How to Trade Bitcoin: A Step-by-Step Guide

Learning how to trade bitcoin involves experiencing the market’s fluctuations in the first person and dealing with the actual consequences of potential losses. Trading cryptocurrency is not all about luck, hope, or determination, but also about knowledge and informed decision-making.

Let’s start!

How To Trade Bitcoin: A Step-By-Step Guide

What Does “Trading Bitcoin” Mean?

Trading Bitcoin simply means taking a bet on its price movements, with the goal of making some return off the market volatility. But it differs from more general investments, which are really long games where you simply hold onto an investment, and trading constitutes more of a short- to medium-term movement in terms of prices.

You can trade the cryptocurrency via the old-fashioned “Spot” trading method, where you hold the currency in your wallet until you decide to sell it. Alternatively, another method exists where the trader “speculates” the course of the cryptocurrency’s value through a variety of financial instruments, but that may be too complicated for a beginner. 

How to Trade Bitcoin Like a Pro? – Beginner Steps

Note: Try not to skip any of the steps to make your trading strategy even better!

1. Learn How the Market Works

Studying the market and taking notes on how it works is essential for any newcomer trader, regardless of the cryptocurrency you’re about to trade.

We recommend starting with the following tips for studying the market:

Market Sentiment: Trends on social media, public sentiment, news.

Regulatory Development: Laws and regulations affecting cryptocurrencies.

Macroeconomic Factors: Interest rates, inflation, geopolitical events.

Supply of Bitcoin: Currently, the supply of Bitcoin is capped at about 21 million.

2. Formulate a Trading Plan

A trading plan delineates the scope of your trading objectives, risk tolerance, and strategies. 

Include the following in your trading plan:

Trading Style: You need to decide whether you will be day trading-trading both sides of the market during a day, swing trading-hold for a few days or a few weeks, or scalping-several trades within minutes.

Risk Management: You determine the amount that you will risk per trade. The risk management rule is not to risk more than 1-2% of account equity on any given trade.

Profit Targets and Stop-Loss Levels: Know when to take profit and stop loss. This also includes not getting too greedy about the potential gains and exiting your position as reflected in your plan.

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3. Choosing a Trading Platform

Choosing the right platform is the fundamental step in seamless trading. Beware of those platforms offering the following:

User-Friendly Interface: Easy to handle and integrated with sophisticated analytics embedded.

Security: 2-factor authentication, encryption, and cold storage of funds.

Liquidity: High-volume trading for the fluent execution of trading.

4. Conduct a Market Analysis

If you’re a beginner, we recommend a technical analysis to grasp what Bitcoin is about and have a general understanding of what you’re about to invest in. Experienced traders tend to conduct the so-called fundamental analysis that includes complete information about the asset.

The main difference between the two analysis types is the depth of study. In a surface-level analysis, the trader tends to go over some simple information found in social media for example, but in an in-depth analysis, you dive deep into the asset’s past, present, and potential future.

5. Create a Demo Account

Most of the platforms have demo accounts, too, where one can practice without investing real money. Use it to:

  • Get familiar with the features of the platform.
  • Backtest your strategies with them.
  • Become emotional with your trades.

6. Execute Your First Trade

Managing your first trade involves several essential steps such as adding funds to your account, choosing a trading pair (Bitcoin in your case), and setting a market order. 

When all of these are combined, you can create a successful trade but don’t forget to set a stop/loss for the order, especially if you’re trading at higher prices. Limiting your order is extremely essential, for both newbie and seasoned traders.

Additionally, apply risk management techniques to limit the amount you can lose from potentially unsuccessful trades. 

How To Trade Bitcoin: A Step-By-Step Guide

Key Trading Strategies

Stick to these key trading strategies to refine your Bitcoin asset positions:

1. Trend Following

The Trend Following strategy involves moving in the direction of the dominating trend and later looking for trades through the use of moving averages and trend lines in an attempt to infer whether the market is in a bullish or bearish trend.

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2. Breakout Trading

Identify major points of resistance and support. Price breaks of these tend to create massive movements in the price of Bitcoin.

3. Range Trading

Because the price of Bitcoin fluctuates within its resistance and support, traders can place a buy position near support and close it out near resistance.

4. Scalping

Scalping involves placing fast trades to capture minuscule moves in price. This technique requires precision and access to up-to-the-second news and data.

5. Dollar-Cost Averaging (DCA)

DCA is the key for long-term investors. It involves putting small portions of Bitcoin into the market at regular intervals, independent of the cryptocurrency’s price. By doing that, that averages out market volatility.

Risk Management Tips

Bitcoin trading is regarded as extremely high-risk due to Bitcoin’s intense volatility. To safeguard your capital:

Diversify Your Portfolio: Never invest all your capital in Bitcoin. Look at other cryptocurrencies or asset classes.

Use Leverage Sparingly: As much as leverage will increase your gains, it will also increase your losses.

Control Your Emotions: Fear and greed will make you make irrational decisions. Stick to your trading plan.

Be Knowledgeable: Go through daily current market news and reports.

Set Realistic Expectations: One should not expect unrealistic returns. Steady and slow growth is always better.

Common Mistakes to Avoid

Overtrading: Overtrading would lead to exhaustion besides additional loss.

Not Using Stop-loss Orders: Not using stop-loss orders might lead to tremendous loss.

Disregarding market analysis: Rumor or speculative trading always leads to catastrophes.

Too much leverage: It will wipe your account clean in very volatile markets.

Fear of missing out: The hype-driven buying might lead you to buy into local tops.

Conclusion:

This was all about how to trade Bitcoin and how to do it properly. After reading this guide, you will be confident to purchase your first crypto asset without having too much worries about what to do and where to start. We hope the information here helped you to also construct a beginner trading plan and enter the world of crypto trading.

The information presented herein has been prepared by Tredomatix and is not intended to constitute Investment Advice. It is provided solely for general informational and marketing purposes.

The materials, analysis, and opinions included or referenced are for educational purposes only. The views expressed are those of the author and should not be interpreted as a recommendation or investment advice. Recipients are encouraged to conduct their own research and analysis before making any trading decisions. Reliance solely on the information provided may lead to losses. It is important to assess your own risk tolerance and only invest funds that you can afford to lose. Past performance and forecasts do not guarantee future results.

Tredomatix disclaims any responsibility for losses incurred by traders resulting from the use or reliance on the information presented herein.