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Everything You Need to Know About Bitcoin Trading in 2023

by Lois Earles

Bitcoin (BTC), the most valuable cryptocurrency worldwide, is also known as the most volatile asset, whose price can fluctuate from one extreme to another. With increased interest in it under strict regulatory scrutiny and mixed media coverage, trading in this cryptocurrency is an attractive way to make some passive income when the bear market appears.

The Bitcoin price wasn’t much to rejoice over last year, partly due to disheartening events like the Luna Crash and the FTX collapse. But it entered in full force starting with 2023, providing substantial growth and a beacon of hope for Bitcoin holders wondering whether their favourite cryptocurrency will see the days of glory it had back in 2021, when it reached an all-time high of 65,000 USD. From closing in 2023 at 16,000 USD and ending February at 23,500 USD, BTC is an appealing investment tool again for those sceptical about its potential.

Thus, beginner investors must have enough knowledge of how it works to safely navigate the cryptocurrency’s changes and make the most out of the investment vigilantly. Here’s a helpful guide explaining what it means to trade Bitcoin and the factors influencing its value.

Bitcoin Trading Explained

Bitcoin trading means purchasing and selling BTC on an exchange platform, and there are many ways of doing so. The first way is to buy and sell it on the exchange. There are more ways of trading it, including HODLing, day trading, position trading, and swing trading.

Another way to trade Bitcoin is through derivative financial instruments like CFDs (Contracts for Difference), which allow you to speculate on the token’s future market movements without owning any underlying coins. CFDs have gained popularity in recent years as they offer great flexibility and opportunities in both bull and bear markets.

To start trading Bitcoin, knowing the regulatory laws that can affect your decisions and fully understanding the associated risks is recommended.

How Beginners Start Bitcoin Trading

The first step to starting your Bitcoin journey is to find a reliable, trustworthy cryptocurrency exchange. There are many apps providing different offerings and user experiences. Still, it’s crucial to find one that stores your money safely and offers the security of deals, minimising the risk of theft and hacking.

Additionally, the exchange you choose has to be transparent, meaning that it should publish cold storage addresses or audit data on how to check its crypto reserves. Audit reports are an excellent way to ensure the exchange has enough liquidity and that you can easily convert your coin into cash or other coins. Also, remember that no exchange lets you work for free and that fees vary from platform to platform.

After you sign-up for the chosen cryptocurrency exchange, you’ll be offered several ways to fund your account, including bank deposits, credit or debit cards, peer-to-peer, or other wire transfers. You then determine an amount of money you don’t mind losing and buy Bitcoin.

The Bitcoin Trading Strategies with Pros and Cons

Several Bitcoin trading strategies like dual asset investment exist to help mitigate the financial risk you’re exposing when investing in cryptocurrency. They keep you from making impulsive and rash decisions and take emotions out of the equation. If you’re a beginner, you can give Binance Futures testnet a try to familiarise yourself with the world of peaks-and-throughs.

Here are some of the most common strategies adopted by crypto traders:

Day trading

Bitcoin day trading, also known as intraday trading, is the most common type of trading, meaning you open and close trades on the same day. As a result, you have no overnight exposure to the Bitcoin market and won’t have to pay overnight financing charges on the position.

This technique is great if you hope to benefit from Bitcoin’s short-term market changes since it allows you to capitalise on daily price volatility.

The pros of Bitcoin day trading are quick profits, the lack of impact owing to overnight market changes, and better risk management. On the other hand, closing a deal within a day might be difficult, just like understanding the market in this fast-paced way.

Bitcoin swing trading

In Bitcoin swing trading, you take full advantage of short-term price trends. This strategy is built on the notion that prices never move in one direction, and so keep swinging. As a result, as a swing trader, you seek to profit from both the up-and-down-market movement that takes place in a short and narrow time frame.

The pros of Bitcoin swing trading are the minimal time commitment and the fact that you can make long-term decisions with less risk involved. On the other hand, this strategy can take a lot of work to learn as it implies thorough research.

Bitcoin position trading

This type of trading is also known as trend trading and is a long-term technique. It implies purchasing and holding BTC for an extended period, focusing on long-term growth and not taking into account the short-term price movement.

The pros of Bitcoin position trading include predicting market movements more quickly and with less stress. On the other hand, you can only make profits in the long term, and keeping positions for that long can be risky.

Bitcoin scalping

Bitcoin scalping focuses on very short-term market movements, resembling day trading. It allows you to make small but constant profits on extremely small price changes.

Lastly, Bitcoin scalping allows you to take advantage of relatively insignificant price movement without targeting immense profits. However, you’ll need the proper skills to gain a return on investment, and it can be risky if you’re unprepared.

Final take

Bitcoin’s price is mostly determined by supply and demand, like any other cryptocurrency. It has always had a limited number of coins, with the current supply cap at 21 million coins, which is likely to be exhausted by 2140. Because there is a limited quantity, its price may fluctuate according to increasing and decreasing demand.

Since it has the largest market capitalisation, Bitcoin is considered the largest cryptocurrency worldwide, meaning that users consider this digital asset a more desirable investment.

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