Bitcoin Trade: How Does It Work?

CryptocurrenciesBitcoin has become one of the most popular digital currencies in the virtual world. It is a global currency that has gained popularity around the world. Bitcoin, just like other currencies, is exchanged every day in the market. There are various ways that investors use Bitcoin trade to make profits. However, investors rushed into the Bitcoin trade when it was introduced. The truth is that majority of traders lose money and quit the Bitcoin trade within the first year. The Bitcoin trade is risky, and the venture can cost one a lot of money. It is essential to get the right information before proceeding with the trade.

Before explaining the Bitcoin trade, it is important to point out some reasons why one should get involved in the Bitcoin trade.

  • Bitcoin is a fiat currency that is not related to the economy and policy of any country. It is a global currency that is free from government interference. It is not affected by inflation making it a unique money to invest in.
  • Bitcoin trades all the time. Unlike the stock exchange, Bitcoin trade is open 24/7. There is no official Bitcoin trade or price, and this provides traders with many opportunities.
  • Bitcoin is volatile. Volatility allows traders to make high profits without leveraging. There are significant price moves in Bitcoin trade, and these are designed to extract high profits.
  • Bitcoin is the cheapest and convenient instrument of commerce. Bitcoin exchange rates are minimal. Additionally, Bitcoin deposits and withdraws take less time compared to traditional exchanges.
    The Bitcoin trade takes place in two main ways the direct sales and online exchange. The direct selling is conducted using digital currency exchange markets. The exchange sites allow the seller to register and post their offers to buyers. Buyers who are interested in the proposals made by the sellers will purchase the Bitcoin. In the online exchange, the seller is expected to indicate the amount of Bitcoin they are selling and the price per unit. The transaction will find a buyer with a matching order hence it acts as an intermediary. The problem with Bitcoin exchange is that there is no official Bitcoin exchange. The traditional stock exchange has a formal exchange, and investors know the stock exchange to consider. However, in Bitcoin trade, an investor must first ensure that the Bitcoin exchange they are using is secure and they will not lose their money to fraud. There are various factors that traders should consider when choosing a Bitcoin exchange. They include:
  • The regulation and trust. Traders should ensure that the transaction is trustworthy
  • The trader must believe the amount of fee that exchanges charges and determines if it is acceptable to them
  • The traders must consider the liquidity of the exchange. If they are trading significant amount of Bitcoin, the Bitcoin exchange should be large
  • The traders must find the location of the transfer and if it accepts payments in the currency that they intend to use.

Based on the above pointers, there are some Bitcoin Exchange that dominates the trade. New traders may use the following Bitcoin exchange Bitfinex, Coinbase, Kraken, Bitstamp, Gemini, and LocalBitcoins.

There are many ways through which traders can make money by trading Bitcoin. In Bitcoin, traders make profits by buying Bitcoin at a low cost and selling it when the price goes up. The Bitcoin trade is volatile, and price move by a significant margin hence traders have a better opportunity to make more substantial profits compared to stock market. The process of setting up Bitcoin trade is simple. A trader is only required to set up an account with an online exchange. After verification has taken place, the trader can deposit funds into the account. The trader can begin to trade Bitcoins. However, to make profits, Bitcoin traders must study the market to identify various opportunities to make gains through buying and selling of Bitcoins. The trader can make profits by buying Bitcoins and selling them at a high price when the price increases. Alternatively, a trader can make profits by exchanging Bitcoins into local currencies when the value of Bitcoin is higher than the regional currencies. Alternatively, a trader can exchange Bitcoin into other digital currencies such as Ether in a way that makes them realize profits.

A trader who is not well versed with Bitcoin trade can lose a lot of money. It is essential to understand various strategies that one can use to avoid losing your investment. The first one is opening several accounts with reliable exchanges. A trader should mitigate their losses by opening various accounts. Placing all transaction in one account is risky. In case the account crashes a trader can lose all their money. Opening various accounts is vital. Additionally, a trader should be involved in a trade of multiple currencies besides the Bitcoin. The second strategy is selecting an appropriate trading strategy. There are several trading strategies that one can choose the day trade, swing trade, and waiting for the market to stabilize. Day trade involves making many trades on a single deal based on the sophisticated technical analysis. The main aim of day trade is to make small profits on numerous trades and mitigate losses by staying away from unprofitable trades. Swing trade, on the other hand, occurs when trading occurs over a period of days. A swing trade takes some days to take effect. In Bitcoin trade, day trading is an effective trading strategy. Bitcoin exchange fee is minimal hence it is cost effective to conduct trade every day. Additionally, Bitcoin is traded 24 hours making it convenient for most traders. The Bitcoin is volatile and making daily trading will create a better chance to make profits.

Enter the Chinese into the hot Bitcoin trade

Global Bitcoin trading research indicates that Bitcoin trade has improved over the years. Most of the Bitcoin is conducted in China because China has opened financial markets and they are less regulators. Traders who intend to join in the Bitcoin trade must be well versed with the trade. They must conduct in-depth research to avoid losing money. They must come up with appropriate strategy and hope for a little luck.

 

Note: This article was contributed to ValueWalk.com by George.

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The author of this article is a contributor to ValueWalk.com. ValueWalk is your everyday source of breaking and evergreen news on everything hedge funds and value investing.

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