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The first part of our bitcoin trading guide series explains the basics of bitcoin and trading terminology. Instructions are also provided for buying bitcoin and getting ready to trade on BTC.sx
. We originally produced the first part of this guide for our own traders to get started with our platform. However, after some really good feedback we thought we should share it publicly too. So please bear with us if it is quite orientated to our own platform. Future parts will be much more applicable to trading in general.
Here is what we have planned for the series:
1) Getting ready to trade (this post)
2) Making your first trade
- Fundamental analysis
- How to read a chart (candle sticks, volume, log vs linear scales)
- How to spot a trend (moving averages)
- How to open and close a position
3) Basics of technical analysis
- Assumptions / theory behind TA
- Classic support / resistance patterns e.g. head and shoulders
4) Advanced TA
- Elliot Waves
- Ichimoku Clouds
- Bollinger Bands
- Parabolic SAR
5) Developing a sustainable strategy
- Timing entry and exit points
- Managing multiple open positions
- Avoiding emotional trading
Please let us know if there are any topics you would like specifically covered and whether or not articles are the best format for learning.
Why should you listen to what we have to say?
Our CEO turned $100 into $200k by trading bitcoin, our COO previosuly worked at senior management level at Deutsche Bank and UBS, and one of our advisers has a Wall Street background as a Portfolio Manager and is a Chartered Market Technician. http://i.imgur.com/G06P306.png
This article begins with an overview of bitcoin, how to buy bitcoin and how to manage risk. The remainder of the article focuses on understanding trading terminology and creating a bitcoin trading account on BTC.sx
. What is bitcoin?
Bitcoin is a digital currency that uses encryption, rules of mathematics and a decentralized network to control the creation of more bitcoins and verify transactions. Bitcoin was designed to operate as ‘digital gold’ — it resembles a commodity but can be used as a currency. Bitcoin can be traded for fiat currency, like dollars or pounds, creating opportunities to profit from trading price fluctuations. http://i.imgur.com/hNnKxGE.png Why is bitcoin so volatile?
Compared to the price of gold, the price of bitcoin has exhibited much larger price swings. Typically the price of gold will change by just a few percent each week, but bitcoin’s price often changes by 10% or more — even in a ‘flat’ market.
Volatility is generally considered a good thing by bitcoin traders because it creates opportunities to buy lower and sell higher than flat markets.
The primary reason why bitcoin is volatile is because it has a small market cap and low trading volume. Market cap is the number of units (bitcoin here) in circulation multiplied by the value (bitcoin price here).
For example, bitcoin has a market cap of about $3 billion
vs $31 billion
for the a gold ETF (GLD is the most popular American gold investment vehicle). Additionally, the daily average trading volume for bitcoin is about $12 million
vs approximately $939 million
for the gold ETF.
The result of this small market cap and low trading volume is that less trading less money is required to make a large difference in supply and demand.
For instance, if a trader wants to buy $3 million worth of bitcoin this represents 33% of the daily trading volume and would push the price up approximately 14%, at the time of writing. However, buying $3 million worth of the gold ETF is just 0.3% of the daily trading volume and is nothing compared to the hundreds of millions of trades that influence gold’s price. http://i.imgur.com/NLtgVrX.png Further information
The information we have provided about bitcoin is only the bare essentials a trader needs to know. If you are completely new to bitcoin, also consider exploring these external resources: We Use Coins Bitcoin.org Bitcoin Wiki 2. How to Manage Risk Risk of buying bitcoin
As discussed above, bitcoin is an extremely volatile asset. Besides increasing in value, bitcoin’s price can also dramatically fall. When buying bitcoin, never invest more than you can afford to lose.
You cannot lose more than you put in, so don’t put in more than you can afford to lose and you’ll be all right, even in the most negative case. - Rpietila, Bitcoin and commodity investor Risk of trading bitcoin
Furthermore, investing more than one can afford to lose reduces a trader’s ability to make good decisions. In particular, there is a risk of ‘panic selling’ when the market declines slightly. Instead of holding throughout a market dip, someone who is over-invested may panic and sell-off their holdings for a low price — attempting to cut their losses. This tends to lead to losing more money when the market recovers and the trader buys back at a higher price. http://i.imgur.com/yrQbCsI.png
Simply, the best way to manage your risk is to not invest more than you can afford to lose. At BTC.sx
, losses cannot exceed your deposit — so simply make sure this is a comfortable amount for you to trade with. 3. Understand Basic Bitcoin Trading Terminology Trading
Trading is the act of buying, selling or exchanging one asset for another. Exchanging Bitcoin for US dollars, for instance, is trading. Position
A position is similar a trade, which can either be long (buying bitcoin) or short (selling bitcoin). Like a trade you profit from a long/buy position when the price rises; and you profit from a short/sell position when the price falls.
Unlike a trade, a position has an open and close. At BTC.sx
you begin by depositing bitcoin. Then you may acquire more bitcoin or US dollars by opening a position. When the position is closed you are left with just more or less bitcoin than the value deposited — this depends on how profitable your position was. Trading platform
A trading platform, like BTC.sx
, is a place where traders go to enter positions. Unlike an exchange, it is uncommon for to use platforms for exchanging one asset for another. Typically trading platforms also include more advanced features, such as leverage. Leverage http://i.imgur.com/Aik56aI.jpg
Leverage is borrowing assets for the purposes of increasing potential trading returns. This is also known as margin trading.
Trading with 10x leverage on BTC.sx
, allows you to deposit 1 bitcoin and trade with 10 bitcoins. When you are done trading (closing a position) you return the 10 bitcoin and keep any profits made.
For example, let’s say your trading has been going well and you are consistently making a 10% return each week. Trading with 1 bitcoin, your profit is 0.1 bitcoin. However, with 10 bitcoins your profit is 1 bitcoin — this is the power of leverage when used correctly.
Although leverage does also increase trading risk exposure, your losses can never exceed your deposit at BTC.sx
. Furthermore, your risk of an exchange failure is reduced because you are trading with 9 bitcoins that belong to BTC.sx and only 1 bitcoin of your own. Exchange
Unlike trading platforms, investors use exchanges to swap an asset for another. For example, Bitstamp allows investors to trade their local currency for Bitcoin, or vice versa. Exchanges are the main determinants of bitcoin’s price because they contain an order book.
At an exchange you can either be a market maker or a market taker. Market maker
A market maker sets the price they wish to buy or sell at and waits for a market taker who agrees to that price. Market taker
A market taker finds a market maker that is offering a desirable price and quantity then immediately trades with them. Order book
An order book is a list investors wanting to buy and sell an asset at specified quantities and prices. These are the market makers. Below is an annotated explanation of a bitcoin exchange order book. Picture the order book as a very hectic auction and the concept should be easier to understand. http://i.imgur.com/DuRYrnx.png Sell orders: “Asks”
This part of the order book lists the prices and quantities investors wish to sell bitcoin at. Here the cheapest seller is offering 2.3467 bitcoin at a price of $244.58. As these investors are asking for a price to sell at, these are called asks. Buy orders: “Bids”
This part of the order book lists the prices and quantities investors wish to buy bitcoin at. Here the most expensive buyer is willing to purchase 0.5 bitcoin at a price of $244.43. As these investors are bidding for a price to buy at, these are called bids. Current bitcoin price
This is the last price at which bitcoin was exchanged for US dollars. Given that buyers will fulfill the cheapest ask, and sellers will fulfill the most expensive bid, the price will always fall between the the cheapest ask and most expensive bid.
In this example, the price is $244.39 — the same as the most expensive bid. This means that the last bitcoin trade was a market taker selling to a market maker. This is also a demonstration of a seller always wanting to sell to the highest bidder. Order book depth
This depth graph visualizes the amount of asks and bids at various prices. The more bitcoins that are available at a price, the ‘deeper’ the graph is. Naturally, as sellers do not want to ask for cheap prices and buyers do not want to buy for expensive prices, the graph is normally shallow in the middle.
If the chart is one-sided, it suggests that the market may be feeling bullish or bearish. In the above example, a lot of investors want to sell at $245 which would make it difficult for the price to rise beyond that. Conversely, the shallow graph on the bid side shows not many people want to buy bitcoin at these prices. This is typical of a bearish market. Order book execution
An important feature of BTC.sx
is that the positions our users open/close make buys and sells on exchange order books. In practice, when our users click buy, US dollars is used to buy bitcoin from the order book bids. Conversely, when our users click sell, bitcoin is sold for US dollars from the order book asks. http://i.imgur.com/1Dk8G0t.jpg Why is this important?
Firstly, when you trade on BTC.sx
you do so with leverage. This means you can have a larger impact in the market and move the price in your favour. In the above example using just 1.3 bitcoin at 10x leverage would create buy 13 bitcoin from the asks. This helps drives the price up because now the cheapest ask is $244.61. If the market sees this as a bullish sign then others may follow, sparking a price rally.
Secondly, order book execution means that BTC.sx
does not trade against our users. Trading platforms that do not offer this execution are acting as market makers and stand to profit from their traders losing money. At BTC.sx
we want our traders to be profitable so they can keep trading.
*4. How to Buy Bitcoin *
As a bitcoin-only trading platform, BTC.sx
only accepts bitcoin deposits. This allows you to begin trading in minutes and without verifying your identity.
If you do not yet own any bitcoin there are a number of places that bitcoin can be bought from, including: Circle Coinbase LocalBitcoins Click here to see other ways to buy bitcoin in each region of the world.
To store your bitcoin you will also need a wallet, such as MultiBit
. 5. Create an Account on BTC.sx
Once you have bitcoin, you are ready to start trading. Head over to BTC.sx
to begin the registration process. 1. Click ‘Sign Up’ http://i.imgur.com/Fikj8Nd.png 2. Enter your details and read and agree with the terms of service http://i.imgur.com/AjnKzRY.png 3. Click on the email activation code http://i.imgur.com/lz5yBqK.png 4. Login to your account http://i.imgur.com/P6VJ0xm.png 5. Visit trade screen http://i.imgur.com/WjGockR.png 6. Send a deposit to BTC.sx
You are now one step away from being ready to trade bitcoin. All that is required is to send a deposit by following these instructions: 1. Click on ‘Deposit’ in the trading screen http://i.imgur.com/1TxpgUh.png 2. Send bitcoin to your wallet address http://i.imgur.com/cTZim5t.png
If you do not know how to send bitcoin please contact your wallet provider for assistance.
Conclusion** ** You should now be in a position where you understand the basics of bitcoin, trading terminology and have an account on BTC.sx
to begin trading.
In part 2 we will be covering fundamental analysis, the basics of technical analysis and how to make your first trade. Like us on Facebook
or follow us on Twitter
for future updates. If you have not yet signed up for an account on BTC.sx click here. The registration process takes just two minutes and does not require any identity verification documents
I'm a casual investor and with all the bitcoin hype I realize the only order book I've ever seen is the bitcoin order books. When it comes to technical analysis of typical charts (like the price of a commodity) I can not predict what is going to happen but I can look at the last 1-5 years and see the resistance and trends and whatnot. submitted by
There must be some kind of technical analysis for order books (and their corresponding charts). What does a normal order book look like? How does that compare to the Bitcoin exchange order books?
FYI, when it comes to bitcoins, I've multiplied my investment 10x. I've already cashed out my initial investment and a nice bonus. The rest I have stored away for long term investment years from now.
These types of orders are offers to buy or sell bitcoin at a certain price. Passive orders are placed in the exchange order book and remain waiting there until cancelled (by the trader) or consumed by another trader. Market orders are "active" trades because they consume limit and stop orders in the order book. Bitcoin Exchange Guide is a hyperactive hybrid of heavy-handed cryptocurrency content curation creators from christened community contributors who focus on delivering today's bitcoin news, cryptoasset user guides and latest blockchain updates. Latest News. Bybit Fastest Bitcoin Exchange: Buy Crypto with Ease! Each trade takes place between two parties: the manufacturer, whose order is in the order book before the trade, and the winner, who places the order that matches (or “takes”) the manufacturer’s order. We call manufacturers “manufacturers” because their orders make the BTC-USD Pump Monitor, Bitcoin Full order book and all trades history with buying and selling weight indicator This means the entity who opened this order would like to purchase 20.24 units of bitcoin at a price of $8,218.50 per unit. In the Bitfinex order book, you will also see the terms “count” and
Let's learn how to read an exchange - covers the order book, trade history, price chart, and depth chart at GDAX, one of the top Bitcoin/Litecoin exchanges, but can be applied to any exchange. - The order book is the live list of all limit orders from everybody on the exchange. It is comprised of bids, asks and the spread. - A limit order is a firm offer to buy or sell the contract. Buy/Sell Walls and Order Books - What You Need To Know ... But how does bitcoin actually work? ... How orders get to the exchange - Duration: 4:06. Udacity 16,663 views. 4:06. The order book ... Order Book, Limit Order, Market Order - Kraken Futures Kraken Bitcoin Exchange. ... Kraken Bitcoin Exchange 12 views. New; 5:21. Stock Market Order Types (Market Order, Limit Order, ... This is the first video in a series that tackles how to interpret order flow and use it to trade profitably. Trading Order Flow/Market Sentiment on the Bitcoin is, without a doubt, the best ...