How to Trade Bitcoin

When it comes to trading Bitcoins online a trader can either buy or sell Bitcoin contracts so as to make profits.

A trader will buy Bitcoin if they think that the value of Bitcoin will appreciate against the US Dollar or they can sell Bitcoin if they think the price of Bitcoin will depreciate against the US Dollar.

Buy Trade - Going Long

When the Bitcoin prices are moving up, then traders will buy Bitcoin. This is also referred to as going long. Going long is another name for buying.

Buy Trade - Going Long - Bitcoin Trading

In the trade above when the prices of Bitcoin are moving up, a trader will open a buy trade as shown above. This is known as going long - a trader will hold this buy trade as long as the Bitcoin prices continue moving in this upwards direction.

The price of Bitcoin will continue moving upwards as long as both moving averages are pointing upwards. The two moving averages are used to show the direction of the prices - what is commonly referred to as the trend. The method of using of two moving averages is known as moving average crossover trading system. A shorter moving average and a longer moving average for example the 5 period moving average and 7 period moving averages are used together to come up with the above moving average crossover trading system of determining the general direction of Bitcoin prices. At any one time these moving averages will either be moving in an upwards direction or a downwards direction - at other times when the market prices are consolidating, the moving averages will move sideways showing that prices are neither moving upwards or downwards.

Sell Trade - Going Short

When the Bitcoin prices are moving down, then traders will sell Bitcoin. This is also referred to as going short. Going short is another name for selling.

Sell Trade - Going Short - Bitcoin Trading

In the above trade, the Bitcoin prices are moving downwards as shown by the two moving averages which are both moving downwards. A trader would open a sell trade and this is known as going short. The trader will then keep their short trade open as long as prices continue moving downwards.

Bitcoin Charts

Now that as trader you know when to buy and when to sell Bitcoin, the question is how to sell or where to place the buy or sell trade.

To do this a trader will use the Bitcoin charts provided. A Bitcoin chart will represent the movement of Bitcoin prices and draw this using a graphical format that can be used by technical traders to analyze the Bitcoin price movement.

Bitcoin Price Trading Chart

The above Bitcoin chart which is the 1 hour trading chart shows the upward movement of Bitcoin prices from $3584.416 per Bitcoin to $4253.647 per Bitcoin during the month of September 2017.

The price is shown by the vertical axis that has price markings and the date is shown by the horizontal axis that has date and time markings.

The price of Bitcoin and its movement is represented in the form of a chart. The chart shows an upward movement of price. Traders who are trading Bitcoin will analyze this price movement to know which market direction to trade. In the chart example above because prices are moving upwards a trader would buy the Bitcoin and go long.

A trader can open a buy or a sell trade directly from this chart. By right clicking anywhere on the chart - a menu will appear and the trader can choose the open new order option and open a new Bitcoin trade.

Calculating Profit

When trading Bitcoins, profit is calculated from the price movement - the difference between where a trader opens a trade and where they close the trade will be used to calculate the profit.

In the above example where Bitcoin prices moved from $3584.416 per Bitcoin to $4253.647, if a trader opened a buy trade at $3584.416 per Bitcoin contract and closed the trade at $4253.647 per Bitcoin contract, the price difference would be $669.231 dollars.

Because Bitcoin is traded in lots of 1 Bitcoin, then trading one lot of Bitcoin will mean that for this one move the trader would have made $669.231 trading one Bitcoin contract and if the trader was trading 10 Bitcoin contracts they would have made a profit of $6,692.31.

To trade 10 Bitcoin lots a trader would not need to have 4,253.647x10= $42,536.47 - because there is leverage provided by the online Bitcoin trader which is 5:1 meaning a trader would only need to have one fifth of this amount to open 10 contracts, a fifth of $42,536.47 is equal to $8,507.294 - therefore a trader with $8,507.294 in their account can open and trade 10 bitcoin contracts using this leverage option of 5:1 provided by the online Bitcoin trading broker.

This means that is a trader had bought 1 lot of Bitcoin at $3584.416 per Bitcoin and closed the trade at $4253.647 per Bitcoin, where the price difference would be $669.231 dollars. Then trading 1 Bitcoin contract, then this would mean the trader would have made $669.231 in profit from this trade.

To buy one lot of Bitcoin which is equal to $4253.647 - a trader would need to have capital of $4253.647. Because not very many retail investors can afford that amount of money - Bitcoin brokers provide leverage, which means traders can trade using borrowed capital. With the default leverage of 5:1 for Bitcoin - it means that traders can borrow 5 times their capital which means to open a one lot of Bitcoin traders will only need to deposit $850.729 dollars in their account and they can now open one lot of Bitcoin - the $850.729 multiplied by 5 times which is the leverage of 5:1 is equal to $4253.647 - which is the amount of trading capital that a trader will control after using Bitcoin trading leverage.

Bitcoin Trading Platform

The Bitcoin price charts can be accessed from the Bitcoin trading platform provided by online Bitcoin trading brokers - Bitcoin cryptocurrency BTCUSD is now provided for trading by the traditional Forex currency trading brokers and BTCUSD can now be traded alongside traditional currencies such as EURUSD and GBPUSD. The trading platform is the software that traders will use to connect to their brokers and place trades in the online Bitcoin trading market - The platform used to trade Forex Currencies is the same platform that will be used to trade cryptocurrencies such as Bitcoin BTCUSD.

The platform used is MetaTrader 5 platform, The trading platform will draw the price charts for the trader. The platform will also calculate the profit and losses from the trades opened by the trader and the trader does not need to calculate profits, the profits are calculated automatically.

The trading platform can be downloaded from the Bitcoin broker's website and traders can learn how to use this platform using a practice demo account.

Demo Practice Account

Demo practice account is a practice account that traders use to learn about the trading platform used to trade Bitcoin and how to open and close trades without the need first of investing their own money. The money used on this demo practice account is virtual and traders can practice with the virtual funds until they learn enough about Bitcoin trading. Once traders gain enough knowledge and experience to help them make profits then the traders can then decide to open a real Bitcoin trading account and start trading Bitcoin contracts online.

Live Bitcoin Trading Account

The live Bitcoin trading account is the account used by traders to trade Bitcoin in the online market. With this account a trader will trade with real money, a trader will have to make a deposit into this account and after that the trader can place Bitcoin trades in the market through this account and the profit or losses they make will be credited to this account.