How to trade Bitcoin online in 2023
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10/1077% of retail CFD accounts lose money.
Bitcoin is the best-known and most widely traded cryptocurrency and this guide shows you how to start your Bitcoin trading journey. Find out about the different strategies and indicators you can use and follow a step-by-step guide to make your first trade.
How to trade Bitcoin – a step-by-step guide
Use the guide below to start trading Bitcoin. It’s an extremely simple process to start, although there is a lot of freedom to be creative in the strategies you use.
1. Sign up for a trading platform and deposit money.
Sign up for a Bitcoin broker or a crypto exchange. The right choice depends on whether you want to trade CFDs or buy and sell crypto directly. A broker is best for the former, an exchange is best for the latter. Once you have signed up, deposit money into your new account via the payment method of your choice.
2. Research Bitcoin to learn what moves the price.
Every trader needs to understand the short term and long term factors that affect the Bitcoin price. Familiarise yourself with the fundamental factors, such as its popularity as a store of value and the wider economic environment, as well as key technical indicators like support and resistance levels.
3. Perform technical analysis on Bitcoin.
Most trading strategies rely on technical analysis, which means the study of price charts to identify patterns and trends. Most successful traders have one, or a small handful, of specific indicators they use to identify buy and sell opportunities. Take time to do the analysis and create strict rules about the sort of price movement you need to see before you trade Bitcoin.
4. Decide whether to go long or short.
With a trading account you can either buy (go long) or sell (go short) Bitcoin. Use your analysis to decide which is the right approach; if your indicator suggests the price is about to go up then you should buy, while if it signposts a fall in price, you should short Bitcoin.
5. Search for Bitcoin and execute trade
Sign in to your trading account and find Bitcoin using its name or ticker symbol, BTC. Enter the trade details; how much you want to spend or how much BTC you want to buy (or sell). When you’re happy all the details are correct, hit the ‘open trade’ or ‘buy’ button to execute the trade.
6. Set stop-loss and limit orders.
Stop-loss and limit orders are ways to protect yourself and reduce your risk. Both are trade orders you place in advance that execute as soon as the Bitcoin price reaches a certain level. Stop-loss orders are set below the price you bought to limit the risk of a price fall, and you can place limit orders above the price to lock in profit if there’s a steep move up.
7. Monitor position and close to take profit or cut a loss.
Keep track of your position regularly so that you can act quickly to take a profit or cut your losses. Stop-losses help you do this if you can’t monitor your position at all times. It’s important to stick to the rules you set yourself before opening the trade, and making decisions according to unemotional rules set in advance is safer.
What platform should I start trading with?
The platforms below are the best places to start trading Bitcoin. These are tried and tested trading platforms that are ideal for beginners. Sign up by clicking the links in the table or keep reading to find out more information about how to trade BTC.
77% of retail CFD accounts lose money.
Ways to trade Bitcoin
There are two ways to trade Bitcoin. You can either trade CFDs through a broker or buy and sell Bitcoin through a crypto exchange. They are similar approaches but the differences are laid out below.
- CFDs. A CFD is a contract for difference, known in financial circles as a ‘derivative’. A Bitcoin CFD gets its value from the current price of Bitcoin and you buy and sell them directly from an intermediary; normally a broker. CFDs are the best option if you want to trade frequently as you can often trade for free, or if you want to use leverage.
- Exchanges. An exchange lets you buy and sell Bitcoin from other users. The experience is largely the same as trading a CFD. The main difference is that exchanges often have better prices (but normally have trading fees as well) and you take ownership of the coins themselves.
Bitcoin trading strategies
There are lots of different trading strategies but most fall into one of three camps. These are based on the length of time you keep your Bitcoin trades open and how many trades you make. Learn more about each strategy below.
- Swing trading. Swing trading means making a trade and keeping it open for multiple days to try to take advantage of large changes – swings – in price. This is a popular way of trading crypto, where coins can increase in value many times over. It’s particularly important to stick to strict stop-loss and limit orders to protect yourself, as it’s obviously not possible to be awake and trading at all hours of the day.
- Day trading. Day trading works on the same principle but a shorter time frame. With this strategy, you open and close lots of trades in a single day to take advantage of smaller changes in price. This strategy is normally based on charts with smaller time frames, such as an hour or even five minutes.
- Scalping. Scalping is a high volume, small gain approach. It takes advantage of very small changes in price by using leverage and reacting quickly to open and close large trades. It relies on very strict rules and tight stop-loss orders, as one bad trade can easily wipe out the small gains made elsewhere.
BTC trading indicators
Most Bitcoin trades are based on analysis of a small set of key indicators. These can be used in a variety of different ways to create a unique strategy but it’s important to understand all of them so you can start to predict how other traders might act.
Support and resistance levels
Support and resistance are two of the most basic trading indicators and are easy to spot on a chart. Support refers to a price at which enough buyers are interested that they outnumber the sellers and reverse a drop, while resistance is the opposite; a level where more people want to sell than buy.
As traders are human creatures, support and resistance often crop up at psychologically significant round numbers. This is because traders often want to take profit or cut their losses at a specific figure (such as $50,000 for Bitcoin). That means a lot of sell orders are waiting to execute at $50,000, and the excess supply can push prices down, at least temporarily.
Trends
Trends are another basic indicator that show whether the market is generally positive or negative about Bitcoin. If the trend line is up, more people are interested in buying, while if the trend line is down then more people are interested in selling.
The best way to trade trends is when two trends converge into a ‘wedge’ or a triangle. When this happens it often suggests a decision one way or the other, where the price either breaks out to the upside or falls to the downside.
Channels
A channel is the area on a chart within two parallel lines. The lines are often at support and resistance levels and are normally used to show how a price has traded between two values for some time. Traders can use this information to buy as the price falls to near support and sell as it nears resistance.
Channels clearly show how support and resistance levels work in practice. Lots of sellers at the high end create resistance, while lots of buyers at the low end create support. The buying and selling pressure at either end means that the price fluctuates within a relatively fixed range until one side wins. In the example above, the buyers eventually triumph.
Moving averages
A moving average is calculated by adding daily closing prices together for a select number of days and dividing by the number of days. It can be done for the last 20 days, 50 days, 200 days, or any time of your choice. As with any trading indicator, however, the ones that the most other traders look at are the most valuable.
The most important moving average for Bitcoin is the 200 day moving average. This shows the average daily close over a long time period. A very popular indicator is to compare this average with shorter term averages, such as the 20 day or 50 day. If the two lines cross, it is considered a strong buy (if the shorter MA crosses above the longer line) or sell indicator.
Volume
Volume simply means the number of trades, rather than the total value. It’s a basic indicator that can be used in combination with other indicators to identify buy or sell opportunities. Normally, high volume indicates a significant price move is imminent.
You can see trading volume at the bottom of a price chart. The higher the candle, the more volume there has been. The candles are coloured according to whether the price went up (green) or down (red) over that particular time period.
Fundamental factors
Alongside the technical indicators, lots of real world factors affect the Bitcoin price. As a general rule, more widespread institutional adoption is good for the price, while a loss of confidence is bad.
- Adoption as a means of payment. More companies and payment providers accepting Bitcoin as a means of payment is a sign of more widespread acceptance. It can prompt mode demand for the coin and a subsequent increase in price; a good example of this in action was Tesla announcing it would accept Bitcoin payments in 2020.
- Institutional investment. More mainstream financial institutions offering Bitcoin funds and trusts builds confidence in the long term future of the cryptocurrency. One particularly important factor would be US approval of a spot Bitcoin ETF.
- Economic conditions. Bitcoin’s price moves like a tech stock at the moment and it is correlated with the tech-heavy NASDAQ stock exchange. When investors are looking for riskier assets, both Bitcoin and tech stocks do well, but when there is less appetite for risk the price tends to fall.
Should I trade Bitcoin now?
That is up to you. There is a lot of potential to make money trading Bitcoin because it’s a volatile asset where the price can change substantially in a short space of time. That comes with risks, however. To be successful you need a solid trading strategy, a cool head, and strict rules that govern your trading decisions.
Trading BTC is a good move if you have some trading experience already and you’re less interested in the fundamental success of the coin. You need to consider whether you have sufficient time to dedicate to trading and analysing price charts to look for opportunities.
If not, there are alternative options available. You can use Bitcoin signals to effectively outsource the analysis, or a copy trading platform like eToro where you can copy professional traders. Or you can simply buy Bitcoin and hold it to invest for the long term.
Pros and cons of trading Bitcoin
Here is a quick summary of the pros and cons of trading Bitcoin. Use this information to decide whether trading is for you and then sign up to a trading platform to get started.
Pros
- Start trading with as little as $10
- Most platforms let you trade for free
- Craft your own trading strategy to get an edge on the competition
- Social trading platforms and Bitcoin signals can help you learn
- Can use leverage to make your money go further
Cons
What are the fees for trading Bitcoin?
Most of the time it’s free to trade on a Bitcoin broker like eToro. On an exchange the fees can vary from as little as 0.1% to around 2% or higher.
FAQs
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