How to trade Bitcoin online
Bitcoin is the most well-known and widely traded cryptocurrency around – with a track record of more than a decade and a market cap of around $120 billion. This page, along with our educational guides including how and where to buy bitcoin, we teach you how to get started trading Bitcoin.
Compare the best platforms for Bitcoin trading
If you think you’re ready to get started with bitcoin trading, see the table below. Need more time to research first? Then keep reading this helpful guide.
If you want to start trading Bitcoin, you will want to understand some of the basic principles of cryptocurrency investing first. Consider these questions:
What do I need in order to trade Bitcoins?
The answer to this depends what you want to do. If you want to buy and hold coins, you’ll need a Bitcoin wallet, or an account on an exchange platform, or a stockbroker. However, you can also choose to trade Bitcoin without owning actual coins by using a CFD broker (more on CFD brokers shortly).
Beyond that, you’ll want to know the basic terms and principles that go with online crypto trading. Getting to know how price spreads work and how Bitcoin’s price is behaving in relation to other global markets are good starting points.
Here’s a look at some of the services most relevant to Bitcoin trading:
- Exchange – A cryptocurrency exchange is a platform that enables you to trade Bitcoin in exchange for other currencies, be it fiat currency or other cryptocurrencies. Exchanges are recommended for more advanced traders, though, as they’re not always easy for beginners to navigate.
- Broker account – A broker account is any account you can open which allows you to facilitate investments, be that holding shares or actively trading Bitcoin. There are many variations with minor differences. However, the most important thing to know is: A CFD (contract for difference) broker allows you to trade assets without actually owning them. This means that you can trade bitcoin, but you wouldn’t be able to withdraw and spend the bitcoin. Rather, you’d withdraw profits in your local currency.
- Wallet – A crypto wallet is a digital device, program, or service which stores the keys used to receive, spend, and track ownership of cryptocurrencies, including Bitcoin. Having your own wallet provides a more secure platform for your Bitcoin than just leaving it in the custody of an exchange. If you’re trading a significant amount of Bitcoin, this level of extra security can be a worthwhile purchase.
Should I trade Bitcoin?
That’s up to you; you should weigh up all the information and decide if investing in Bitcoin is the right move. Helping you make informed decisions about Bitcoin investing is the reason we do what we do.
The upside is that Bitcoin trading offers lots of potential for gains if you read the cryptocurrency market well, whereas the downside is that you can lose money with Bitcoin trading if things don’t go your way. One more helpful tip: many trading platforms will let you open a demo account where you can get used to trading Bitcoin without risking any of your money. This is a useful practice technique that will help you get acclimated to trading in real time.
What is the best way to trade Bitcoin for a beginner?
If you’re a beginner in the crypto space who wants to make money out of Bitcoin, then by using a broker you won’t have to go through the process of buying and holding actual Bitcoins.
CFD trading means that you own a contract related to the value of Bitcoin, but not the actual coins themselves. That means you don’t have to worry about the hassle of finding a place to store your coins securely, and you won’t be able to spend them. Later on, you can always move onto trading on a crypto exchange, especially if you want to trade different cryptocurrencies for each other and hold a variety of cryptos at once.
When using a CFD platform to trade Bitcoin, you’ll sometimes have the option to trade with leverage. Trading with leverage means that you can make large trades while only staking a small percentage of the overall trade amount. The size of that leverage can vary dramatically, including up to 100x the size of your own stake, depending on the platform you’re using to make the trade.
Leveraged trading can maximise profits, which makes it a popular choice among more experienced investors. The problem is that leveraged trading can also quickly lead to substantial losses, particularly in volatile markets such as Bitcoin. For this reason, we don’t recommend that beginner investors trade with leverage.
How to trade Bitcoin using a broker
Numerous brokers offer platforms you can use to start trading Bitcoin, and you can find the links to some of the top platforms out there at the top of this page.
Here’s how Bitcoin trading with a broker works:
1. Open an account with your broker
Signing up with a crypto broker is a fast and easy process. First, choose a broker that offers a simple and secure platform, and narrow price spreads. You’ll need to provide some contact and security information to confirm your account, as you would when you open, say, an online banking account.
2. Deposit funds into your account
There are several different methods you can use to deposit funds into your brokerage account. Those methods include debit card, credit card, linking to your bank account to use bank transfers, and using PayPal. Once your payment method has been set up, you’ll be ready to trade Bitcoin.
3. Plan your trading strategy
Here are the four most common methods for Bitcoin trading:
- Day trading. This is when you open and close a Bitcoin position on the same day, in search of rapid gains. To day trade successfully, you’ll want to learn the art of chart reading, also known as technical analysis.
- Swing trading. This is also a short-term trading strategy, but with a slightly longer timeframe than day trading. When swing trading Bitcoin, you’re holding for a period ranging from one day to a few days. The goal is to profit from price changes, also called price swings.
- Scalping. This trading technique seeks to capitalise on market inefficiencies, in search of repeated small gains. Two common approaches to scalping are arbitrage and spread scalping. In arbitrage you’re searching for a discrepancy between the bid and ask spread of two different brokers, then taking advantage of that discrepancy. Spread scalping is the same idea, but with the same broker. Some crypto brokers ban this practice, so make sure your broker allows it before you dive in.
- Automated trading. This is a form of trading done through computer-generated algorithms. Technical indicators and statistical arbitrage drive automated Bitcoin trading. Automated trading is also sometimes called robot trading.
Each of these strategies offers different advantages to Bitcoin traders. Consider how short you want your trading time horizon to be and whether you want to place your own trades or have a machine do it when deciding which trading method to use.
If you’d rather buy and hold Bitcoin, that’s labeled as ‘investing’ (not trading), a strategy which can yield big long-term gains if you buy at the right time and show patience through market fluctuations.
4. Place your first trade
Alright, you’ve done your research, picked a trading platform, deposited money into your account, and selected your preferred method for trading. Go ahead and make your first trade!
That was easy, what should I do next?
Keep learning more about trading strategies, risk management, and other key trading principles. The more you learn, the more sophisticated trading techniques you can pursue. Invezz contains Bitcoin trading lessons to help you become a successful crypto investor.
Additional hints and tips
If you’d rather trade directly, rather than using broker contracts then you can also trade cryptos on an exchange. Note that trading Bitcoin on an exchange can be more challenging to navigate and harder to make deposits, while also entailing a steeper learning curve. We recommend this for traders who have at least ‘some’ experience.
That said, if you’d like to give exchange trading a shot, read our online guide on how trading exchanges work for Bitcoin and other cryptocurrencies.
How to trade Bitcoin using an exchange
If you’re looking to buy and trade Bitcoin, you can do so on a crypto exchange. With an exchange, you’re trading Bitcoin and other coins directly with either brokers or other individuals, with price fluctuations happening in real time as trades are made. Here’s what you need to know when planning on trading Bitcoin through an exchange:
1. Decide which exchange you want to use
Which exchange you plan to use depends on multiple factors. Those include the strength of the exchange’s reputation, the size of the exchange’s trading fees, and the choices available to crypto traders. Some exchanges allow you to buy just a few cryptocurrencies using fiat currency. Others offer more trading options, including trading a wide variety of crypto pairs.
2. Set up an account
Once you’ve chosen an exchange that suits your goals, the next step is to set up an account. Provide contact information, verify your identity, and link to an accepted method of deposit, and you’ll be all set up. We discuss the different deposit methods you can use to set up a Bitcoin trading account below.
3. Select which cryptos you want to hold and trade
If you’re planning to trade Bitcoin, you can do so on any crypto exchange. When you trade Bitcoin, you do so in pairs, such as trading Bitcoin with Ripple (BTC/XRP), Bitcoin with Ethereum (BTC/ETH), and Bitcoin with the British pound (BTC/GBP).
4. Place your trade
Exchanges offer a wide variety of strategies you can use when trading Bitcoin and other cryptocurrencies. Here are some of your trading options when using an exchange:
- Buy order. This is simply when you buy some number of crypto units, such as buying one Bitcoin at a price of around $7,000 (as of mid-April 2020).
- Sell order. This is when you close your trade, either by cashing in your Bitcoin position to make a profit, or to cut your losses.
- Put/call. When trading Bitcoin options, you can bet on Bitcoin’s price either going up (call) or down (put). You’re purchasing a contract which gives you the option (but not the obligation) to buy or sell Bitcoin at a specified strike price, by a specified date.
- Market order. This is when you want to buy Bitcoin immediately, at the current market rate given on the exchange.
- Limit order. This is when you want to buy Bitcoin, but you’re only willing to pay up to a certain price. You set that price and therefore ensure you don’t buy any coins for above the amount you’re willing to spend.
- Stop-loss order. This is when you buy a cryptocurrency, then programme your account to sell the coins if the value falls to a set amount. So for instance, if you buy Bitcoin at $7,000 and put in a stop-loss order at $6,300, your goal is to limit the size of your loss to no more than 10%.
5. Receive your coins
You’ve now bought Bitcoin. If you plan to store your coins on the exchange you’re trading on, you’ll use a digital wallet, which is essentially like an online bank account provided by the exchange to store your coins. Exchange-issued wallets are called “hot” wallets as they are connected to the internet.
6. Transfer your coins to a separate wallet
If you want better security than a hot exchange wallet can offer, you can opt to buy your own Bitcoin wallet and transfer your coins there. It is recommended that you only store coins on an exchange account that you are wanting to trade in the near future, as it is safer to store your coins somewhere where you control their security.
Which exchange should I use to trade Bitcoin?
Check out the table below, which lists the leading exchanges for trading Bitcoin today so you can find the right place to buy and sell coins.
You can’t trade Bitcoin directly from your PayPal account as PayPal only holds fiat currencies. Instead, you can use your PayPal account to make deposits into your trading account with a broker and with some exchanges. Check out our PayPal guide to see which brokers and other services allow you to use PayPal to fund your Bitcoin trading account.
Some brokerages and exchanges will allow you to use credit and debit cards to make deposits into your trading account, but you can’t trade Bitcoin directly with a credit card or debit card. This is because they connect to bank accounts that don’t have the ability to store cryptocurrencies. Our credit card trading guide will go over which trading platforms allow credit card and debit card deposits.
You can’t just buy Bitcoin directly from your bank account, as your account won’t be able to store the coins. Instead, you can use your bank account to make deposits into the trading account you have with a brokerage or exchange. Note that there may be a waiting period of a few days before the money is transferred. Our bank transfer trading guide will walk you through the important steps.
As with all trading methods, Bitcoin trading does put you at risk of losing money. That said, the more you study the craft of Bitcoin trading, the better your chances of success. It is a good idea to consider using stop-loss orders to limit the size of your loss, should your trade not pan out the way you hope. When making any trade, you should always ensure you’re not risking too much – real profits are made when you are able to stay in the game long-term.
No commodity is entirely safe; if you can make money by trading something (e.g. Bitcoin, oil, or wheat), you can also lose money. Bitcoin has also been volatile lately, going from above $10,000 in February 2020 to below $4,000 a month later, to around $7,000 as of mid-April. That volatility can be scary to someone who’s new to crypto trading. That said, volatility can also give you more chances to capitalise on big price swings if you invest when the market’s at a low point.
You can trade Bitcoin 24 hours a day, seven days a week. Cryptocurrencies are one of the only tradable assets that offer round-the-clock market access. So if you spot a trend on a Tuesday night or a Sunday afternoon, you can take action right away!
Yes. Choose a crypto broker that offers a reliable, easy-to-use app, and you can complete your mobile Bitcoin trades quickly and simply.
That depends to a large extent on which platform you use. Withdrawals are usually pretty simple, but it can often take a couple days before you can access your funds, and you may have to pay a fee for withdrawals. Pick a trading platform that offers fast withdrawal time if that’s a high priority for you.
A crypto wallet is essentially like a bank account for cryptocurrencies. Crypto wallets are made up of two ‘keys’: a public key (which is like your account number) and a private key (which is like your PIN number, but much more secure). Having your own wallet can offer a more secure platform for your Bitcoin than merely leaving it in the custody of an exchange.
There are four widely recognised forms of cryptocurrency wallets that you can use for storing Bitcoin away from an exchange:
- A hardware wallet. This is the most secure option, and is a hardware device not connected to the Internet (such as a USB stick) that will store your private keys away from danger.
- A paper wallet. These enable you to store your private keys and public addresses on a piece of paper, which you can use to store your coins.
Hardware wallets and paper wallets are known as “cold wallets,” as they are not accessible on the Internet and thus not at risk of being hacked or infected with malware. Two non-exchange wallets that don’t fit into the “cold wallet” classification are:
- A desktop wallet. These take the form of pieces of software that work with Mac, Windows, and Linux operating systems. Your coins can be stored and accessed via a desktop app.
- A mobile wallet. These are similar to desktop wallets, but are accessed by an app on your phone. They enable you to store and access your coins easily in a wallet embedded within your mobile device, whether that device is Android- or iOS-based.
If you’re a beginner, we advise against trading Bitcoin with leverage, as it can lead to heavy losses quickly if you’re unfamiliar with what you’re doing. When you trade Bitcoin with leverage, you only need to put down a small percentage of the capital needed for the trade, with your broker putting down the rest. The advantage of that method is that if you guess right, you pick up a much bigger gain. But if you guess wrong, you lose a lot more too.
- 1. How to trade Bitcoin online
- 2. Compare the best platforms for Bitcoin trading
- 3. What do I need in order to trade Bitcoins?
- 4. Should I trade Bitcoin?
- 5. What is the best way to trade Bitcoin for a beginner?
- 6. How to trade Bitcoin using a broker
- 7. That was easy, what should I do next?
- 8. How to trade Bitcoin using an exchange
- 9. Which exchange should I use to trade Bitcoin?
- 10. FAQs