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What is Bitcoin Trading? How it works? For Beginners

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What is Bitcoin trading and how does it work?

Bitcoin trading is strongly criticized for being unregulated, too manipulated and too volatile. But, yet forex scalpers love it for the volatility, hedge investors are calling it digital gold and we’ve seen institutions like JP Morgan Chase have been taking full advantages of these loop holes. So, what’s the deal?

 

 

 

What is Bitcoin trading?

Bitcoin trading means to make money off Bitcoin in any market trend by betting on the short-term market volatility.

The Bitcoin trader buys and sell Bitcoin on cryptocurrency-exchanges and uses technical analysis to place bets on the short-term market trends.

A Bitcoin position trader buy Bitcoin at market value when prices go down and sell them at a profit as they rise.

A Bitcoin leverage trader places a short order at the top and sells at the bottom to finance buying the upturn. Then s/he places a long position at the bottom to cash out at the time

 

How does Bitcoin trading work?

Bitcoin is notorious for having longer bear markets than bull markets.

What this means for newbie amateur investor, is that when they hear about bull market , it’s usually too late because prices are usually starting to peak.

So, while early investors cash out , the newbie investor sees his investment crash 70%.

 

How is bitcoin trading done

Traders usually place trades on cryptocurrency exchanges.

They enter positions based on their technical analysis.

If the conditions are right (a.k.a the set up aligns

 

Are bitcoin traders legit

Not, all of them , 

 

A real traders analyses the technical and fundamentals before placing a trade.

Some newbie traders rely on Bots and copy trading to bypass this system.

However, the problem is that they have a higher lose rate as soon as the market shifts because each strategy works in specific conditions .

 

What is the best Bitcoin trading platorm

Not all Bitcoin trading strategies are equal.

The evaluation below is based off of trading volume for the most popular products

 

  • Bitcoin Leverage trading (futures/margin) – Bybit
  • Bitcoin Day trading (futures/margin)- Bybit
  • Bitcoin Scalping (futures/margin) – Bybit
  • Bitcoin Swing trading  (weekends) – Binance
  • Bitcoin trading bots – Binance
  • Bitcoin copy trading – Bybit

 

*NOTE: I have not added spot trading (position trading) because the goal is make consistent profits in the short term.

In other words, consistently, for me means: every day, week and month .

 

Not every four years – otherwise, I call professionals call it babysitting.

 

Bitcoin trading pairs

  • Futures trading (perpetual, contract and invese)
  • Margin trading
  • Spot trading

Price manipulation…

Speaking of price manipulation…

All markets are manipulated except in a so-called regulated environment, the ones manipulating prices are called “market makers”.

Retail traders are usually exit liquidity for institutions everywhere and not just cryptocurrencies.

Regulation does not mean no price manipulation, it only means they can get fined which is basically an elaborate tax system and slap on the wrist.

 

Crypto Exchanges have trading desks

The New York Times (to confirm) that Binance and Bittrex had trading desk where they trade against the customers.

And more recently

Why is Bitcoin trading important?

The Bitcoin trading volume is what drives Bitcoin’s prices.

And we all know that Bitcoin is the one driving the prices of the cryptocurrency market.

 

Why traditional stock and forex traders are getting in

Forex traders

Bitcoin trading is very popular among forex traders for the volatility.

The technical analysis for Bitcoin is closer to forex than traditional stock.

In other words, the fundamentals of Bitcoin do not always affect its price.

 

Hedge funds

Since volatility is the name of the game, hedge funds short on the way down.

Then they use those profits to buy back Bitcoin at a discount.

 

 

The difference between Bitcoin trading and investing

The different between Bitcoin trading and investing is often confused.

Both of them have different goals and therefore need different strategies.

Different strategies require different tools

Bitcoin investing usually refers to long-term cost averaging.

 

The main difference between an investor and trader is the trader cashes out on the short-term whereas an investor wants to grow his assets.

Another difference is level the level of analysis skills.

The trader waits for certain market conditions whereas the investor reacts to hype and news.

Most skilled traders (forex/stock etc… ) can make profit in either direction of the market.

 

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  • Usually an investors buys every month on platform like Binance.
  • An investor does not usually invest too much effort in technical
  • A trader waits for market conditions to react but an investor tends

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How does price manipulation work

There are 3 most common types of crypto market manipulation

  • Using authority on social media or the news to mislead investors (e.g The most biggest culprit is JP Morgan)
  • Insider trading (in crypto, you’re playing in a casino where the dealer can see your cards)
  • Arbitrage – FTX co-founder recently admitted to conspiring with Binance to keep Bitcoin prices below $20,000.

 

Bitcoin tradings vs Forex trading

While the technical analysis for price action remains the same

 

The advantages of trading Bitcoin over forex:

  1. Volatility
  2. You get easier access to market data thanks to ( Onchain analysis tools /a.k.a blockhain)
  3. Metatrader 4/5 sucks

 

The disadvantages of trading Bitcoin over forex:

  • Price manipulation
  • Cashing out (cryptocurrency exchanges suffer liquidity issues during the bear meaning
  • Flat lines during bear markets
  • Or extreme volatility in low liquidity markets (bear)

 

Is trading in bitcoin profitable

On  October 17, 2023, Coindesk wrote a lengthy article on how  African Students Became Victims of FTX’s Collapse.

 

The reality is that 99% of traders fail, no matter the market.

It can also take anywhere from 6 months to years for a trader to become profitable.

Very often, fingers get pointed at the strategy.

The problem is not the strategy but it’s the trader who does not know what s/he’s doing.

There is a misconception spread on social media that you only need to spend 1-2 hours a week to master trading.

These are lies.

Becoming a trader is a real career and to become a trader you need training just like any job.

You WILL LOSE MONEY AT THE BEGINNING- we all have.

To become a profitable trader in any market, you will need a lot back testing, emotional mastery and perseverence.

 

BONUS: is trading Bitcoin worth it

 

For this reason, Investing in yourself is ALWAYS worth it even if you do not see immediate results.

 

The reason learning how bitcoin trading works ,especially the technical analysis part, will put you ahead of retail investors as well as a step closer into understanding the next move.

 

And MOST IMPORTANTLY, when is the BEST TIME TO BUY BITCOIN.

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