
less strict than in other countries. Therefor, Chinese exchanges can offer leverage, lending, and
futures options that exchanges in other countries can’t. Additionally, Chinese exchanges charge
no fees so bots are free to trade back and forth to create volume.
If you’d like to learn more about Bitcoin trading in China, this video from Bitmain’s Jihan Wu
provides additional insight.
Once your account is verified, head over to the “funding” tab. You should see something similar
to the screenshot below. Select your funding method from the left side:
Kraken offers many deposit methods, which are listed here:
EUR SEPA Deposit (Free) - EEA countries only
EUR Bank Wire Deposit (€5) - EEA countries only
USD Bank Wire Deposit (Free until 3/1/2016, then $5 USD) - US only
USD SEPA and SWIFT Deposit (0.19%, $20 minimum)
GBP SEPA and SWIFT Deposit (0.19%, £10 minimum)
JPY Bank deposit (Free, ¥5,000 deposit minimum) - Japan only
CAD Interac Deposit (Free until 3/1/2016, then 1%, $10 CAD fee minimum, $5,000 CAD deposit maximum)
CAD EFT Deposit (Free until 3/1/2016, then 1%, $10 CAD fee minimum, $50 CAD fee maximum, $10,000 CAD
Deposits made using the traditional banking system will take anywhere from one to three days.
Bitcoin deposits require six confirmations, which is about one hour.
Now, navigate to the “Trade” tab. Using the black bar at the top of the page, you can switch trading
pairs. In this example we’ll use XBT/USD. We want to buy bitcoins, so let’s put in an order.
Navigate to the “New Order” tab.
Let’s say I’ve deposited $300 into my account with a USD bank wire. In the example below, I’ve
submitted an order to buy 0.5 bitcoins (XBT) at a price of $370 per bitcoin.
Check the black bar at the top, and you’ll notice that the last trade price was $383.17.
Why submit an order to buy at $370 per bitcoin (XBT) and not $383.17? One may submit an order
lower than the current price if one expects the price of Bitcoin to fall. In this case, since my order
is lower than other offers in the orderbook, I won’t receive
my order for 0.5 bitcoin immediately. Placing an order at
a specified price is called a _limit order._ Before placing
an order, be sure to check the orderbook for your trading
In the example orderbook below, you can see that the
highest buy offer is for $382.5 per bitcoin, while the
lowest sell order is at $384.07 per bitcoin.
Using the order form there’s also an option for “Market”.
A market order in this case would submit a buy order for XBT at the price of the lowest available
sell order. Using the orderbook above, a market order for 0.5 XBT would purchase 0.5 XBT at
$384.07 per XBT. If selling bitcoins, a market order would sell bitcoins for the highest available
price based on the current buy orderbook—in this case $382.5.
Bitcoin trading is exciting because of Bitcoin’s price movements, global nature, and 24/7 trading.
It’s important, however, to understand the many risks that come with trading Bitcoin.
Leaving Money on an Exchange
Perhaps one of the most famous events in Bitcoin’s history is the collapse of Mt. Gox. In Bitcoin’s
early days, Gox was the largest Bitcoin exchange and the easiest way to buy bitcoins. Customers
from all over the world were happy to wire money to Mt. Gox’s Japanese bank account just to get
their hands on some bitcoins.
Many users forgot one of the most important features of Bitcoin—controlling your own money—
and left more than 800,000 bitcoins in Gox accounts. In February 2014, Gox halted withdrawals
and customers were unable to withdrawal their funds. The company’s CEO claimed that the
majority of bitcoins were lost due to a bug in the Bitcoin software. Customers still have not
received any of their funds from Gox accounts.
Gox’s catastrophic collapse highlights the risk that any trader takes by leaving money on an
exchange. Using a regulated Bitcoin exchange like Kraken can decrease your risk.
Your Capital is at Risk
Remember that as with any type of trading, your capital is at risk. New traders should start trading
with small amounts or trade on paper to practice. Beginners should also learn Bitcoin trading
strategies and understand market signals.
Bitcoin Trading Tools & Resources
Cryptowatch & Bitcoin Wisdom – Live price charts of all major Bitcoin exchanges.
Bitcoin Charts – More price charts to help you understand Bitcoin’s price history.
bitcoinmarkets – A Bitcoin trading sub-reddit. New users can ask questions and receive guidance on trading
techniques and strategy.
TradingView – Trading community and a great resource for trading charts and ideas.
How to Make Profit: Basic Rules for Beginners in Bitcoin Trading
There has been a protracted debate on the actual identity of Bitcoin, whether it should be regarded as a currency or a
With reasonable support on each side of the debate based on its inherent characteristics, a huge segment of the
ecosystem is of the opinion that Bitcoin can, and should be regarded as both a currency and a commodity.
Whatever definition attached to Bitcoin, the constant variation in price offers an opportunity for investors to make a
profit by trading the cryptocurrency, either as a long term investment or in a speculative short term pattern.
What is Bitcoin trading?
Bashir Aminu, Bitcoin trader and convener of online crypto group Cryptogene, explains the basic Bitcoin trading
process as follows:
“If you buy Bitcoins at one price and then sell them for a higher price, you make a profit of the difference between those
two prices, less any commission that you paid. However, if the price goes down, you will be in the uncomfortable position
of having to either sell them at a loss or hold and hope the price goes back up while risking higher and higher losses if
the price continues to drop.”
There are two major types of traders in the Bitcoin market, they are ‘long term’ traders and ‘short term’ traders. Each of these
group of traders are classified by how long they may wish to hold onto a given position of trade.
Long term traders are usually involved in studying price trends over long periods of time. This informs their decision to buy and
hold Bitcoin also over long periods with the hope of taking profit at a price higher than their original entry point. With Bitcoin still
in its developmental stages, a lot of users suggest that this is a good time to buy.
This suggestion is based on the assumption that with increasing use case scenario and more adoption, demand for Bitcoin and its
associated technology will increase, thereby creating more demand for the cryptocurrency which will automatically cause an
eventual increase in value. Glimpses of this have been observed with the surge in Bitcoin price which coincides with a boost in its
market capitalization and volume of trade.
On the other hand, short-term traders analyze the intraday behavior of Bitcoin price and seek to take advantage of the swings in
price. These traders thrive in market volatility, a factor that is presently characteristic of Bitcoin.
In its early stages, the swings in Bitcoin price was usually so huge as every little event within the crypto space had very serious
impact on the price of the cryptocurrency. As adoption grows and Bitcoin becomes more stable, price volatility has reduced
considerably and experts think it is a better time to trade the cryptocurrency, compared to an earlier time.
“Bitcoin is certainly safer to invest in now than it was a couple of years ago”, says Aminu.
Aminu describes Bitcoin trading as extremely profitable if you play your cards well. According to him, it all depends on the
market movement pattern. He tells Cointelegraph that Bitcoin value rises and falls dramatically throughout each trading day,
jumping in whole dollar amounts. A phenomenon which he identifies as very risky when misjudged.
Based on his trading experience, Aminu outlines a set of rules for newcomers who may wish to profit from the Bitcoin market as
Never put all your eggs in one basket. Your capital should be broken into smaller lots for multiple positions at
different price levels.
Do not invest your life savings or money that may change your life drastically in the event of a loss. This rule is
important mainly due to the existing level of uncertainty that still exists within the Bitcoin market.
Take full advantage of available technology in order to gain maximum profit
Understanding the market is a continuous process and requires a lot of time, concentration and effort. It is very crucial
to do research and be up to date with current trends.
Know when to cash in. It is important to stay focused, unemotional and professional.
Traders should keep in mind that losing, just as much as winning, is an integral part of trading. It is the cumulative gains