Bitcoin 101: What is Bitcoin?

The Backstory

In this article, we’ll answer the question: What is Bitcoin? Bitcoin emerged as a consequence of the 2008 financial meltdown, created by a person or group who called himself Satoshi Nakamoto. In the original whitepaper, the stated goal was to create “a new electronic cash system” that was “completely decentralised with no server or central authority”.

The technology and concept were cultivated right up until 2011, where Nakamoto turned over the source code and domains to others in the space and subsequently vanished from the scene. What is bitcoin? In layman’s terms, bitcoin is a digital currency with no physical representation, unlike fiat. There are no bills to print or coins to mint. It is a decentralised payments network with no government, institution, bank or otherwise in control. Owners of the coin are pseudonymous, which means that a user’s identity isn’t readily available for all to see. So, Instead of names, tax IDs or social security numbers, bitcoin enables buyers and sellers to connect through encryption keys. Unlike traditional currencies, coins are not issued from a top-down structure, but rather are “mined” by thousands of computer participants in the network connected through the internet.

What is bitcoin mining?

In order to mine new bitcoin, a series of computers must solve a series of math and cryptographic problems, which mint coins, record transactions on the bitcoin ledger, and secure the network. When someone sends bitcoin to another user, the network records the transaction, and all of the others made over a certain period of time in what is called a “block”. Miners (i.e. computers running specific software) inscribe these transactions on a massive ledger, where all transactions are visible since the inception of the currency. Collectively, these blocks are what make up the “blockchain” – an eternal, openly accessible record of all transactions.

With their specialised software and hardware – and no small amount of electricity – miners convert these blocks into sequences of code, called a “hash”. Producing a hash carries more weight than it sounds, as producing a hash requires serious computational power, wherein thousands of miners compete simultaneously to do it. In layman’s terms, it’s as if a thousand chefs are feverishly racing to prepare an extremely complicated dish, and the first one to serve the perfect version ends up getting paid.

The newly created hash is placed at the end of the public blockchain. Miners are rewarded for their work, earning as much as 12.5 bitcoin’s, which back in February 2018 was worth around $100,000. From a more technical perspective, bitcoin’s monetary policy dictates that every 210,000 blocks (or approximately every 4 years), this miner reward is slashed in half in an event called the halving. Find out more about the halving here.

What determines the value of a bitcoin?

At the end of the day, bitcoin’s value is determined by the free market and whatever people will pay for it. This is similar to how foreign exchange fiat currencies are meant to be priced, but with a completely public, decentralised and unalterable monetary policy.

The protocol ensures that only 21 million bitcoins will ever be minted, with over 18 million having been mined thus far. In effect, the limited supply is similar to gold and other precious metals with a tweaked intrinsic value-proposition that’s based on unstoppable and immediate transactions, among other things.

Given the relatively early stages bitcoin has existed in relation to gold, bitcoin is still undergoing volatile process of price discovery, which speculators, traders and investors are well-aware of – at least for the most part. The coin has minted plenty of millionaires among the tech pioneers and early bitcoiners, the Winklevoss twins being two of the most well-known bitcoin billionaires in the crypto playground.

How do I purchase bitcoin?

If you’re willing to assume that buying and selling bitcoin and other cryptocurrencies carries risk, there are many regular and margin exchanges available to enter the marketplace. Regular exchanges are typically used for new beginners and allow simple purchasing of cryptocurrencies. For those who are more advanced traders familiar with margin trading like those from FX and other traditional markets, there’s also the possibility to trade on margin using bitcoin as collateral. The latter is riskier and should only be used by highly experienced traders and investors. That said, there are plenty of tutorials which show users the ropes on how to trade bitcoin.

What can I do with bitcoin?

Believe it or not, bitcoin can be used to buy things from over 100,000 merchants worldwide. A recent survey showed that over 36% of American businesses accept crypto payments, indicating a growing retail demand for bitcoin and other virtual currencies.

Is this legal?

Bitcoin is accepted legal tender. In fact, bitcoin has just recently been given the go-ahead by major financial organisations and watchdogs to be used as a legal financial instrument, among other things. A series of regulatory developments in early 2020 are now also serving to boost on-ramps into the space as bitcoin and other cryptocurrencies surge in popularity in South Korea, India, Europe and throughout America.

Are there other cryptocurrencies?

There are over a thousand cryptocurrencies, each with their own claimed use-case and world-changing solution. Of course, it’s vital to note that these assets exist in a highly entrepreneurial space which has only existed for a little over 10 years. Serious observers and market participants operate with the knowledge that any number of these projects can and will probably go to zero. Needless to say, bitcoin and a handful of other early cryptocurrency projects have stood the test of time and are unlikely to fail given their resilience.

The future is decentralised

That being said, recent events surrounding the corona virus epidemic continue to emphasize the importance and need for a currency that exists outside what might be called an interchangeable system of fiat currencies. As government printers work on overdrive to the sound of trillions of dollars in stimulus, the need for an alternative currency system has never been greater.

Bitcoin Trading – How To Trade Bitcoin

While the Bitcoin market is relatively small in comparison to Forex, interest in cryptocurrency trading continues to grow exponentially. Having been around for decades, the matured Forex market is now worth trillions of dollars as people trade huge amounts of cash on big exchanges.

But why do people trade currencies, commodities and stocks? While there are different reasons to invest or park money in these various assets, traders see these tradeable assets as a means to profit off their volatility. Indeed, volatility is every trader’s dream.

Given that traders chase volatile markets, then it stands to reason that bitcoin is the perfect asset to trade, as evidenced by the numerous exchanges offering financial products for traders. Put simply, Bitcoin is one of the most volatile assets in the world, hence it is popular among successful traders.

That said, let’s take a look at how to trade bitcoin’s volatile market.

A Guide On How To Trade Bitcoin – Key Steps

  1. Buy Bitcoin From A Bitcoin Exchange
  2. Create An Account On A Bitcoin Trading Platform
  3. Deposit The Bitcoin To The Platform
  4. Learn Basic Trading Strategies
  5. Start Trading Bitcoin!

This page will help you through your journey with some essential and important tips on how to get started with Bitcoin trading, HOW to trade Bitcoin and WHY someone would want to trade Bitcoin in the firs place. In addition, this article will give you some background information explaining bitcoin in more depth, because it is important for a trader to know what asset s/he is trading.

Why trade Bitcoin?

Bitcoin trading is surging in popularity as exchanges such as Bybit and Phemex are registering thousands of new users every day to their Bitcoin trading platforms. The questions is: why are traders choosing Bitcoin trading over traditional trading?

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Forex Trading Vs. Bitcoin Trading

One of the major reasons for this shift is due to the volatility present in the Bitcoin market. Since a trader can make money both when the price goes up or down, then this market presents a great opportunity for traders who wish to either long or short prices.

In light of this, many Forex traders and commodity traders have now started to trade Bitcoin instead. To put things in perspective, Bitcoin’s price can spike up 10% one day, and come back down 7% the next on an average trading day. For the average investor that might present a problem, but for a Bitcoin trader, this volatility is eminently desirable. The implied volatility in Bitcoin almost guarantees that the prices will be different from day to day.

The Market Is Open 24/7

Something quite unique about Bitcoin trading is that you can trade Bitcoin all day and all night, because the market is NEVER closes. If you trade on an exchange like Bybit, you can trade WHENEVER you want, 24/7, unlike legacy markets. Clearly, that is a feature that many traders are drawn to.

No KYC

Another big factor behind the growth of Bitcoin trading is the fact that most Bitcoin exchanges don’t require KYC (Know Your Costumer) information. This makes the ease of access as simple as an email sign up. You can then deposit Bitcoin, and start trading instantly.

If you already own Bitcoin, you can go to Bybit for example, and sign up with your email, and start trading Bitcoin within 30 seconds. However, if you don’t already have Bitcoin, check out our list of the best Bitcoin exchanges to buy Bitcoin from.

When Did Bitcoin Trading Get So Popular?

Bitcoin has been available since 2009, but people didn’t trade it back then. There were no exchanges and there were too few traders for a market to emerge. Over the years the Bitcoin price started to explode and more traders started to see the potential for Bitcoin trading. Fast forward a few years and the huge price swings between 2017 and 2020 led to a massive increase in Bitcoin futures trading on exchanges like Bybit and more recently, Phemex.

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Bitcoin got a lot of attention back in 2017 when it quickly rose to $20,000 dollars, only to later plunge back down to $3,200. Since then, the number one digital currency has recovered from the lows and fluctuated heavily between $3,200 and $14,000. In the image below you can see the famous 2017 Bitcoin bubble. These big swings put Bitcoin in the headlines and this has lead to more traders entering the space.

The Bitcoin price and volatility in Bitcoin. Bitcoin trading, margin trading Bybit BitMEX
Bitcoin is volatile. The price of Bitcoin from 2017 to 2020.

How To Trade Bitcoin – The Basics

You need to learn about technical analysis if you want to trade Bitcoin. Further down on this page we will list the top 5 most popular books for trading. In those books you’ll learn everything you need to know about technical and fundamental analysis. But let’s start with the basics.

Longing And Shorting

When you long an asset like bitcoin, you are essentially buying the asset. Shorting an asset, means that you’re selling the asset. So “long or short” is just a trader’s way of saying “buy or sell”.

Long = Buy, Short = Sell

Bitcoin Futures Trading & Spot Trading

When trading you need to decide whether to trade on spot or to do Bitcoin futures trading. Trading on spot means that you buy or sell actual Bitcoin, without any leverage. Now, when you do Bitcoin futures trading, you will be trading futures contracts instead of actual Bitcoins. This allows for something called leverage trading or margin trading. For example, you can use 0.1 Bitcoin to make a 1 Bitcoin trade, if you use 10x leverage. This would enhance your potential winnings, but also your potential losses, while often using your balance on the exchange as collateral. At the moment, the most popular Bitcoin futures exchange is Bybit. However, it’s best to read up on other platforms to compare the different futures exchanges and their offerings. You can see the full list here: Bitcoin trading exchanges here.

Support And Resistance

Support and resistance is created in the chart based on supply and demand, and the orders in the order book. Without getting too technical here, support will often keep the price from going lower, and resistance will often keep the price from going higher.

Support & Resistance is important in technical analysis

Usually, traders try to short at the resistance and long at the support. This is one of the most basic trading strategies when trading Bitcoin.

Trading Chart Patterns

One of the most common way to trade Bitcoin is so called “breakout trading”. This means that you short or long Bitcoin when the price breaks support or resistance. As an example, when a support line and a resistance line converge, there will be a breakout, where the price leaves the range. A traders job is to catch the breakout by shorting or longing. In the image below, you’ll see some of the most popular chart patterns that traders are looking for when trading Bitcoin.

A cheat sheet of common charts patterns for Bitcoin trading.

Stop Loss – Risk Management

Something that you should always make sure to have is a stop loss. The stop loss will prevent you from losing more money after a given price. It’s an automatic order that will trigger by it self based on a price that you decided when you entered the trade. For example, let’s say you buy Bitcoin at $10,000, and you wish to sell at $15,000. What if Bitcoin goes down? Well, you can set you stop loss at $9,000, which means that you can maximum loose $1,000.

A stop loss is used to prevent further losses.

When trading, it’s imperative to use proper risk management by entering a stop loss for every trade. It’s not only about winning, it’s also about NOT losing. In fact, protecting capital is the corner-stone of every successful trader. To this end, Bybit exchange has made it simple to enter a stop loss as soon as you enter a trade. For more info, read our full Bybit tutorial to learn more about how to enter a stop loss.

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Different Types Of Bitcoin Trading

Bitcoin can be traded in various way, and as a trader, you’ll have to choose between the options that best suit your trading style. The below possibilities are several strategies you can use to make money from trading Bitcoin, and no strategy is better than the other.

Swing Trading – Swing trading is a slower type of trading where you sit in a position over several days or several weeks.

Day Trading – Day trading is a faster paced type of trading where you normally enter and exit out of your position during the same day.

Passive Trading – This is if you make very slow moves and basically just sit and hold your position over a very long time. This is more like investing than trading.

Bitcoin Futures Trading With Up To 100x Leverage

There are several Bitcoin trading exchanges that offer Bitcoin futures trading. Some of them offer up to 20x leverage, and some allow up to 100x leverage, like Bybit. Of course, the higher the leverage, the higher the risky profile, so a trader must take this into consideration when making a trading decision. Find out more about our Bitcoin trading exchanges to compare them against each other.

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Leverage trading comes with increased risk and reward.

As alluded to earlier, it’s important to be aware of the fact that when you introduce leverage, you also introduce something called a liquidation price. When Bitcoin meets this price, your position is liquidated. Make sure to always have a stop loss in place before reaching the liquidation price.

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Bitcoin trading with leverage comes with a liquidation price.

Naturally, with proper risk management, leverage can greatly enhance your profits over time. If you want to learn more about the liquidation price and how to trade Bitcoin with leverage, read our Bybit tutorial or BitMEX tutorial.

Bitcoin Bot Trading – Automated Bitcoin Trading

Many Bitcoin traders use bot programs to create their own Bitcoin trading bot. This bot will automatically trade for you even when you’re fast asleep. The most popular bot trading program in Bitcoin is called 3Commas. It’s easy to learn and set up.

Top 3 Reasons To Use A Bitcoin Trading Bot

  • Automatic trading
  • Trade without emotions
  • Reduce costly mistakes

A very cool thing with 3Commas is that you can actually copy other already successful bots and use them yourself. As an example, let’s say you go to 3Commas website and find a bot which is making 1% profits per day. You can actually see EXACLY how the bot is set up, and just copy the configurations, to make these profits yourself. You can set up 3Commas both with BitMEX and Bybit.

Learn How To Trade Bitcoin

Bitcoin trading might be a whole new playing field for traders, but simple trading strategies from traditional markets work equally as well in Bitcoin trading, with the only major difference being the volatility. The fast paced Bitcoin market means that strategies SHOULD translate into profits quicker than in the Forex market. In essence, this means that you can learn Bitcoin trading by simply reading about regular trading. As with other markets, there are two types of analysis to understand called technical and fundamental analysis.

Technical Analysis & Fundamental Analysis

In technical analysis you’ll learn about moving averages, support and resistance lines, chart patterns and valuable technical indicators that help to provide confluence reasons for any given trade. For a Bitcoin trader, it is key to know about this basket of tools.

While technical analysis is very effective, it is also very important to also know fundamental analysis. This analysis is not directly related to prices, but to factors on the asset like the news, technological developments, and other important pieces of information outside the price.

Top 5 Trading Books Of All Time

These books are widely known to be among the most important books for traders. In these books you will find extremely valuable knowledge and strategies about trading. You’ll also learn both technical and fundamental analysis. While none of these books cover Bitcoin specifically, the information can be applied to any market that is subject to human psychology. As such, they can be applied to Bitcoin trading.

If you only were to choose one of these books, then you should start with Stock Market Wizards by Jack D. Schwager. This book consists of a compilation of interviews conducted by Jack D. Schwager. In this book he interviewed legends in the trading world. In fact, these trading legends have made billions of dollars in trading. The best part is that this book gives you direct access to the knowledge and strategies that were used to build these fortunes. Stock Market Wizards is a must read for anyone who want to start with Bitcoin trading.

YouTube – Take Advantage Of Free Videos

This might already be common knowledge, but just in case, YouTube is a pure gold mine with valuable knowledge and information. There are thousands of videos about trading on YouTube, and the best part: It’s ALL FREE. Whether it be chart patterns or trading psychology, all the thousands of videos about Forex and stock trading can also be applied to Bitcoin trading.

A great tip is to follow big YouTubers who make daily Bitcoin market analysis on Youtube. These people trade Bitcoin for a living and share the strategies and results for free online. Check this list below to find the 3 most popular Bitcoin traders on YouTube.

Top 3 Bitcoin Trading YouTube-Channels

  1. The Moon (daily technical and fundamental analysis)
  2. Crypto Kirby (daily technical analysis)
  3. Krowns Crypto Cave (daily technical analysis)

One thing that most successful traders will tell you is: Find a mentor! Obviously, this is easier said than done. However, YouTube might be the solution to that problem, because these YouTubers can serve the same function. They will share their ideas and knowledge about the Bitcoin market which will tremendously help you to learn Bitcoin trading.

What Is Bitcoin?

Bitcoin is a new form of money, like nothing we’ve ever seen before. Why? Because Bitcoin has a limited supply of 21 million Bitcoins and is backed up by a decentralised network of hundreds of thousands of computers spread around the world.

Bitcoin cuts away the middle man in finance. Basically, with Bitcoin you no longer need banks or services like Paypal. You can think of Bitcoin like digital cash. Bitcoin is the logical evolution of money.

Interestingly, no one knows who the creator of Bitcoin is. All we know is that the person or people used the pseudonym “Satoshi Nakamoto” when releasing the Bitcoin white paper back in 2008.

For more information about bitcoin, read up on our explainer – Bitcoin 101: an introduction to a new monetary standard.

The Value & Price Of Bitcoin

Given the fact that Bitcoin is not backed up by a central bank, you might wonder, what gives Bitcoin its value? The answer is simpler than you might think. The same can be asked about gold, what gives gold its value? The answer is: supply and demand.

Now, gold has a very high market cap of approximately $7 trillion. Why? Because the newly created supply of gold is small relative to the already existing supply. In other words, gold has low inflation. Unquestionably, the low inflation, and the predictability of the future supply of gold, creates demand, which drives the price higher. When there are more buyers than sellers, the price moves up. The same can be said about Bitcoin. Of course, these assets are not the same, but they share similar monetary properties which makes for a great comparison.

The Bitcoin Inflation Halving

The interesting part about Bitcoin, is that the inflation will eventually be 0% per year. This will happen in the year 2144, after the final Bitcoin halving (the Bitcoin inflation is cut in half once every four years, called a halving). Many economic analysts suggest that this fact is one of the main drivers behind the demand for Bitcoin, and the big price swings. If you want to know how many days there are until the next Bitcoin halving, you can check our Bitcoin halving countdown.

How can we know that the supply will never exceed 21 million Bitcoins? Well, this is mathematically and cryptographically set in stone since the Bitcoin network was released to the public. The supply and inflation of Bitcoin can never be changed.

The Bitcoin Volatility

Now that you have a basic understanding of what Bitcoin is and what gives Bitcoin its value, let’s take a look and why the price changes from day to day.

As stated above, Bitcoin does not have a central bank controlling the supply of value of Bitcoin. This means that it is simply the supply and demand, or free market that has to decide the price of Bitcoin from day to day. Of course, the price of Bitcoin will change rapidly based on people’s emotions, which tend to change quite dramatically in this space. The two fundamental emotions driving any market is fear and greed. An experienced trader can use this knowledge to gauge market sentiment and make better trading decisions. There is of course, much more to say about this specifically, but now you have a solid primer to get you started in the bitcoin market.

If trading is something that peaks your interest, check out our exchange review section to find the right exchange for your needs!

BitMEX Tutorial – Complete Guide To Leverage Trading On BitMEX

If you want to learn exactly how to trade Bitcoin on BitMEX, you’ve come to the PERFECT place. This BitMEX tutorial will be a simple step-by-step guide for you.

Not only will you learn the basics, but you’ll also learn extremely valuable tools for making your Bitcoin trading more profitable.

Successful Bitcoin traders around the world are using the BitMEX exchange. Actually, BitMEX is the biggest cryptocurrency leverage trading exchange in the world & in this tutorial we will show you step-by-step how to trade on BitMEX like a successful cryptocurrency trader.

In this BitMEX tutorial you will learn:

  • How to trade Bitcoin on BitMEX
  • The basics of leverage trading
  • How to short Bitcoin & altcoins
  • What a liquidation price is
  • How to set a stop loss
  • How BitMEX fees work

Intro To BitMEX Exchange

The mechanics of Bitcoin trading might seem complicated at a first glance. However, in this tutorial we will make it extremely simple. This BitMEX tutorial will be suitable even for complete beginners. Also, there is a guide on this website called How To Trade Bitcoin, for people who are new to trading.

One of the most common questions people ask is: Can I lose more Bitcoin than the Bitcoin I deposit into BitMEX? No, the only funds you can lose is the funds you deposited. You will never become indebted to BitMEX.

If you made a 0.05 BTC deposit on BitMEX, the maximum amount you can ever lose is that 0.05 BTC. In order for you to be able to do leverage trading, BitMEX has something called the “liquidation price”. More about this below, so keep reading!

Register An Account

It’s really simple to register an account, and all you need is an email address. No KYC is needed to trade cryptocurrencies on BitMEX.

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10% Discount On BitMEX Fees

Use our sign-up link here, to get 10% off the BitMEX fees for 6 months. This discount is very valuable for traders because you get an edge over the rest of the market. If you already have an account and are uncertain if you have this 10% discount or not, just create a new account with our link. This way you know for sure that you have this 10% BitMEX fee discount for another 6 months.

US Citizens & NordVPN

If you are a US citizen, or if you are simply trading from the US, you’ll need a VPN. It’s not illegal to trade from the US, but the US is geo-blocked because of US regulation. So, to trade from the US we recommend that you the VPN called NordVPN. There are free VPNs also, but they are usually really bad. NordVPN in the most popular one out there.

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Leverage Trading For Beginners

When you do leverage trading, or margin trading as it’s also referred to as, you can trade with more money than what you have in your account on BitMEX. As an example, you can deposit 0.1 BTC to use as initial margin in a position worth 1 BTC. This would imply that you went on 10x leverage. If you use 0.5 BTC as initial margin on BitMEX and use 50x leverage on that position, your position will now be worth 25 BTC.

Another way to look at it is, if you’re on 15x leverage and the price moves up 1%, your return on investment (ROI) is 15%. If the price instead moves down, your position is down 15%. Also, there is something called the “liquidation price”. Keep reading to get a full explanation.

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The Liquidation Price

If BitMEX just let everyone borrow money for Bitcoin trading to go on 100X leverage, one small Bitcoin price movement in the wrong direction could put BitMEX in bankruptcy. This is where the “liquidation price” comes in. If the Bitcoin price moves in the wrong direction for your trade, eventually the Bitcoin price will reach the liquidation price. At this point, your trade is liquidated, which means that you lose the initial margin. The initial margin is the BTC you used as “collateral” to open the full leveraged trade.

The image below makes it easy to see how the liquidation price works. As you can see, the liquidation price always comes before the “bankruptcy price”. If your trade theoretically were to reach the bankruptcy price, the full position would have gone to zero. In other words, both your initial margin and the leverage used for that position would be lost.

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The BitMEX Insurance Fund

Therefore, the liquidation price will work almost like a stop-loss, avoiding the BitMEX traders’ position to be auto-deleveraged. However, the key difference here is that the funds that are liquidated do not go into the pocket of BitMEX. Instead, the funds go directly to what is called “The BitMEX Insurance Fund”.

Let’s say there is a price dump, and millions of dollars are to be liquidated. In this case this could trigger a huge flash crash of all these leveraged positions. If there are thousands of longs that need to be liquidated at the same time, chances are BitMEX might not be able to liquidate everyone perfectly at the correct price. Finally, this explains why the insurance fund is crucial. Basically it’s there to make sure that everyone gets payed when they close their position in profit.

Order Submission Error

The only major downside with BitMEX right now is the fact that there are too many people trading on BitMEX, because of its popularity. The exchange can sometimes be overloaded with orders in highly volatile moments. In these moments when you try to put in an order, you might get the message “Order submission error. System overloaded”.

Now, if you are trading more long term, this might be fine. However, if you’re looking to trade breakouts, then we suggest you trade over on Bybit instead. Bybit can handle more trades per second, and has a very user friendly cryptocurrency leverage exchange. Read our full Bybit tutorial here. Also, you can get a $60 deposit bonus on Bybit if you use this link.

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How To Trade Bitcoin On BitMEX

Now, let’s go through the process of trading Bitcoin and altcoins on BitMEX step-by-step. On BitMEX you can do margin trading for Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Litecoin (LTC), Cardano (ADA), EOS (EOS) , Bitcoin Cash (BCH) & Tron (TRX). However, in this tutorial we will be using Bitcoin as our trading example. Let’s get right into it.

Limit Order, Market Order & Stop Market

There is more to Bitcoin trading than just “buy” or “sell”. There are several different order types on BitMEX. Let’s go through the three main order types. These are the order types that you’ll use the most as a Bitcoin trader.

Market Order

A market order is an order that is executed immediately at the current market price. In other words, if you press market, BitMEX will make sure that your order gets filled by matching it directly against the order book. If you use the market order you will be guaranteed fill. However, you will not be guaranteed a price.

Further, sometimes a market order can experience “slippage”. Slippage, might happen in a very volatile price crash and basically means that your order gets filled at a price far away from where the price was when you executed the order. You want to avoid slippage if possible.

Also, the trading fee of a market order is quite high. Consequently, the only time you should use the market order on BitMEX is if you are in a hurry to enter the position. For example if you want to catch a breakout of a pattern.

Limit Order

A limit order is the best way to trade on BitMEX. This order type is used to control you entry price. When you submit a limit order, the order will be put in the order book and will be waiting for the Bitcoin price to reach your limit level.

As an example, if the Bitcoin price is at $100,000 and you want to enter a long position at $90,000, you’ll submit a limit order to buy bitcoin at $90,000. When the Bitcoin price moves down to to this level, you will automatically be entered into your position.

The most interesting part about the limit order is that you actually get payed to enter a position with a limit order. The reason why limit orders get a rebate, and the market orders pay a fee, is because of liquidity. Basically, BitMEX want their order book to be as deep as possible, and if everyone used the market order then the order book would be empty. Therefore, BitMEX pays people to provide liquidity to the order book by submitting their limit orders there.

Stop Market Order

Something that is very important when Bitcoin trading is a stop loss, and we can use the “Stop Market Order” for this. The stop market order is simply a market order that will be executed only when a certain price level is met. Let’s say you want to buy long when the Bitcoin price hits $90,000, but you want a market order, not a limit. In this case you use the stop market order, because when “the stop price” is met, you market order will be executed and filled. The stop market order is used to set up a stop loss. More about stop losses further down in this BitMEX tutorial.

How To Deposit On BitMEX

To deposit Bitcoin into BitMEX, click “Account” at the top of the BitMEX trading view. Now click “Deposit” and deposit Bitcoin like you would on any other exchange. This is also the process if you want to withdraw Bitcoin from BitMEX, but you click “Withdraw”, instead of “Deposit”.

At the top of your BitMEX trading screen you’ll see “Total Balance” and “Avail Balance”. Total balance is what you have deposited into BitMEX. Avail Balance is showing you how much of that is currently available. If you deposited 1 BTC and is currently in a trade where you used 0.1 BTC for initial margin, then your available balance will be 0.9 BTC, or XBT as it’s called on BitMEX.

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A Bitcoin Trading Example

Now, when your BitMEX account is funded with some Bitcoin, you are ready for your first margin trade. Look at the top left corner of the BitMEX trading view, “Place Order”, as show by the image below.

bitmex place order trading bitcoin leverage margin bybit deribit

An Example Of A Bitcoin Short Position

In order to make this even easier we’ll make a real world example of how to trade Bitcoin. In this trade example we will enter a short position worth 20,000 contracts (1 contract = $1), worth $20,000, and we will use 10x leverage. This will mean that the initial margin we use will be worth $2,000 while the rest of our position is the leverage provided by BitMEX. Also, for the purpose of this BitMEX tutorial we will use the market order.

The Place Order Tab

In the “Quantity” box we enter the amount of contracts we want our full position to be worth (initial margin + leverage). Now, below the “Sell Market” (which means short market) you can see that the cost will be 0.1871 XBT, or BTC. However, if you look further down, you can see that the “Order Value” is showing 1.8466 BTC. This is because of the 10x leverage that we’ve chosen in the leverage slider below, as shown, in the bottom of the image. You can choose up to 100x leverage on BitMEX. So, the cost is what will in fact be used from out Available Balance in BitMEX, and the Order Value, is the value of the full position, (initial margin + leverage).

“Post Only”, For Guaranteed Rebate (Limit Order)

If you want to submit a limit order on BitMEX, we recommend that you click the “Post Only” box in the Place Order area. This way you are guaranteed to get the maker rebate for providing liquidity in the order book. You basically get payed to submit the order. More about this further down in this BitMEX tutorial, where we discuss the BitMEX fees.

Review The Terms Before Shorting Bitcoin

Now, if you press “Sell Market”, you will get the following pop up, as shown in the image below. It’s filled with all the information you need to confirm before finally submitting your order. The most important thing to be aware of is the Estimated Liquidation Price, as shown by the green the arrow in the image. Make sure that you are comfortable with this price level. Because remember, if the Bitcoin price reaches this level, your BitMEX position will be liquidated.

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How To View Your Now Open Short Position

If you agree to the terms of your BitMEX short position, click “Sell” Down in the right corner of the pop-up. When you done so, you are currently in a Bitcoin short position on BitMEX. You’ll see your position lower down in the BitMEX trading view, under “Open Positions”. This is shown in the image below by the green arrows.

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In your open short position, the following info can be found:

  • Size – This shows you how many contracts or $USD your position is worth. If it’s in red numbers, it’s a short position. Of the numbers are green, it’s a long position.
  • Value – This is the same number as the size, but measured in BTC. The number is combining your initial margin + the leveraged assigned to your BitMEX position.
  • Entry Price – This is the level on which you entered the trade.
  • Mark Price – This is the current Bitcoin price.
  • Liq. Price – The liquidation price.
  • Margin – This shows you initial margin, the funds that were drawn from you account to open the leveraged position.
  • Unrealised PNL (ROE %) – This stands for: Unrealised Profit and Loss (Return On Investment). This will show you if you are in profit or loss currently in your trade.
  • Realised PNL – This will change if you close part of you position in profit or in loss.

To close you position, press the red “Market” button to the far right of the Open Position area.

Stop Loss

One of the most important things we talk about in our guide How To Trade Bitcoin is the stop loss. To set up a stop loss, press “Stop Market” under the Place Order tab. Enter the quantity of your current position, if you want your whole position to be stopped out. Choose a Stop Price where the position will be market executed. Finally, press “Set Buy Stop” or “Set Sell Stop”, depending on if you are currently in a short position or in a long position on BitMEX.

How To Trade Altcoins On BitMEX

Bitcoin trading is one thing, but if you want even more volatility and more opportunities, you can look into altcoins. On BitMEX you can trade many different cryptocurrencies or “altcoins”.

Choose A Cryptocurrency

Currently BitMEX supports trading of the following altcoins: Cardano (ADA), Bitcoin Cash (BCH), EOS Token (EOS), Ethereum (ETH), Litecoin (LTC), Tron (TRX and Ripple (XRP). To choose an altcoin on BitMEX to start trading, click any of the altcoins at the top of the BitMEX trading view. These cryptocurrencies are marked by the green arrow in the image below.

Altcoin Trading On Bybit & $60 Deposit Bonus

The most popular alternative to BitMEX is Bybit exchange. Bybit is also a leverage crypto exchange, exactly like BitMEX. The reason why altcoin traders like Bybit, is because you can deposit Ethereum (ETH), Ripple (XRP) and EOS (EOS) on Bybit exchange. This is not possible on BitMEX, where you can only deposit Bitcoin (BTC).

This means that on Bybit you can “physically”, so to speak, trade altcoins. Bybit is growing extremely quickly and we are happy to recommend it to our readers. Read our full Bybit tutorial here.

We have made sure to get our readers a big FREE deposit Bonus on Bybit, if you sign up using this link.

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BitMEX Fees Explained

The BitMEX fee structure can be complicated to understand. Therefore, we want to make it as easy as possible to understand.

How To Get 10% Fee Discount On BitMEX

To get a 10% discount on BitMEX for 6 months, we’ve gotten you a special link. Click here to register on BitMEX and get the discount activated automatically. This 10% discount on BitMEX will be applied to all BitMEX fees on the exchange. Accordingly, this will give you a small edge over the market, which is very valuable when trading cryptocurrencies.

Maker Rebate & Taker Fee

When you open a limit order, you are called a market maker, because you make the market by providing the order book with liquidity. If you use a market order, you are a market taker, because you basically take liquidity from the market. Makers are rewarded with a maker rebate, and the takers are penalised with a taker fee. As an example of how you can make money from rebates is the following: If you submit a limit order worth $200,000, you will get $50 back to your account as a maker rebate. You are basically getting paid to provide the BitMEX order book with liquidity.

  • BitMEX taker fee is 0.075%
  • BitMEX maker rebate is -0.025%

Perpetual Futures & BitMEX The Funding Rate

When you are trading Bitcoin & altcoins on BitMEX, you are trading futures. However, there is no expiry date on these BitMEX futures. Instead, these are something that BitMEX calls “Perpetual Futures”, because they never end. The important thing to understand here is that instead of paying a fee when closing the position, you are paying fees every 8 hours when you BitMEX position is open. This is called the BitMEX funding rate.

  • The BitMEX Funding Rate is 0.01%.
Bitmex funding rate fees bitcoin fee contract details

Longs & Shorts Pay Each Other

Interestingly, this rate is not a fee to BitMEX, but rather it’s the holders of longs and shorts paying each other. At the moment of the funding time you will either be payed or charged. It’s always the majority paying the minority. So for example, if there are more longs than shorts, it’s the longs that will be paying this fee to the shorts, and vice versa.

The funding rate is 0.01%, of the whole position (initial margin + leverage combined). If the BitMEX funding rate is positive, it’s the longs paying the shorts. If the BitMEX funding rate is negative, the shorts will pay the longs.

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Best Bitcoin Trading Exchanges

For more Bitcoin Exchanges please check our complete list here.

Bybit Tutorial – Complete Guide To Leverage Trading On Bybit

In this Bybit tutorial, you will learn EXACTLY how to trade Bitcoin on Bybit and how to optimize your Bitcoin trading to be more profitable. Let’s dig in!

When searching for a Bitcoin trading exchange to trade Bitcoin on, it is important that you use an exchange with many users, high liquidity and great user experience. This is where Bybit exchange comes in, as it is at the forefront of the exchange technology and has taken the industry by storm.

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A Step-By-Step Bybit Exchange Tutorial

Bybit is one of the most popular Bitcoin futures trading platform to trade cryptocurrencies on. Trading Bitcoin and altcoins on Bybit is super easy compared to its competitors, and in this Bybit tutorial, we’ll go through the experience step-by-step. To start off with, you’ll need to create a Bybit account.

Bybit Vs. BitMEX

Bybit exchange has become one of the more prominent exchanges in terms of liquidity, and more Bitcoin traders are moving over to Bybit from BitMEX. Aside from a plethora of other reasons for Bybit’s superiority over Bitmex, there are two main two reasons traders choose the former. That is, Bybit does not get “system overload”, unlike Bitmex. The trading experience is seamless and Bybit can handle more trades per second than BitMEX. Another reason is that Bybit has outstanding customer service. You can check out our full BitMEX review here.

Make sure to read this whole tutorial for our best tips and tricks to maximize your profits when trading Bitcoin with leverage on Bybit.

Trade On Bybit From The US

If you are trading from the US, you’ll need to use a VPN. Trading from the US is currently blocked from Bybit. We recommend NordVPN, the most popular VPN out there. There are free VPN’s, but they are usually not very good. Please know that using a VPN is entirely at your own risk and in no way are we responsible if your funds are seized.

In this Bybit tutorial you will learn:

  • How to trade Bitcoin on Bybit
  • The basics of leverage trading
  • How to long and short Bitcoin with leverage
  • How to trade XRP, Ethereum & EOS
  • What a liquidation price is
  • How to set up a stop loss

Leverage Trading For Beginners

A common question is: can I lose more than I deposit into the exchange and then be in debt to Bybit? No, you can never lose more than you deposit into Bybit account. If you deposit 0.1 BTC into Bybit exchange, the maximum amount of funds you can lose is 0.1 BTC. Moreover, you can never lose more than the funds you use to open a position.

To understand this, you’ll need to know the basics trading on Bybit, which you’ll learn in these rapid fire info-graphics. If you want to know how to trade Bitcoin, you need to understand margin trading, also known as leveraged trading.

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A simple Explanation Of Leverage Trading & The Risk Involved

On Bybit exchange, you can trade Bitcoin with up to a 100x leverage. An easy way of understanding leverage trading is to think of it as being able to open a position worth more money than the initial margin you are risking to open the position. When leveraged trading, it’s important to know that margin trading offers both big opportunities as well as risks.

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A Margin Trading Example

For example, if you open a Bitcoin position on Bybit using $1000 worth of BTC on 10x leverage, your full position will be worth $10,000. This means that if the Bitcoin price moves up only 1%, you will actually make 10% on your initial margin. If you use 25x leverage and the Bitcoin price moves up 2%, your return on investment will be 50%, etc. Of course, the same can be said if the prices moves in the opposite direction, but with negative returns.

You are essentially “borrowing” Bitcoin from the exchange to maximize your profits. However, this comes with increased risk because of something called the “liquidation price”.

Risk – The Liquidation Price

In very simple terms, increased leverage means increased risk. For example, if we open a $1,000 Bitcoin position on Bybit with 10x leverage we will increase our profits by 10 times if the Bitcoin price moves up. However, if the price moves down 10% we will reach our liquidation price. If you use 100x leverage, which is the highest leverage possible on Bybit, it only takes a 1% drop in the Bitcoin price for us to reach the liquidation price. Simply put, higher leverage means that the liquidation price will be closer to your entry price, which is riskier. The liquidation price will always be met before the price reaches the “bankruptcy price”, as shown in the image below.

liquidation price bitmex bybit leverage trading margin trading trade cryptocurrencies bitcoin entry price bankruptcy 100x leverage

When the Bitcoin price touches the liquidation price, our position on Bybit gets “liquidated”, which basically means that we lose our initial margin. In other words, if the position gets liquidated, we lose the position and the money we used to open the position. This is the risky part of margin trading Bitcoin.

Consequently, to prevent the leveraged position from getting liquidated you should always set up a stop loss, this is extremely important. Keep reading this Bybit tutorial, because further down below we will explain step by step how to set up a proper stop loss.

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How To Get A FREE Sign-Up Bonus

One thing that is very generous of Bybit is that they are giving their new users a free sign up bonus after registration. You can use this free bonus to make a free trade if you want to. More info about this below.

Register A Bybit Account

First of all, create a Bybit account using this link. If you use this specific link you will get a very valuable FREE bonus if you meet the deposit requirements. now, if you are registering from the United States, you will need a VPN. There are free VPNs out there, but they are usually really bad, so we recommend NordVPN.

How To Deposit On Bybit

To deposit funds into Bybit, click the “trade” tab in the upper left corner, and click “deposit”. On Bybit exchange you can deposit Bitcoin, Ethereum, XRP & EOS. This is a key difference between BitMEX vs. Bybit, because on BitMEX you can only deposit Bitcoin. Deposit 0.2 Bitcoin or 6 Ethereum into Bybit via this link to get the $60 deposit bonus.

How To Trade Bitcoin & Altcoins On Bybit

There is much more to trading Bitcoin than simply “buy” and “sell”. Now, if you want to learn how to trade Bitcoin successfully, you need to know the information below.

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Different Order Types

To make a market order on Bybit, click “market”, and click “limit” for a limit order. The difference between limit and market is the following: 

  • Market Order: When you open a market order, you are a market taker, because you take the best price available in the orderbook and the order executes immediately.  As a market taker, you will pay any fees in the transaction.
  • Limit Order: When you open a limit order, you are a market maker, because you are providing the order book with liquidity when your order ends up in the orderbook. Your order will stay in the orderbook until the price hits your limit order price level.  Here, you have the option of not paying transaction fees.
  • Conditional Order: If you want to go long when the price drops to a certain level, you can use the Conditional Order. For example, let’s say the Bitcoin price is $10,000 and you want to long Bitcoin if the Bitcoin price goes down to $9,000. In this case, you can put a conditional order at $9,000, because when this level is met, a market or limit order will be entered automatically, depending on what order type you choose.

Market Vs. Limit Summary

In other words, with a market order, you’re guaranteed to get the position opened immediately, but you won’t be able to control the entry price. With the limit order, you can guarantee your entry price, but you’ll have to wait for the price to reach your limit price for the position to open. When trading on low time frames, such knowledge is very important to be successful. In addition, Bybit fees are different for both market and limit orders. You’ll learn more about the fee structure further down in this Bybit tutorial.

Up To 100x Leverage On Bybit

Below is an image of the leverage slider on Bybit, and as you can see, you can trade on Bybit with up to 100x leverage. However, using 100x leverage comes with huge risk, and it is safer to begin with lower leverage when trading Bitcoin & altcoins on Bybit. To adjust the leverage, simply use the slider and put it at the amount of leverage that you are comfortable with. You can also manually enter the leverage by clicking the small “pen icon” in the lower right corner of the image below.

Register to Bybit to follow the rest of this tutorial. Use this link to get a FREE sign up bonus. You can use this free deposit bonus to trade on Bybit, instantly. There are several Bitcoin trading platforms offering leverage. Make sure to check our list of the top exchanges for leverage trading Bitcoin.

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Bybit Trading Fees

Bybit’s trading fees are similar to BitMEX. On Bybit exchange there is a 0.075% taker fee (market order), and a -0.025 maker fee (limit order). This means that there is a cost to enter a market order, and you actually get paid to use a limit order. This is why you should always use a limit order when trading Bitcoin on Bybit unless you are in a hurry and need to get filled immediately.

Important to note is that on Bybit, the trading fee is calculated on the value of the full position. In other words, the fee is drawn based on the sum on the initial margin and leverage combined. This means that the trading fee will be higher if you use higher leverage.

  • Market order fee 0.075%, on the whole position.
  • Limit order rebate -0.025%, on the whole position.

“Post Only” On Limit Order

A very important tip when using limit orders on Bybit is to click the “Post Only” box, under the Buy and Sell buttons. This ensures that your limit order will enter the order book as a limit order, and not execute as a market order. Further, this will guarantee that you get the maker rebate.

Perpetual Futures Contracts & The Funding Fee

Trading on Bybit is called Bitcoin futures trading. This is because the financial instrument being traded are futures contracts without an expiry date. Instead, they have something called a funding fee that is drawn every 8 hours. This means that the futures are what are commonly called perpetual futures, just like on BitMEX.

Now, there is one interesting fact to note here, and that is that the funding fee on Bybit is exchanged between the longs and shorts on Bybit, and not Bybit itself. This is done so the Bitcoin price on Bybit stays close to BTC spot price. Therefore, you can be paid to have a position opened every 8 hours if you trade against the majority of the market.

How To Enter A Bybit Trade

The best way to learn how to trade Bitcoin on Bybit is with a real-world example. Below is a step-by-step guide on how to enter a position with leverage on Bybit.

Choose An Order Type

To make a market order, simply press “market”, enter the preferred leverage and the quantity (Qty) in USD value and you’re ready to go. If you look at your Order Value, this number will represent the value of your initial margin plus the leverage you use to open the position.

The actual cost to open the position is visible further down in the image below the “Long” and “Short” buttons. The cost in this example is 1/10 of the Order Value, because we are using 10x leverage in this example. “Available Margin” simply shows you what you currently have in your account to trade with. 

Stop Loss & Take Profit

Remember that one very important thing in Bitcoin trading is a stop-loss. Now, if you click “Long” or “Short”, you will see a pop-up screen, as per the image below. Here, you can enter a take profit and a stop loss level, and when you press “Confirm” in the bottom right corner, your market order will be executed and your take profit and stop loss levels will enter the order book as conditional orders that will trigger automatically if price meets that level. This is very useful and this is another difference between Bybit vs. BitMEX, because on BitMEX you need to manually enter these orders separately. 

Before you press “Confirm”, review the order. Make sure that the leverage is correct and that the liquidation price is a level that you are comfortable with. Also, very important is to make sure that your stop loss will be hit before your liquidation price. If you agree to all the terms, press “Confirm”.

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View Your Open Position

Now you have an open leveraged position on Bybit. You will be able to view your current position at the bottom of your Bybit trading screen, as shown in the image below.

“Qty”, stands for the number of contracts that your position is worth at the time of opening it. Every contract represents 1 USD of value. “Value” is the same number but in BTC terms, and remember, it’s your initial margin + the leverage combined that sums up this number.

“Margin” shows you the funds that have been drawn from your Bitcoin trading account to open the position and “P&L” is your current profit or loss. “Daily realized P&L shows you how much realized profit or loss you have. This number is affected by fees and rebates.

Close Your Position

You can always close the position on Bybit, either by market or limit, and those buttons are seen towards the bottom right corner in the image. Your take profit and stop-loss orders will show up under the “Conditional” tap, above your position.

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How To Trade Altcoins On Bybit Exchange

Bitcoin trading is very popular due to Bitcoins volatility, but if you’re looking for even more risk & volatility you can look into altcoins.

If you want to become an altcoin trader, Bybit also offers smooth altcoin trading options. Compared to competitors in the space, apart from perhaps Phemex exchange, it’s easy to trade altcoins on Bybit. The platform currently supports trading for the following cryptocurrencies: XRP, Ethereum & EOS.

To change from Bitcoin trading into altcoin trading, simply click the little “B” logo, as shown by the green arrow in the image below. Interestingly, a big difference between Bybit vs. BitMEX is that you can, in fact, deposit altcoins into Bybit and then use those altcoins to trade with. This is not possible on BitMEX where you can only deposit Bitcoin and use Bitcoin as margin for altcoin trading. Bybit will add more cryptocurrencies in the future.

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Other Important Tips

Below you’ll find some other very valuable tips that will help your Bitcoin trading enormously. The tools listed below are the most popular ones among Bitcoin traders.

Tradingview – A Very Valuable Charting Tool

If you want to become a Bitcoin trader and are interested to trade BTC on Bybit, you should create a Tradingview account as your default charting program. It is the most used trading tool in the world, and most cryptocurrency traders on Bybit, BitMEX and Phemex are using it. 

Tradingview is completely free to use, but if you want to experience the full power of Tradingview, you can upgrade to the Pro version. It’s a small investment that you could quickly gain back by allowing Tradingview to enhance your crypto trading skills.

NordVPN – For Traders In The United States

Even if you don’t live in the US, you should still always use a VPN to protect your privacy online, especially if you are dealing with cryptocurrencies regularly. Further, to trade on Bybit as a US citizen you will need a VPN (Virtual Private Network). We strongly recommend NordVPN, it’s the most popular VPN in the world and it’s really cheap.

Buy Bitcoin & Altcoins With FIAT

If you still don’t own Bitcoin, you’ll have to buy Bitcoin before you can become a Bitcoin trader on Bybit. We have created a list of the best exchanges where you can buy Bitcoin.

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Other Bitcoin Exchanges

While we believe that Bybit is the best trading exchange there are several others that could be of interest. Make sure to read our list of the best Bitcoin margin exchanges in the world.