With the introduction of cryptocurrencies, particularly Bitcoin, the financial sector has undergone an upheaval. New and interesting fintech products are springing up daily that allow traders to buy, sell, and trade, with massive improvements to trading efficiency with the right digital currency investments.
You’ve either been hearing the hype about Bitcoin (BTC) for years or like most of us suffer through the ups and downs, you might be looking to invest and protect current assets. You may be curious whether cryptocurrency trading operates like the conventional stock market or not, and what might be the best way to start day trading with cryptocurrencies.
We’ll quickly go over some of the basic topics in this article, as well as some fundamentals on how to trade Bitcoin and other cryptocurrencies, often referred to as altcoins. This is by no means an exhaustive guide to crypto day trading, but new traders will come away from this article versed in the basics.
There are a few basic steps before you can start trading cryptocurrency:
- Choose a trusted exchange and create an account
- Buy or transfer cryptocurrency to your account or deposit fiat
- Manually buy and sell or use crypto trade automation
Most major exchanges will let you buy cryptocurrency with fiat currency, or you can purchase it via a peer-to-peer exchange. Once you’ve acquired Bitcoin or altcoins, you can choose who to invest or trade it. Most exchanges will offer multiple trading pairs that you can swap between. Always study the markets you’re going to enter and look for positive signs like liquidity. If there’s no liquidity for your desired trading pairs, you won’t be able to quickly enter and exit positions.
Bitcoin is by far the cryptocurrency most people are familiar with. It has one of the largest networks, it’s been around the longest, and it’s currently the most valuable form of cryptocurrency on the market. But there are some things you should know before you buy Bitcoin or even use Bittrex trade bots.
- No brokerage required
Bitcoin is famously volatile. While that may seem like a drawback, the spikes it can experience open up opportunities for significant profitable trade in the day trading space. From July to November 2019 alone, the price swung form high of $14,000 to just under $8,000.
That movement makes Bitcoin a good digital currency to implement trade strategies like crypto arbitrage (if you’re quick enough), where the trader takes advantage of a price discrepancy in an asset to buy low and sell high, thus making a profit. However, this strategy is becoming increasingly hard to execute without being extremely risky.
Also, cryptocurrency trading doesn’t require you to go through a broker the way conventional forex or stock market trading does. That means a savvy trader can put their experience to use without an intermediary. Unlike traditional stock markets, the crypto market never really closes, so you can trade it 24/7.
Due to the nature of Bitcoin, it allows for lower fees and transaction costs, though you won’t be able to avoid them entirely; each exchange has their own fee schedules they’ll charge per trade, or for withdrawal and deposit. It’s always wise to understand your preferred exchanges fee schedules to avoid unnecessary risk. You do not, however, need a minimum amount to start trading on a major exchange like Bitfinex or Binance.
Another route for buying Bitcoin, if you don’t want to pay the rates you’ll be charged by exchanges, is to use a peer-to-peer (P2P) exchange, which charges a smaller fee and simply requires confirmation of the transaction to complete it. If you have a friend willing to sell Bitcoin to you, this could be an alternative route.
- Hacking attacks
- Lack of regulation
As anyone who’s read the news recently can tell you, storing digital currencies online makes you vulnerable to hacking attacks. Exchanges, even the major ones, are the target of attacks that have stolen millions in cryptocurrency. Digital wallets which store your Bitcoin online are susceptible to malicious actors as well.
To combat this, you can engage in smart security practices like using a strong password, a password generator, and two-factor authentication. You can also store your Bitcoin and other cryptocurrencies in offline hardware wallets, also referred to as cold wallets. Ledger, Nano, and Trezor are the biggest names in the crypto hardware wallet space right now, so that would be a good place to start.
If you choose to store your Bitcoin holdings with an exchange, be as sure as possible that the exchange is a trusted one and utilizes the best security practices available to protect your funds. Binance, for example, has a reserve fund on hand to cover losses from theft, similar to banks insured by the FDIC, as well as digital security like encryption and two-factor authentication.
Steer clear of smaller, shady-seeming exchanges you don’t recognize or can’t find any information on; they may not be safe, and won’t be able to reimburse you in the event of a major loss.
The cryptocurrency trading space is, at the moment, largely unregulated. Major exchanges have made an effort to comply with FTC requirements in the same way as banks, and certain companies like Bakkt are trying to build a regulatory network for the cryptocurrency space, but it’s a long way from being as regulated as the fiat, or traditional, currency system.
Every major cryptocurrency exchange will allow you to trade Bitcoin and choose from a large market of altcoins like Ethereum, Litecoin, or Tether. Cryptocurrency exchanges are a lot like conventional exchanges, letting users track the price of assets so they can execute on their strategies, see the current buy and sell prices on cryptos like Bitcoin, and execute trade orders.
As we said before, the larger the exchange, the more likely it’ll be to take the proper steps to safeguard your cryptocurrency stores, and the more scrutiny it will be under by authorities. Some of the largest and best-known exchanges include:
But there are many, many more. Choosing which one to start with will involve due diligence on your part. Look into the company and see what steps they take to protect your money, what customers say about them, what trading pairs they offer, and what fees they charge.
Then, choose the one that’s right for your budget and offers the cryptocurrencies in which you’d most like to trade. Pick an exchange that you can practice, grow, and thrive on.
If you’re partial to mobile apps, there are plenty to choose from that let you trade in cryptocurrencies. If you’re in the U.S., Robinhood lets users buy, sell and trade cryptocurrencies right from their phone. Other Bitcoin trading apps like TabTrader and Bison App are also available and worth considering if you want to take your crypto trading with you.
Once you’ve gotten the hang of manually buying and selling cryptocurrencies like Bitcoin, you’ll want to scale your trading to the next level. Using crypto trading bots you can automate advanced trading strategies like crypto arbitraging and execute them while you sleep is a great way to step up your trading and turn a better profit. HaasOnline offers a variety of plans that both help you utilize trading bots and connect you with an expert community.
Our Bitcoin trading software allows users to choose from several predefined trading strategies that require very little configuration to get up and running. However, we also offer next generation automated trading capabilities with trading scripts developed with HaasScript, our own crypto trading language.
If you’re unsure of the market, we recommend being overly cautious. Manually buy and sell no more Bitcoin or altcoin that you can risk to lose (risk capital), choose a trusted crypto exchange, and make a few trades to see how you feel. If you see your digital investments grow and like where it’s headed, you can pursue more advanced trading strategies and tools.