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# How to Trade Bitcoin    Cryptocurrency for Beginners

MENU

## How to Trade Bitcoin

Click here for a full list of our Cryptocurrencies and typical
spreads

As the world’s first cryptocurrency, bitcoin (BTC) was the earliest to meet widespread
success
and, to date, it remains the biggest and most popular cryptocurrency in the world. People
are
increasingly trading cryptocurrencies and viewing the cryptocurrency as a viable investment
option. However, while buying bitcoin from a bitcoin exchange may be difficult for many
people
due to the high costs, trading Bitcoin CFDs is making it easier for them to enter into the
bitcoin space.





## Beginner's Guide to Bitcoin Trading

Cryptocurrencies are encrypted decentralised digital currencies that are transferred between
individuals. These currencies are not tangible and exist only in the electronic form, it is
a
digital asset that exists and remains as data. They allow a person to send money in the same
way
as sending an email, with much lower transaction times compared to doing it via your bank
account, minimal fees, no credit cards and no middleman. The joint bookkeeping process is
called
a “Blockchain”.

Bitcoin trading involves capitalising on the opportunity to buy low and sell high using cryptocurrency CFDs. CFDs are contracts that track the price
of
an underlying instrument, and in the case of bitcoin trading, the price of bitcoin and this
is
done without having to actually own the underlying asset - bitcoin.

Unlike investing which requires buying and holding the actual bitcoin for the long run
hoping
its price will ultimately increase, the aim of bitcoin trading is to try and profit from
predicting the cryptocurrency’s price movements.

Essentially, bitcoin trading is about buying and selling bitcoin in the short term
whenever
you think you can profit from any price movement. On the other hand, investing is about
trying to achieve long-term gains regardless of the price fluctuations that may occur
along
the way.



## What Influences Bitcoin Price Movement?

Bitcoin is a decentralised currency and so government regulations that cover fiat money don’t apply
to
it. This means that most geopolitical and economic issues that affect traditional currencies are not
likely to affect bitcoin price. However, several factors influence the cryptocurrency’s price
including:

## 1. The supply of Bitcoin

The maximum supply limit for bitcoin is capped at 21 million coins which are expected to be mined
by
2040. This means that when this number is reached, bitcoin mining will no longer create new
bitcoins. On the other hand, other cryptocurrencies have higher

maximum limits – already, the ether limit has crossed the 100 million coins mark, litecoin has an
84
million coins limit while the one for Ripple is 100 billion coins. Bitcoin’s lower supply limit
makes it more valuable than all the other cryptocurrencies.

## 2.User adoption

The popularity of bitcoin and user adoption can drive its prices up. Conversely, low demand for
the
cryptocurrency can decrease value. Put simply, the higher the perceived value of bitcoin, the
higher
its price is likely to be. For instance, governments, multinational corporations, and
institutional
investors adopting bitcoin tend to push the price up.

## 3. Competition with other cryptocurrencies

There are now over 2,000 cryptocurrencies and all of them are vying for people’s attention. While
bitcoin is still the option with the highest market capitalisation, other cryptocurrencies (also
known as altcoins) such as bitcoin cash, Ripple, litecoin, ethereum and EOS have become top
competitors that are piquing people’s interest. A higher number of competing cryptocurrencies
are
likely to affect the value of bitcoin.

## 4. Media coverage

All currencies are affected by public perception and bitcoin is no exception. The type of media
coverage bitcoin gets can affect its prices and contribute to its volatility. For example, bad
press
questioning the security and longevity of bitcoin tends to decrease the cryptocurrency’s value.

## 5. Key events

Any major events including security breaches and regulation changes can have serious implications
for
the value of bitcoin.

## 6. Integration and use cases

Just like other cryptocurrencies, bitcoin is still in its nascent stage – there is still a lot of
uncertainty regarding how it will be used in the future. Consequently, an increase in the number
of
bitcoin use cases and integration with wider networks tends to increase demand, and with it,
value.
For instance, if there’s an announcement that a

country is adopting bitcoin as legal tender, people may buy more bitcoin to benefit from any
potential future increase in value. The increased demand will probably increase the value of the
cryptocurrency. On the other hand, if a reputable source questions the usefulness of bitcoin in
the
future, demand is likely to decrease and so will price.

## 7. Security

Bitcoin thefts and crypto exchange hacks affect the price of the cryptocurrency. Security
breaches
drive investor fear and decreased demand for bitcoin, in turn causing a decrease in price. This
fear
is heightened by the fact that bitcoin transactions mostly take place on the internet and
cybersecurity threats are a big concern, especially with the increase in the number of hackers.

### Bitcoin (BTC)



Bitcoin is the digital currency with
the
largest market

capitalisation and price levels since its inception in 2008



It dominates 50% of the total crypto
market
cap



The highest that Bitcoin price has ever
reached was in

December 2017, when it hit the $19,783 mark



Experts believe the currency can reach
much
higher price

levels in the future and bitcoin cfd trading is on the rise

## How is Bitcoin Traded?

How you trade bitcoin will depend on what you want to gain from cryptocurrency trading and how much
time
you can dedicate to cryptocurrency trading. There are four main ways you can trade bitcoin.

## 1. Swing trading

Swing trading is the practice of catching trends in price movements when they form and holding on
to
the trend until it experiences a reversal. This strategy is ideal for traders who want to take
advantage of market momentum and don’t have hours to spend monitoring their trades.

## 2. Day trading

Day trading involves executing intraday strategies to open and close positions within a single
trading day. This type of trading is ideal for traders who have more time compared to swing
traders
but still want to take advantage of short-term opportunities in the bitcoin market. These
opportunities may come from certain factors such as emerging market patterns or developing news.

## 3. Scalping

Scalping is a trading style in which traders profit off several intraday trades on small price
movements. This trading style is for traders who would like to make frequent small profits
rather
than waiting for big opportunities. Scalping does require that a trader have a strict exit
strategy
since one big loss may eliminate all the small gains the trader has accumulated.

## 4. Passive trading

Passive trading involves buying bitcoin with the goal of holding the position for a long period.
The
idea with passive trading is to wait for the price of the asset to drop to a certain level
before
buying in then waiting for the price to go up to a certain level before buying out. Unlike the
other
forms of trading, the time between when a trader opens and closes their position can span from
several days to years.

## 6 Reasons to Choose FP Markets

An Australian regulated Forex broker



Australian Regulated

Segregated client funds

& regulation in
Australia



Tighter Spreads

Market leading spreads from

0.0 pips, 24/5



Faster Execution

Low latency, ultra-fast

execution under 40ms



Advanced Platforms

MT4, MT5 & WebTrader

with superior client
portal



24/5 Multilingual

Customer Support

Award-winning support &

personal account
managers



Established in 2005

15+ years

trading experience

Start Trading Cryptocurrencies with an Australian Regulated Broker

Start Trading
Cryptocurrencies with an Australian Regulated Broker

## What Are The Steps To Placing A Trade?

Step 1 | Understand Bitcoin

As with any instrument you want to trade, it’s important to have an understanding of how things
work.
With bitcoin, you have to take time to study the fundamentals including what influences the
cryptocurrency’s price and how margin calls work. You will have to know the latest bitcoin news
and
have an idea of what’s next for the price of bitcoin. It will also be vital to know how to
analyse
bitcoin price movements.

The main methods for analysing the bitcoin market are technical and fundamental analysis.

- Traditional fundamental analysis may not work for cryptocurrencies therefore bitcoin
  traders
  tend to favour technical analysis to
  predict future price movements. However, it’s important to stay up to date with any news
  that can impact bitcoin price regardless of the analysis method you choose.

- Technical analysis focuses on the cryptocurrency’s price movement and historical
  patterns.
  Analysing past data and comparing timeframes can reveal emerging trends and patterns.
  Technical tools such as trend-following, support and resistance levels, Fibonacci  
  levels, and Elliott waves, are favourite tools of bitcoin traders.

Fundamental analysis tries to determine the price of bitcoin by looking at the internal and
external
forces that can affect its value. This means that fundamental analysis for bitcoin can involve
the
evaluation of major bitcoin and macroeconomic news, regulation updates, and technical
developments.
For example, if a large economy decides to ban bitcoin, fundamental analysis will probably
predict a
price drop.

Step 2 | Create a Plan

A good trading plan is essential. It will help you to make objective and educated decisions that
increase your chances of becoming consistently profitable. Some of the key things to include in
your
plan are:

- An outline of your short- and long-term trading goals and expectations.

- A description of your risk appetite and preferred trading style.

- A robust trading strategy with clear rules for entering and exiting trades.

- A risk and money management plan. This plan should outline all the elements that are
  central
  to good risk management including how much overall risk you are willing to take, a
  risk/reward ratio, and the use of orders to minimise losses.

Sticking to your plan, even when it may be more profitable not to, will give you discipline and
an
edge that increases your chances of succeeding in bitcoin trading.

Step 3 | Open an account

To trade cryptocurrency, you have to open an account
with a CFD or Forex broker who offers CFDs on bitcoin. Select a broker with a good reputation
for
providing a reliable trading platform and support. The broker should also have trading terms and
conditions that align with your trading style and risk profile. When choosing an account, it’s
prudent to start with a demo account before
moving to live trading.

Step 4 | Place a trade

Once you have opened an account you can place your first trade. You do this by specifying the
amount
you are staking on your trade and choosing to buy (go long) or sell (go short) depending on how
you
expect the market to move. If you expect that the price of bitcoin will rise, you buy, and if
you
expect a price drop, you sell. You can also define your close

conditions using stop-loss or limit orders before opening and monitoring your position.
To close the trade, you simply do the opposite of what you did when you opened the position. So
if
you buy initially, you sell to close the trade. If you sell initially, you buy to close the
position.

Start Trading Cryptocurrencies with an Australian Regulated Broker

Start Trading
Cryptocurrencies with an Australian Regulated Broker

## Why Trade Bitcoin?

Bitcoin is a decentralised currency and so government regulations that cover fiat money don’t apply
to
it. This means that most geopolitical and economic issues that affect traditional currencies are not
likely to affect bitcoin price. However, several factors influence the cryptocurrency’s price
including:

## 1. Volatility

The value of bitcoin has been historically volatile. For instance, its volatility reached almost
8%
between October 2017 and January 2018. High volatility means there is a higher earning potential
if
you manage to anticipate the market movements correctly.

## 2. Unlimited market access

Most traditional markets such as commodities and stocks have opening and closing times. With bitcoin and other
cryptocurrency markets, there is no central exchange. Instead, there are hundreds of
cryptocurrency
exchanges worldwide making it possible to trade bitcoin 24/5.

## 3. Low trading costs

In most cases, bitcoin traders enjoy very low trading fees which represent the spread on bitcoin
CFDs. The spread is the difference between bid and ask (buy and sell) prices of the CFD.

## 4. Access to leverage and margin

Trading CFDs on bitcoin comes with access to high leverage. This means you can gain exposure to a
large position by only depositing the margin while retaining the ability to profit according to
the
actual size of the trade.
For instance, a leverage ratio of 30:1 means you can open a position size that’s 30 times bigger
than your trading account. With this leverage, you would require only 2% of the total value of a
trade to open a position. Nonetheless, leverage is double-edged and can easily magnify losses
the
same way it magnifies the gains. It’s important to use it cautiously.

## 5. Ability to gain in both rising and falling markets

Similar to other cryptocurrencies, you can trade CFDs on bitcoin in both bullish and bearish
markets.
In a rising market, you can go long, buying bitcoin for a lower price and selling it later when
the
price has increased. In a falling market, you can short-sell, selling bitcoin and buying it back
when the price has dropped.



### What Does It Take To Trade Bitcoin Successfully?



Just like trading any asset,
bitcoin
trading involves some risk and it’s possible to make some mistakes as you go.



Bitcoin trading is not a
get-rich-quick
scheme – going in with the wrong expectations and trying to make large gains without
putting
in the time and work may see you get out of trading in very little time.



To increase your chances of
succeeding,
you need to go beyond any hype and plan your crypto trading strategy carefully. You will
also need to start small, stay up to date with the market, and be patient as you learn
and
improve your skills.



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DISCLAIMER: This material on this website is intended for illustrative purposes and general information only.
It does not constitute financial advice nor does it take into account your investment objectives, financial situation or particular needs. Commission, interest, platform fees, dividends, variation margin and other fees and charges may apply to financial products or services available from FP Markets.
The information in this website has been prepared without taking into account your personal objectives, financial situation or needs.
You should consider the information in light of your objectives, financial situation and needs before making any decision about whether to acquire or dispose of any financial product. Contracts for Difference (CFDs) are derivatives and can be risky;
When trading CFDs you do not own or have any rights to the CFDs underlying assets.

FP Markets recommends that you seek independent advice from an appropriately qualified person before deciding to invest in or dispose of a derivative.
A Product Disclosure Statement for each of the financial products, as well as our TMD (Target Market Determination), are available from FP Markets and can be obtained either from this website or on request from our offices and should be considered before entering into transactions with us.
FP Markets is a group of companies which include First Prudential Markets Pty Ltd (ABN 16 112 600 281, AFS Licence No. 286354), a company authorised and regulated by the Australian Securities and Investments Commission (ASIC),
Registered Address: Level 5, 10 Bridge Street, Sydney, NSW, 2000, Australia and First Prudential Markets Ltd (registration number HE 372179),
a company authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC Licence number 371/18, Registered Address: Griva Digeni, 109, Aigeo Court, 2nd floor, 3101, Limassol, Cyprus.
FP Markets does not accept applications from U.S, Japan or New Zealand residents or residents from any other country or jurisdiction where such distribution or use would be contrary to those local laws or regulations.

Winner of ‘Best Global Forex Value Broker’ at the Global Forex Awards 2019 & 2020

\\ Data acquired from our server shows our EURUSD spread to be 0.0 pips on average 63.56% of the time from 01-12-2022 to 31-12-2022 (available for our RAW Spread trading accounts only).

^ For MT4/5 only. Terms and conditions apply

\* The median order execution time between the trade being received, processed and confirmed as executed by us is 29 milliseconds. As observed from our bridge provider between 01-12-2022 to 31-12-2022. FP Markets was rated by Investment Trends as the Best for Quality of Trade Execution 2019

\\ Terms and conditions apply.

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\* Winner of ‘Best Global Forex Value Broker’ at the Global Forex Awards 2019 & 2020

\\ Data acquired from our server shows our EURUSD spread to be 0.0 pips on average 63.56% of the time from 01-12-2022 to 31-12-2022 (available for our RAW Spread trading accounts only).

^ For MT4/5 only. Terms and conditions apply

\* The median order execution time between the trade being received, processed and confirmed as executed by us is 29 milliseconds. As observed from our bridge provider between 01-12-2022 to 31-12-2022. FP Markets was rated by Investment Trends as the Best for Quality of Trade Execution 2019

\\ Terms and conditions apply.

^^ Sat & Sun 08:00am to 16:00pm (GMT+2)

DISCLAIMER: This material on this website is intended for illustrative purposes and general information only.
It does not constitute financial advice nor does it take into account your investment objectives, financial situation or particular needs. Commission, interest, platform fees, dividends, variation margin and other fees and charges may apply to financial products or services available from FP Markets.
The information in this website has been prepared without taking into account your personal objectives, financial situation or needs.
You should consider the information in light of your objectives, financial situation and needs before making any decision about whether to acquire or dispose of any financial product. Contracts for Difference (CFDs) are derivatives and can be risky;
When trading CFDs you do not own or have any rights to the CFDs underlying assets.

FP Markets recommends that you seek independent advice from an appropriately qualified person before deciding to invest in or dispose of a derivative.
A Product Disclosure Statement for each of the financial products, as well as our TMD (Target Market Determination), are available from FP Markets and can be obtained either from this website or on request from our offices and should be considered before entering into transactions with us.
FP Markets is a group of companies which include First Prudential Markets Pty Ltd (ABN 16 112 600 281, AFS Licence No. 286354), a company authorised and regulated by the Australian Securities and Investments Commission (ASIC),
Registered Address: Level 5, 10 Bridge Street, Sydney, NSW, 2000, Australia and First Prudential Markets Ltd (registration number HE 372179),
a company authorised and regulated by the Cyprus Securities and Exchange Commission (CySEC Licence number 371/18, Registered Address: Griva Digeni, 109, Aigeo Court, 2nd floor, 3101, Limassol, Cyprus.
FP Markets does not accept applications from U.S, Japan or New Zealand residents or residents from any other country or jurisdiction where such distribution or use would be contrary to those local laws or regulations.

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