The first cryptocurrency appeared back in 2009. Over ten years passed, but digital assets still spark great interest from investors. It is difficult to overestimate the role of bitcoin in the global market. It has become a jolt of fresh air in a great variety of conventional and out-of-date trading instruments.

After traders understood the nature of BTC, they jumped into action to make money from the first cryptocurrency. Day by day, bitcoin traders were creating profitable strategies and, as a result, have developed a new field in price speculations - bitcoin trading. In this article, we will get an insight into this field.

What is BTC and how did it appear?

Let us start with a definition of bitcoin. It is a virtual money unit that is generated by computer networks and is used as an alternative means of payment to replace fiat (paper) money.

In 2009, Satoshi Nakamoto, the developer of Bitcoin, wrote the protocols for a fundamentally new currency and founded the technology for managing it. The same year of 2009 became the starting point for mining the first digital coins. The network founder created the first Bitcoin wallet and generated the first block. Interestingly, the bitcoin price was initially determined by the cost of electricity consumed when creating one currency unit due to the lack of material support.

Later on, the importance of BTC grew, so many investors started wondering how to trade bitcoins. The cryptocurrency price rose sharply. In August 2017, bitcoin was traded near $5,000, and two weeks later the price declined to $3,000.

As a result, the traders who invested real money in bitcoins and did not manage to close their positions before the plunge lost about 40% of their initial investments. Still, BTC remains a lucrative asset for most investors despite its extreme volatility.

You can track changes in bitcoin prices and learn how to invest in bitcoin CFDs online on InstaForex website.

How to trade BTC?

If you expect to get some extraordinary and complicated answer to this question, then you will be disappointed. Trading digital money is the same process as the common speculation on price changes in any other market. Before you start trading BTC, it is important to decide how you are going to gain access to the virtual currency:

  • via trading bitcoin derivatives
  • via buying the cryptocurrency on a bitcoin exchange
  • via the Crypto 10 Index

Trading bitcoin derivatives implies that you do not actually own the digital coins but speculate on their price changes in a form of contracts for difference (CFDs). This way, you can profit from both price rises (when you have a long position) and price falls (when you have a short position).

An option of buying BTC on a cryptocurrency exchange can suit those who use the buy-and-hold strategy. By purchasing through an exchange, you gain direct ownership of bitcoin. To make a profit, you need to wait for a rise in price.

Besides speculating BTC derivatives or buying bitcoin on an exchange, you can also trade it through the Crypto 10 Index. This index includes ten leading virtual coins with the highest capitalization and liquidity. Crypto 10 reflects the net market value of the most popular cryptocurrencies and enables you to speculate on their price changes.

You can start investing in cryptocurrencies and use the best BTC trading platform for that on InstaForex website.

To profit from bitcoin, you need to choose your trading style and strategy. There are four methods:

  1. Day trading
  2. Trend trading
  3. Hedging
  4. The Hold strategy (holding an asset under any circumstances)

Day trading implies opening and closing a position within one trading day. This strategy helps you avoid swaps, i.e. fees for holding positions overnight. This trading style can suit those who aim to profit from short-term fluctuations in BTC prices and get the most of daily volatility.

Investors who employ trend trading open positions following the underlying price trend. Thus, you open a buy deal when the trend is bullish (upward), and if the trend is bearish (downward), you place a short position. If you see that the trend is slowing down and seems to reverse soon, then you’d better close your position and open a new one depending on the new trend direction.

When using the BTC hedging strategy, traders aim to reduce risks by opening new positions opposite to the existing ones. For example, if you have several bitcoins but worry that their price may decline in the short term, then you can place a BTC sell deal in a form of CFD. In such a case, the losses incurred due to a fall in bitcoin prices will be offset by the profits received from the short position.

As the name suggests, the Hold and Buy strategy implies buying and holding bitcoins. However, it is reasonable to hold the cryptocurrency only if its long-term outlook is positive. If your trading plan suggests selling assets in order to fix profits or reduce losses, then you can use a stop loss order intended for limiting losses. This order is triggered once the price reaches a preset level.

To sum up

We hope that our article has provided you with a clear answer to the question “How to start trading cryptocurrencies?” If you want to get a better understanding of the digital money features and learn more about BTC trading opportunities, then go to InstaForex website.