Bitcoin Trading – How To Trade Bitcoin

7:18 pm, Sun, 12 January 20

Current Bitcoin Data

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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.


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.

bitmex leverage trading bybit bitmex deribit bitcoin cryptocurrencies crypto trading money margin trading trade
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.

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