Learn How To Trade Bitcoin In 2023 – Forbes Advisor INDIA

With increasing interest in Bitcoin amid strict regulatory glare and mixed media coverage, trading in this particular currency has become a tempting side gig that helps earn an extra income. Bitcoin (BTC) is the first and most valuable cryptocurrency in the world which is also known as a highly volatile asset, whose price can fluctuate from one extreme value to another.

Therefore, it is important for people trading in BTC to have sufficient knowledge of how Bitcoin works so that they can safely navigate the Bitcoin movements and make the most of it by trading carefully and vigilantly.

Here is a detailed guide that will explain the importance of Bitcoin trading, how it works, and what are the factors that affect Bitcoin’s price the most and the role of technical and fundamental analysis in forming a comprehensive trading strategy.

What is Bitcoin Trading?

Bitcoin trading refers to the act of buying and selling Bitcoin via an exchange platform. In short, Bitcoin can be traded in many ways. The first way is to indulge in the buying and selling of BTC on a cryptocurrency exchange. Another way to trade Bitcoin is through financial derivatives, such as Contracts for Difference (CFDs). Trading via CFDs makes it easier for traders to trade according to the direction of market movement over the very short-term period and allows you to bet on Bitcoin price changes without actually owning any underlying coins.

CFDs have become a popular way to trade in Bitcoin as they offer greater flexibility and with optimal leverage one can take short as well as long positions in Bitcoin.

To start trading with Bitcoin, one must first be well equipped with sufficient information and should have familiarity with the subject. It is also important to know the associated risks and regulatory laws that may affect one’s jurisdiction and decisions.

Step by step guide on how to start trading bitcoin

Sign up for a cryptocurrency exchange: Opening a Bitcoin trading account is a quick and easy process. You can open an account with Bitcoin friendly exchanges like CoinDCX, WazirX, Zebpay, CoinSwitch Kuber and many others. All of these exchanges have a simple user interface and a wide selection of coins, including Bitcoin. Simply provide personal information and meet Know Your Customer (KYC) requirements.

Read our detailed article on “Best Cryptocurrency Exchanges in India” for more detailed information about crypto exchanges along with their pros and cons.

Deposit money into your account: Once you’ve registered with a crypto exchange, the next step is to fund your account through bank deposits, peer-to-peer (P2P) and other bank transfers.

Choose Bitcoin to invest in: After depositing money in your account, you can choose how much Bitcoin you want to buy to trade further.

Start the process of trading with Bitcoin: After buying a significant amount of Bitcoin, you can now start trading Bitcoin according to your chosen trading strategy. To begin with, you can also take the help of Bitcoin trading robots that are available on most of the cryptocurrency exchanges. This automated process helps give you significant returns based on your trading goals.

Store your bitcoins safely in digital wallets: If you are an active Bitcoin trader, you may need to store BTC on the exchange to access them. You can also buy a specific Bitcoin wallet if you buy BTC and plan to hold them for a little more than a short-term period. Broadly, there are two types of digital wallet: software and hardware wallet with their own advantages and disadvantages.

Bitcoin Trading Strategies

Bitcoin Day Trading: Bitcoin day trading is a common type of trading strategy, which is also known as intraday trading. This means that traders enter and exit positions within the same day. So here the trader does not have any Bitcoin market exposure overnight. Thus, it is not possible to avoid overnight financing fees on the position.

This strategy is ideal for those looking to profit from Bitcoin’s short-term market movements helping you make the most of the daily volatility in Bitcoin’s price.

Benefits:

• Quick profit.
• Better risk management.
• Not affected by changes in the market overnight.

Cons:

• Very short-term outlook.
• Can lose money faster.
• Closing a deal within a day is difficult.
• Too fast-paced way to understand the market.

Bitcoin Swing Trading: In Bitcoin swing trading, the trader takes full advantage of short-term price patterns. This type of strategy is based on the assumption that prices never go in one direction and thus continue to fluctuate. Therefore, a swing trader appears to make money from both up and down market movements that occur in a short and narrow time frame.

Benefits:

• Traders have more time to understand the day trading.
• Traders can make many long-term decisions with less risk involved.
• Less stressful than day trading.

Cons:

• Traders must be well researched.
• Do not sway away from emotional attachment as you hold the position for a long time.
• Not easier to learn.

Bitcoin position trading: This type of trading is also known as trend trading, which is a long-term approach. It involves buying and holding Bitcoin for a longer period of time. This strategy does not take into account the short-term price movement and focuses on the long-term growth.

Benefits:

• Easier to get hold of.
• Less stressful.
• Market movements are easier to predict.

Cons:

• Profit can only be realized in the long term.
• Holding position for long periods can be risky.

Bitcoin Scalping: This type of strategy is like day trading which focuses on extremely short-term market movements. Scalping allows traders to make significant small but frequent profits on very small price changes.

Benefits:

• Very fast profit with high win rate.

Cons:

• Very risky.
• Need the right skills to make money.

Understand factors that affect Bitcoin’s price

Let’s understand the factors that have a major impact on Bitcoin’s price:

Limited supply: The price of Bitcoin depends entirely on supply and demand. Bitcoin has always had a limited number of coins, and its current supply is limited to 21 million, which is expected to be exhausted by 2140. A limited supply means that there is a large possibility of change in the price of bitcoin as its demand rises and falls .

Market value: Bitcoin is known as the largest cryptocurrency in the world as it has the highest market value which makes users perceive this currency as a more desirable investment.

Important and important events: Any major news that is directly related to Bitcoin’s security tends to have an effect on Bitcoin’s overall market price. For example, the ban on crypto in China has led to a massive selloff in BTC. At the same time, any major development in Bitcoin’s community can lead to a major rally in BTC.

Smooth integration: Bitcoin is a cryptocurrency that enables smooth transactions between the two parties and without the involvement of regulatory or centralized authorities. Therefore, the image directly depends on its smooth integration into a new payment system. If many companies or countries accept BTC as a legal payment method, it could have a direct effect on prices.

How to Analyze Bitcoin: Fundamental vs. Technical?

Like all other financial assets, Bitcoin is also analyzed using two techniques:

Basic Analysis: Fundamental analysis is an approach used by Bitcoin traders to determine the “intrinsic value” of Bitcoin. This is done by a number of other internal and external factors. For traditional asset classes such as shares, fixed-income securities and commodities, it is easier to carry out fundamental analyses. However, for cryptocurrencies, one has to look at various parameters to assess it fundamentally, such as white paper, liquidity and trading volume, fees, market capitalization and other project calculations.

Technical analysis: Simply put, technical analysis of Bitcoin includes reviewing the price patterns using various types of charting techniques such as a line chart, bar chart, candlesticks, etc. and using technical analysis indicators. Such indicators are a combination of trend lines, support and resistance levels, moving averages, directional movement index, momentum indicators and extension, etc. Technical analysis indicators use past prices of Bitcoin to predict its future price movement.

Bitcoin technical analysis usually relies on charting patterns, statistical indicators or both. The most commonly used charts are candlestick, bar, line and bar charts. Each can be created with similar data, but presents the information in different and useful ways.

Tips for doing Bitcoin trading in the most successful way

Do your research: Unlike other financial markets, Bitcoin markets are notoriously volatile, and important events can affect and move the price of Bitcoin both strongly and quickly. It is imperative to stay, if you want to be a pro Bitcoin trader and want to make the most of Bitcoin, then you need to stay updated on all possible bitcoin news and all important events that can potentially cause market movements.

In fact, there are various exchanges that help you gather all the relevant news stories you need to read before the day starts.

Ignore hype or misleading news: Don’t make your trading calls based on social media news. Since Bitcoin is a hot topic and misleading and fake news about Bitcoin tend to spread very quickly.

Build a balanced portfolio: Bitcoin trading is still at a very nascent stage. There is still quite a lot of ambiguity in the crypto market. Thus, it is very important to build your balanced portfolio, and not a very Bitcoin heavy portfolio. Building a balanced portfolio includes different cryptocurrencies such as Bitcoin, Dogecoin and Ethereum and also a mix of other financial assets. This strategy will help you go a long way in beating volatility.

The bottom line

Bitcoin trading in India is still fairly new and largely fragmented. Since Bitcoin is open to arbitrage and margin trading, it offers huge opportunities to traders looking for short-term gains. However, Bitcoin is also subject to several changes in regulation, taxation and the way it must be treated. Therefore, it is very important for traders not to get caught up in the hype and remain vigilant about Bitcoin’s volatile nature and unpredictability.