The Beginner’s Guide to Bitcoin Trading
What is Bitcoin?
Bitcoin is a virtual online currency. Everyone can buy or sell bitcoins on the networks. The Bitcoin transaction process is done via online peer-to-peer technology. It is managed by dedicated Bitcoin servers. Each time that they communicate, they update and share the information concerning the amount of Bitcoins that each user owns.
Bitcoin is generated by a process called ‘mining‘. There is an algorithm that defines Bitcoin. This algorithm is designed to have both a fixed rate and a finite supply at which it can get mined. What this means is that we know approximately how much Bitcoin has already been generated. Therefore, we know the amount of Bitcoin there’s in circulation and can be traded.
Fundamental influence of Bitcoin
Determining the value of Bitcoin is different to other currencies since it isn’t a fiat currency, and no precious metal back it. Also, the very essence of Bitcoin means that it’s subject to volatility. Therefore, Bitcoin can get influenced by some factors outside the essential influences that impact the foreign exchange markets. Bitcoin’s value is heavily influenced by government regulations, speculators, and its adoption by the mainstream corporations as a valid option for payment.
How to make money by Bitcoin trading
There are a several ways to make money by Bitcoin trading. Most of these ways are done when trading Bitcoin against the US dollar, known in market terms as the BTC/USD pair. The first method is to find a top Bitcoin trading broker and to invest in this cryptocurrency in the same way that you would do with a physical currency – by buying low and selling high. Since Bitcoin is highly volatile, you should be able to identify the dip with studying and Bitcoin research.
Bitcoin trading with a regulated broker
It is best to find a regulated broker when getting involved in Bitcoin trading since it has had a rocky history because of its early unregulated days. Because of the added tenuous nature of Bitcoin ownership, reliability and trust of the online Bitcoin trading broker are arguably more valuable when getting involved in Bitcoin trading than any other currency.
How to Choose the Best Broker for Bitcoin Trading
Because there’s so much competition in the Bitcoin exchange market as well as having many brokers and exchanges to choose from, it can be difficult for beginners to know which option will work best. Here are a few things to keep in mind before you decide on the right online broker for your Bitcoin trading:
Use a regulated Bitcoin Broker or Exchange. The regulatory body develops rules and services protect the integrity of the market, as well as traders, and investors, such as the Financial Conduct Authority (FCA) in the UK. Due to possible safety concerns, open your trading account with a regulated broker.
Bitcoin trading happens 24 hrs a day online, so customer support should be available at all times. You’ll want to be able to speak with a live support person, and many brokerages have a local UK office for ease of use. The representative’s ability to answer your questions regarding spreads and leverage, as well as company details is very telling.
The details of a good broker should be out in the open for everyone to see, either online or otherwise.
Your ideal online broker for trading Bitcoin should be able to offer either multiple account options or provide you an element of customizability. Perhaps the broker even has a separate account for beginners. Look for a Bitcoin Broker that offers competitive spreads and easy deposits/withdrawals.
When selecting an online Bitcoin broker, many just concentrate on Bitcoins. Nonetheless, you should keep in mind there are many other types of investment alternatives offered. Including Forex (FX) currencies, Stocks or shares, ETFs, CFDs, futures or options.
Buying and selling Bitcoins costs money. However, unlike buying stocks or bonds, Bitcoin brokers usually charge a percentage. You may consider looking for an online broker that charges a flat rate fee instead of the percentage model.
Because Bitcoin is traded in a market where people are both looking to buy or sell the currency, it’s crucial to consider the amount of liquidity that an exchange can have. Liquidity is the ability to sell without the price being significantly affected, causing the price to drop.
For more information on Currency and Forex Trading, please see our tutorial: What is Forex?