The cryptocurrency market has been booming for the past couple of years as more and more governments accept it as a cash flow model. Bitcoin is the leading digital asset that is widely traded by tons of investors worldwide. The crypto was first introduced back in 2009 by Satoshi Nakamoto. Since then, it has grown up to $60000 in value.
Nowadays, many exchanges have introduced bitcoin in their portfolio for traders to trade. It is available alongside forex, stocks, futures, etc., with plenty of trading leverage that can be employed to open big positions.
What is Bitcoin trading?
Bitcoin trading includes speculating on the price of the asset in both the long and short directions. This requires a solid internet connection along with good hardware to run the trading platform smoothly.
Many altcoins have been introduced alongside bitcoin that follow the same trend as the parent currency in most cases. Traders use mining capabilities that allow them to earn free coins at the cost of hardware and electricity.
Platform
There are tons of trading platforms that brokers or third-party companies present for trading bitcoin. This software includes all the necessary stuff such as charting, order types, support etc. for traders. Exchanges can list bitcoin and other financial assets that allow traders to diversify their investments easily.
Important Characteristics of Bitcoin trading
Traders have to grasp the critical points of bitcoin trading to help them make profits. Lack of proper knowledge can hurt them in the long term. Let us go through a few below.
Analysis
Traders use multiple forms of analysis while trading bitcoin. This can include scanning the charts using price action techniques such as resistance and support lines, support and resistance zones, etc. Trading indicators are also available in this regard.
Image 1. A trader plots the respective support and resistance lines on the H4 chart on BTCUSD. Notice how the price bounces off the points.
Mining
Bitcoin mining had one of the crucial factors in the promotion of digital currency. Through mining, traders use their hardware for solving a complex puzzle in the blockchain network. As a reward, they receive a portion of the cryptocurrency.
It requires a good amount of hardware for mining cryptocurrencies as the competition is high. Traders have to consider electricity costs beforehand to make their mining profitable.
Algorithms
Many brokers and traders provide algorithms for trading bitcoin. These so-called expert advisors trade the market based on the coded information. Algorithmic trading helps in executing positions that are not possible manually. For example, an arbitrage robot will capitalize on differences in price feed amongst various brokers for trading.
Hours
Unlike stock and forex markets that are limited by their trading hours, there is no such case in bitcoin. The cryptocurrency is available to trade 24/7.
A ton of volume is available that allows traders to enter and exit their positions with ease. This is especially important for investors that trade with big lot sizes. The price movement is also significant, which is considered as the bread and butter for investors.
Are there any benefits for trading bitcoin?
Trading bitcoin can have the following potential advantages for traders:
● Mining can help generate extra income for traders
● The market is open 24/7 for traders to trade
● There is a good amount of volatility and liquidity for traders to capitalize on
● The coin is accessible easily where many traders can purchase and sell it easily
While we can list a few demerits as follows:
● There are fewer regulations by the government on the asset
● High volatility can be bad for beginners
