Today I will teach you the basics of how to trade Bitcoin and other cryptocurrencies. Bitcoin is the leader of the pack, but alternative coins known as “altcoins” are also increasing in demand.
Please be aware that this is a high risk market and the price of all cryptocurrencies fluctuate widely. It is not uncommon to see 20 – 40 percent swings in price every single day. So it is easy to see that there is definitely profit to be made due to the volatility of the market.
Investor vs Trader
An investor is someone who will purchase bitcoin or other cryptocurrencies and hold on to the coins for the long term. These investors understand that the longer you hold onto these coins, the higher the value with increase over time.
Since investors focus on long term profits, they are not as concerned with the daily fluctuations of price. Instead they care more about the appreciation of value over months or years.
A trader, on the other hand, focuses more on short term profits. These traders purchase coins with the intent to sell them at a higher price in a shorter time frame.
Traders utilize the volatility of the market and the fluctuation of price to their advantage. You may have heard the term “Buy Low, Sell High” and this is the ultimate goal for traders.
Many people also become a mixture of both investor and trader.
You can certainly hold some coins long term, if you believe in the coin, as well as day trade other coins for daily profits.
This is where you need to decide what your comfort level is and what level of risk you are willing to take.
How to Buy Bitcoin
There are several ways you can buy bitcoin but I always recommend beginners to make their purchase at CoinBase.
CoinBase has been around for a very long time and is one of the most trusted and reliable platforms to purchase Bitcoin.
Currently CoinBase offers Bitcoin, Ethereum, and Litecoin that can be purchased on their website.
When signing up for CoinBase, do not be alarmed if you are asked for personal information. This is to verify your identity and is required by law. Basically, they need to make sure you are not involved in money laundering.
If you are focused on investing long term and are satisfied with the 3 coins they offer, then you are pretty much done. You can leave the purchased coins on CoinBase and check back every few months or even years.
However if would like to trade your coins for other altcoins, then this is when you need to send your coins to an exchange.
How to trade Bitcoin
You can imagine a Cryptocurreny Exchange like the stock market. With stocks, you would need to establish a brokerage account in order to buy and sell stocks of a company. An exchange works in a similar fashion but instead we are trading cryptocurrencies.
There are several exchanges to choose from but I highly recommend Bittrex to most beginners. Bittrex has become one of the most reliable exchanges and, in my opinion, has the most user friendly interface.
Once you create and account at an exchange, it is time to transfer your coins purchased on CoinBase to the exchange.
You can do this by going to your wallet on the exchange and choose which coin you would like to deposit.
Carefully copy the wallet address and head back over the CoinBase.
On CoinBase, simply paste in the wallet address and enter the amount you would like to send to the exchange.
*One thing to note is that transfers of Bitcoin can be rather slow. So please do not freak out if you do not see your transferred coins on the exchange for 10-30 minutes*
Buy and Sell
Once your coins has been deposited to the exchange, you can now select which coin market you would like to buy or sell.
When choosing the coin, you will be presented with charts, order books, and transaction history.
You can use these tools to help determine what price you would like to buy or sell that specific coin.
Please see video for a visual demonstrations.
After trading for your desired coin, it is always recommend to transfer the coins out of the exchange and into your local wallet.
I always use the recommend wallet that is listed on the official website of that specific coin.
Trading Bitcoin can be very profitable and exciting, however please be aware of the risks.
Cryptrocurrency is an unregulated market and there are no laws governing this system. You need to be responsible for your own money because no one is going bail you out.
This is not financial advice. If you choose to invest in this market, please understand that cryptocurrency is very volatile. Do not invest more than you can afford to lose.