Bitcoin Trading: How to Trade Bitcoin for Profit

Alena Khatkova
April 24, 2023
Bitcoin trading can be complex and volatile, but it also offers the potential for high returns. In this article, we will explore the basics of BTC trading, including how to get started, the different trading strategies you can use, and the risks and rewards of trading.

Bitcoin, the first and most well-known cryptocurrency, has captured the attention of investors and traders worldwide. As the value of Bitcoin has skyrocketed recently, more and more people are interested in learning how to trade this digital asset for a profit. Bitcoin trading can be complex and volatile, but it also offers the potential for high returns. In this article, we will explore the basics of BTC trading, including how to get started, the different trading strategies you can use, and the risks and rewards of trading. Whether you're a seasoned trader or just getting started, this guide will provide the knowledge and tools you need to succeed in crypto trading.

What is Bitcoin trading?

Bitcoin trading is buying and selling Bitcoins for profit on an exchange.

Bitcoin is a decentralized digital currency operating on a peer-to-peer network without a central authority. Trading Bitcoins for profit involves purchasing Bitcoin at a low price and selling it at a higher price, taking advantage of market fluctuations. Trading can be done through various methods, including spot trading, futures trading, and options trading. While trading coins can be lucrative, it is essential to understand the risks involved, such as high volatility and market uncertainty. To successfully trade Bitcoin, traders must understand technical analysis, market trends, and risk management strategies. With the proper knowledge and skills, trading bitcoins for profit can be a rewarding and exciting experience.

Steps to be taken before trading BTC

Numerous strategies are available for trading cryptocurrencies, each with advantages and disadvantages. Before engaging in cryptocurrency trading, it is essential to have a thorough understanding of the topic. Additionally, knowledge of the potential risks and legal regulations that may vary depending on the trader's jurisdiction is crucial, and traders must make informed decisions based on these factors.

The first steps to start trading:

  1. Register on a cryptocurrency exchange.
  2. Make a trading plan.
  3. Perform research.
  4. Convert fiat currency into cryptocurrency.

Registration on a cryptocurrency exchange

One must first sign up for a cryptocurrency exchange to manage cryptocurrency payments. Registering for a cryptocurrency brokerage account necessitates providing personal identifying information, much like a stock brokerage. When creating an account, one must provide their address, date of birth, and email address, among other things, to fulfill KYC requirements. The top cryptocurrency brokerages, such as Coinbase, CoinPrice, and CoinMarketCap, have user-friendly interfaces and offer a broad selection of alternative coins.

Make a trading plan

To trade Bitcoin, a well-crafted trading plan is essential. Such a plan should contain critical elements, including the reasons for trading, time commitment, trading goals, risk tolerance, available capital, personal risk management rules, the markets to be traded, strategies to be employed, and procedures for keeping accurate records. This comprehensive decision-making plan will guide traders on when and how to trade Bitcoin, aiding in making informed trading decisions. A successful trading plan is crucial in Bitcoin trading and can help traders achieve their financial goals while minimizing risks.

Perform research

If you want to learn Bitcoin trading, it is essential to conduct thorough research to understand the factors that impact its price, such as its finite supply, negative press, integration into payment systems, key events like regulatory changes and security breaches, and market capitalization. These factors can significantly affect demand, affecting Bitcoin's overall market price. By visiting informed and keeping abreast of pertinent information, traders can make informed decisions and take advantage of profitable opportunities in the Bitcoin market.

Start trading from converting fiat currency into cryptocurrency

To trade Bitcoin for profit, one must first fund their account through bank deposits, P2P transactions, or wire transfers on a crypto exchange. Once the account is funded, the trader can select the number of Bitcoin they want to purchase and trade. After buying Bitcoin, the trading process can be based on the chosen trading strategy. Automated Bitcoin trading bots are also available on most cryptocurrency exchanges to assist traders in achieving significant returns based on their trading objectives. Using these resources, traders can efficiently and effectively trade Bitcoin.

Bitcoin Trading Methods: 5 Strategies to Make Money

Bitcoin trading methods refer to the various strategies and techniques used to buy and sell Bitcoin to make a profit. Several popular trading methods are used in the cryptocurrency market, including day trading, swing trading, position trading, and scalping.

  1. Daily trading
  2. Swing trading
  3. Scalping trading
  4. Hedging strategy
  5. Auto-trading

In addition to these methods, traders use technical and fundamental analysis to inform their trading decisions. Technical analysis involves using charts and indicators to identify patterns and trends in price movements. In contrast, the fundamental analysis examines the underlying factors that drive the cryptocurrency market, such as news events and macroeconomic trends.

Daily trading

Day trading involves opening and closing trades within the same day, taking advantage of small price movements. It means that you won't be exposed to the Bitcoin market overnight. This approach could be beneficial if you want to profit from short-term price movements in Bitcoin, and it can assist you in capitalizing on the daily volatility in the price of Bitcoin. Remember that overnight funding charges are determined based on positions held at 10 pm UK time, which may vary in other time zones.

Swing trading

Swing trading involves holding on to a position for a few days to a few weeks to take advantage of medium-term price movements. It is happening thanks to capitalizing on short-term price patterns by profiting from the up-and-down movements of Bitcoin that occur within a narrow timeframe. Unlike those who follow broad trends, swing traders look for minor reversals in the cryptocurrency's price and try to spot them in advance to make profits from a series of small market moves.

Scalping trading

Scalping involves opening and closing trades within minutes to take advantage of small price fluctuations and is considered one of the most high-risk trading methods due to the fast-paced nature of the market. The strategy is based on the idea that building a large trading account is possible by taking smaller profits repeatedly rather than placing fewer trades and letting profits run. However, scalping requires a strict exit strategy as losses can quickly offset gains, especially in volatile markets like Bitcoin. To avoid overnight funding charges that can quickly erode profits, most scalpers will close their positions before the end of the day.

Hedging strategy

Bitcoin hedging involves minimizing your risk in the short term by balancing an existing position with an opposite position. This allows you to protect yourself from unfavorable changes in the Bitcoin market. Suppose you hold bitcoins but anticipate a short-term decrease in the cryptocurrency's value. In that case, you would create a short position. If the market price for Bitcoin does drop, the profits from the second position will offset the losses from the first. However, while hedging may reduce your risk, you'll still incur fees on both positions, which should be considered in all calculations.


Automated Bitcoin trading relies on independent algorithms to execute trades automatically based on predetermined rules, such as specific price movements. When the market conditions meet the criteria set by the trading algorithms, the system can execute buy or sell orders on your behalf without your direct involvement.

Common mistakes in trading

Learning from and avoiding repeating your mistakes is essential to becoming a better trader. Below are six of the most common trading mistakes that traders make. To be better equipped during your time on the markets, we will examine these mistakes individually and offer strategies to avoid them.

Mistake 1 — Misunderstanding the risk-benefit ratio

Trading carries inherent risk, and it's crucial to manage it effectively to succeed. Traders must consider the risk-to-reward ratio when making trading decisions, as it helps determine if the potential profit is worth the potential risk. Experienced traders often have strategies to manage risk, while beginners may be more risk-averse. One common mistake is risking more money than you can afford to lose. Trading with a comfortable amount can help prevent bad decisions and minimize the impact of losses. Overinvesting can lead to poor trading decisions and should be avoided.

Mistake 2 — Trading without a plan

A trading plan is crucial for any trader, as it provides a clear strategy, sets time commitments, and establishes the amount of capital to invest. However, after experiencing losses in the market, traders may be tempted to abandon their plans. This is a mistake, as a trading plan should serve as the foundation for every trade. A single lousy trading day does not necessarily mean the plan is flawed. Instead, the market conditions did not align with the anticipated direction during that period.

Keeping a trading diary is a helpful way to track successful and unsuccessful trades and analyze the reasons behind each outcome. By doing so, traders can learn from their mistakes and make more informed decisions in the future.

Mistake 3 — Leaving money in the exchange

Any cryptocurrency trader needs to follow a basic rule: avoid leaving your funds on an exchange you are not actively trading with. You risk losing money if the exchange gets hacked, goes offline, or ceases operation. Leaving your money on an exchange means relinquishing control over it.

Moving any money not required for immediate trading to your Bitcoin wallet or bank account is advisable to keep your funds safe. This way, you can control and protect your funds from potential risks.

Mistake 4 — Insufficient market research

Some traders may rely on their intuition or rumors they've heard to make trading decisions, but this can be risky. It is crucial to support such feelings or tips with solid evidence and thorough market research before acting. Before opening a position, it is vital to have a deep understanding of the market you are entering. Is it an over-the-counter or exchange market? Is it currently experiencing high volatility, or is it relatively stable? 

Mistake 5 — Rapidly over-diversifying your portfolio

While diversification can reduce risk in a trading portfolio, opening too many positions too quickly can be imprudent. Although a diversified portfolio can offer higher returns, it requires more monitoring and management.

For example, you must stay informed about more news and events that could affect the markets. This extra effort may not be worthwhile, especially if you have limited time or are new to trading. However, having a diverse portfolio can increase your exposure to potential market gains, allowing you to benefit from trends in multiple markets rather than relying on a single market.

Mistake 6 — Emotional trading

Trading based on emotions can be detrimental to your success. It's natural to feel excited after a good trading day or down after a bad one, but it's important not to let those emotions cloud your judgment. Emotional trading can cause traders to deviate from their plans and make impulsive decisions. For example, after experiencing a loss, a trader might start opening positions without proper analysis to recover the loss. However, this is unlikely to lead to a favorable outcome.

To avoid emotional trading, it's crucial to remain objective in your decision-making process. Base your trading decisions on fundamental and technical analysis that you've conducted yourself. By doing this, you can eliminate emotions and make more rational decisions during your time on the market.

Summing Up — How Do You Trade Bitcoin?

In conclusion, BTC trading can be a challenging and potentially rewarding venture. However, it is essential to understand that success in trading requires dedication, time, and effort to acquire the necessary skills. While trading may not suit those seeking quick and easy profits without risk, those committed to learning can benefit from the available resources. We encourage you to continue your education and utilize the tools provided in our resource section. If you have any further questions, please leave them in the comments.