Bitcoin Trading Guide with Broker Reviews and Tutorial

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Bitcoin Trading Guide with Broker Reviews and Tutorial

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Beginners Guide on How to Margin Trade BTC & Altcoins Derivatives & Futures Contracts, Full BitMEX Tutorial

Introduction to The Bitcoin Mercantile Exchange (BitMEX)

The Bitcoin Mercantile Exchange (BitMEX) is a leading digital currency exchange platform that offers Derivatives, Futures, and Prediction contracts and markets for margin trading cryptocurrencies. Bitmex Offers cryptocurrency margin trading for Bitcoin, Ethereum and Litecoin up to 100x in the case of Bitcoin. BitMEX offers a variety of contract types, and all contracts are bought and paid out in Bitcoin. It is the only platform that offers a “Perpetual P2P Swap”, a contract that trades like a future but never expires!

BitMEX offers Bitcoin/USD (XBT), and variety of other alternative cryptocurrency markets. Alternative cryptocurrency markets include Zcash (ZEC), Ethereum (ETH), Ethereum Classic (ETC), Monero (XMR), Ripple (XRP), , Litecoin (LTC), , Dash (DASH), Cordano (ADA), Bitcoin Cash (BCH), NEO (NEO), Steller (XLM).

They also offer Demo Accounts for you to test trading strategies without putting real money.

How Does Margin Trading on BitMEX Work?

Margin Trading refers to borrowing from the broker (Trading Platform) to either buy or sell a stock.

Depending on which market, BitMEX offers a flexible leverage of up to 100x for Bitcoin markets and up to 33x for Altcoin markets. But that doesn’t mean that you should use the maximum available leverage, and in fact, you shouldn’t unless you really know what you are doing!

Getting Started — Sign Up & Fund Your BitMEX Account

For BitMEX, like most Bitcoin and cryptocurrency exchanges, there is no need to go through KYC/AML document submission and approval process, and you can start trading immediately just by signing up and funding your account!

After you set up your account, the first thing you should do is to keep Kour Account Secure,

  1. MUST DO: 2FA on both exchange and email account. Once this is done, you should not be able to get compromised, except in rare cases such as sim-jacking. Highly suggest using Google Authenticator / Authy type of 2FA, instead of SMS 2FA
  2. MUST DO: Use strong passwords; minimum 15–25characters with a mix of upper- and lower-case letters, numbers, and characters.
  3. Optional: Use a separate email address for Bitcoin and cryptocurrency only.

BitMEX Trading Dashboard & Mechanism/Structure

Few landing page you’ll see upon logging into your BitMEX account. Lets Discuss them, For More Easier we split them into three segments:

A) Market Information

B) Account Information

C) Trading Tools & Management

A) Market Information

1. Market Overview

Right at the top, you can find the ticker symbols of all the available markets. Clicking on the symbols on the left will toggle between showing the market data of the relevant market, namely current trading price and 24h % gain/loss.

2. Bitcoin & Altcoin Markets

You can find a row of markets and their associated tickers in this section. Clicking on each of the markets will load the relevant market information as below.

3. Market Information

In this section, you can find the charts powered by tradingview.com, the order book, and recent trade history.

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4. Market Contracts

Here you will be able to see information about the contract

B) Account Information

5. Dashboard Tabs

Trade, Account, Contracts, References, API

6. Account Balance Info.

You can view your balance at the top right.

Alternatively, your available trading balance is also shown on the left side under the “Place Order” section.

7. Account Information & Settings

You may access your account information by clicking on your username at the top right, where you can change your currency denomination display, color theme, dashboard layout, and access other account/security and site preference settings.

Alternatively, you can also click on “Account” in the dashboard tabs section to access your account settings.

8. Place Order

This is where you place your orders by inputting the quantity, price, and other parameters where required.

9. Position Overview

Here you can see the overview of your open positions, including the number of contracts, entry price, Return on Equity (ROE), liquidation price, and leverage used. You are also able to adjust the leverage used in your open position.

10. Manage Orders & Positions

Active orders and open positions will appear in this section. It also shows a history of your orders and fills.

BitMEX Trading Dashboard — Order Types

Now that you are familiar with how to navigate BitMEX’s platform, let’s move on to the various order types, placing an order, and get to the actual trading proper! Click on the image below to view it in full size.

Again, for easy reference, We split the 7 available order types into 3 Groups:
A) Market & Limit Orders
B) Stop Orders
C) Take Profit Orders

Let’s go into more detail for each order type below.

A) Market & Limit Orders

Market and Limit orders are the most common types of orders used by traders to enter into a trade/position. These orders are immediately entered into the order book once opened.

1. Market Order

Straightforward. Buys/sells at the nearest available price.

After clicking Buy or Sell, there will be a confirmation page, where you can adjust your desired leverage for the trade.

2. Limit Order

Next most commonly used order would be the Limit Order, which basically allows you to place a buy/sell at your desired price.

Similarly, there is a confirmation page where you adjust your desired leverage for the trade.

B) Stop Orders

Stop orders, unlike market or limit orders, do not appear on the order book immediately upon opening. These orders are associated with a trigger price, or “Stop Price” in the case of BitMEX, whereby your order is only entered into the order book after the stop price is hit. Stop orders are usually used as “Stop Losses” to get out of a bad trade, but are also extremely effective in buying into breakouts.

3. Stop Market Order

A Stop Market Order is a market order that is triggered (opens) when your stop price is hit.

For example, if today’s BTC price is $7000, and you place a stop market buy order at $7500, your position will not trigger if price trades anywhere below $7499. Once a trade occurs on the market at $7500, your stop market buy order will trigger and a market buy is made.

4. Stop Limit Order

In the same way that a market order differs from a limit order, a Stop Limit Order works in the same way as a Stop Market Order, except with an additional “Limit Price” parameter that is triggered only when your stop price is hit.

Further to the example above, if you enter $7000 as the stop price, and $6500 as the limit price, and when a trade occurs on the market at $7000, a limit order at $6500 will be placed.

Alternatively, if you enter $7000 as the stop price, and $7050 as the limit price, this will act almost like a market buy when your trade is triggered (unless there are not enough sells for your purchase quantity up to the limit price — in which case you need to increase the limit price or simply use a stop market order).

5. Trailing Stop Order

Instead of setting a stop price, a Trailing Stop Order makes use of a “Trail Value” parameter to determine when a market order gets triggered. This “Trail Value” is calculated against the market’s price at which you entered the position.

For example, if BTC price is $7050 and we have an active buy position, and we open a Trailing Stop Order by entering a “Trail Value” of $5, our active buy position will close when price goes to $7000. Whereas if BTC price is $7000, opening the same trailing stop order will close ouractive buy position when price goes to $6995.

C) Take Profit Orders

Take Profit Orders, as the name suggests, enables you to set a target price on an existing open position to close it and “take profit”. This can be done in the form of a market order or limit order.

It simply works in the same way as placing a limit order in the opposite direction of your active position (i.e. placing a limit sell order if you have an active buy position).

See below for a closer look at the Take Profit Market Order and Take Profit Limit Orde

How to Trade Forex with Bitcoin in 2020

Unlike other currencies on the Forex market, Bitcoins are not an actual world currency, in the sense of being produced by a central bank and issued in the form of coins and banknotes. Instead, it is a virtual currency; in fact, it is the world’s first cryptocurrency, and has no physical form, being held entirely electronically instead. While Forex traders have enjoyed participating in the traditional markets for years, the arrival of this new and exciting cryptocurrency has led to a deeper dimension in trading with a range of new possibilities, and interest around this new type of trading is starting to rise. Created as recently as 2008, with the open-source software being released in 2009, Bitcoin has rapidly risen in profile, and is now being offered as a trading instrument by many online Forex brokers.

What are Bitcoins?

Unlike all other currencies, Bitcoins are digital, and are therefore held and created electronically with no one organisation or bank being in control of them. Bitcoins were created by a man using a nickname “Satoshi Nakamoto” (in May 2020 Craig Wright revealed himself as the creator of Bitcoins), a software developer, with the idea of creating a currency that would be completely independent of central authorities, but which could be electronically transferred instantly with only a low transaction fee applied. Bitcoins cannot be devalued, as only 21 million are permitted to ever be produced. However anyone with the right know-how can create Bitcoins, as they are mined using a distributed network of computing power. Transactions are also processed by this network. Each Bitcoin is divided into parts of 100 millionth of a Bitcoin, and these are called “Satoshis”. Although traditional currencies have their basis in precious metals like silver and gold, Bitcoin is different, having its basis in mathematics. Bitcoins are produced using a freely available open-source mathematical formula.

What are the Benefits and Risks of Trading Bitcoins?

Bitcoin trading is becoming more popular due to its many benefits. These include the following:

  • Decentralised currency – There is no central bank changing the valuation of Bitcoin, and therefore the rate of Bitcoins is completely free from any macroeconomic or geopolitical issues or influences.
  • Leverages – The majority of Forex brokers offering Bitcoin as an instrument offer a high leverage of up to 1:1,000, which allows experienced traders to gain greater profits.
  • Free transactions – As Bitcoin transactions are recorded digitally on a public network with no bank or clearing agency involvement, there is usually no transaction fee involved on Bitcoin trades, even when transferring sums globally.
  • Low deposit amounts and trading costs – It is possible to start trading Bitcoin with an amount as small as $25 with certain brokers, and trading costs are kept low to appeal to new clients.
  • High security – There is no need to reveal any personal or bank details when trading in Bitcoin, which allows investors to remain anonymous while maintaining the security of their funds.
  • No global restrictions – When a trader chooses to trade in Bitcoin they can use any broker based anywhere in the world, which is not the case with regular currencies.

There are, however, increased risks associated with Forex trading in Bitcoin:

  • Volatility – Historically, there has always been high volatility in Bitcoin prices, and as there is no regulation, brokers can use this to their own advantage at the expense of clients. As prices can swing wildly by up to a dollar or more per day, there is also an increased chance of extreme losses for inexperienced traders.
  • Theft and software problems – Bitcoins are increasingly becoming the target of cyber-criminals, and any Bitcoin account is at risk of being hacked. There have also been cases where entire Bitcoin accounts have been lost due to computer hardware or software failures.
  • Leverage – While the high leverage available on Bitcoin trading is appealing to an experienced investor, it can be very risky for a newbie who may underestimate the potential losses.

What Affects the Price of Bitcoin?

As with any currency, there are several factors that impact on the value of Bitcoins. These include the following:

  • Supply and demand – As there is a limit of 21 million Bitcoins set over a century, and around half of that amount has been mined so far, there are cycles of great interest among the public in this currency, so when demand stays high, Bitcoin prices are dramatically increased.
  • Banking blockades – When one of the traditional banks decides to block a specific organisation or business, they are still able to receive and send payments in Bitcoins, thus increasing its value.
  • Traditional currency issues – If one of the traditional currencies is facing a crisis such as a banking crash, Bitcoin comes to the fore since it is not controlled by any single organisation or central bank.
  • Market manipulation
  • Regulation and government bans of Bitcoins – If a country decides to ban the use of this cryptocurrency, its value decreases.
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