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Last update: January 05, 2017

bitcoin trading Tips & bitcoin Trade Exchanges

If you want to start trading bitcoin, generally you can do that on a regular bitcoin exchange.

Most novice traders tend to make it complicted and seek to get overwhelmed by technical analysis indicators. The truth is it is not necessary. Keep it simple. What you really need is a bitcoin exchange with high liquidity so that you don’t wait ages for your order to complete.

To get your charts and tools you can always use bitcoinWisdom which plots charts for any major exchange.

What to look for

Regular BTC exchanges good for trading

Shitfinex

Since Bitfinex was hacked no one should want to do business with them anymore.

Since some time ago Bitfinex plots charts from Cryptowat.ch but they were taken off during the rally at the end of May 2016 since they were lagging one hour. Use bitcoinWisdom when you trade.

You can do exchange or margin trades and you have the standard possibility to do market or limit orders. To short bitcoin you can use P2P lending system for margin trading on Bitfinex (read more on that further down). Bitfinex uses the maker-taker system and has very low fees.

You cannot open buy and sell position simultaneously on the same market (for instance, to hedge a short ETHBTC position) - opposite orders get filled from one another. The way to do this hedge is to open positions on CoinBTC and CoinUSD markets. You can use any coin or fiat that you have in your trading account as a collateral to borrow any currency you need.

If you have a margin position on a market that involves USD but you want your profit in a coin, you can use the CLAIM button.

Kraken

Kraken has many trade options (including margin trading), it can hold your fiat balance in USD, EUR and other currencies and it has a recently updated fee schedule (used to be cheaper).

Kraken applies the maker-taker fee system which means you get lower fees when you mostly do limit orders and wait for them to be executed as opposed to market-price instant orders. On bitcoinWisdom you only see their EUR charts since the other markets are not liquid enough yet. Nonetheless, they are there.

The USD market has grown since Jan 2016 after Kraken acquired Coinsetter.

In January 2017 Kraken added Monero trading.

BTC-E

BTC-E has a bit better liquidity for LTCBTC trades. It is a good starting point for bitcoin arbitrage because prices of BTC are generally the lowest here.

Bitstamp

Bitstamp is a large exchange, very liquid. Their tradeview is probably as good as it can get. It only has BTCUSD market, your deposits in other currencies are converted to USD. Fee is 0.25% (it only gets lower for monthly volume of 20K USD and more). As of January ‘16 debit card and prepaid card deposits are possible.

What type of orders you need

Very briefly:

Limit orders. You decide at which price you want to buy, set a limit order and wait until the market gets there. You decide at which price you want to sell, set a limit order and wait until the market gets there.

On Bitstamp you can also set if executed limit order:

If this limit order to buy at $350 gets completed,
then set an order to sell the same amount at $355.
Ledger Wallet protects your bitcoins

Trading bitcoin from the US

If you are from the US you won’t be able to trade on margin and to trade futures on most exchanges due to financial regulations. There should be no problem with spot trading, the issue is really only with leverage and derivatives.

If you still want to trade bitcoin futures or use margin, here are your options:

Shorting bitcoin

Shorting is notoriously known as dangerous. In the basic sense though it is the only way to trade bitcoin and hold bitcoin at the same time.

You can do the most elementary short at any exchange and many people do it without knowing they are shorting.

Dummy numbers

This is shorting because you work with a spike in BTC price and use the volatility to generate more bitcoin.

This kind of shorting is less insane in the way that you are not borrowing to do that. You are working with your own bitcoin only which is also the only thing to risk here - and “loss” still means fiat profit here.

Generally speaking though, bitcoin price moves a lot, taking the fiat instead of waiting to buy back is just impatience. Remember, you are not paying interest for holding this short position - it is your money, you didn’t borrow anything. If the price rises in the meantime it doesn’t matter either. The “short position” is only open in your mind. In the eyes of the exchange, you just sold bitcoin for fiat.

Of course, you can borrow to short. Bitfinex and Kraken make it easier for you to gain more faster with leverage (they also make it easier to lose, though).

bitcoin and technical analysis

So you maybe noticed there are quite some places offering bitcoin technical analysis. A lot of portals do this in form of news, you can get paid signal reports too.

Should you use technical analysis for bitcoin at all?

There is a rule of thumb that most traders who say they only trust their gut are the ones who lose. But then, 99% of day traders lose. Anyway, usually (not regarding bitcoin only) you trust your gut either when you are a beginner who doesn’t know how to use any tools or when you are a top expert who has BTC trade and forex in their blood. You will know which one you are.

On the other hand, you will often see TA (technical analysis) reports going like it’s peaceful now and the indicators show that nothing will happen in the coming week. Six hours later a couple thousand guys in China decide to buy some bitcoin and the rally is on again.

So the best thing you can do is to get a bitcoin ticker for your desktop and simply keep your eye on the price all day.

Some exchanges will send you a text for price spikes (Bitstamp does it if you set it up).

MACD and BBANDS

As for the TA indicators that you get on bitcoinWisdom, the truth is it won’t hurt you to know them. Most people look at MACD which stands for moving average convergence divergence.

Moving Average

A good video by ibankbitcoins:

Moving average is simply an average price over certain number of time windows, repeatedly calculated as the time goes so that it makes a curve.

An average of couple of most recent time windows captures how the price evolves at the moment, an average of many more time windows captures a more general trend.

What MACD indicator shows:

On bitcoinWisdom you can select MACD under Settings > Indicators. It appears under the main chart. The green bars is when the rise is faster than the long term trend would go, red bars for the opposite movement:

Click for larger image

Traders use the MACD indicator as a signal to buy cheap at the start of the rally in order to sell dear later.

Similar thing with MA (moving average) as main indicator: The blue line is the short-term MA, orange one is a long-term MA. At one moment the blue line gets above the orange one and indeed a rise follows:

Click for larger image

Stochastic oscillator

Stochastic is another indicator that uses moving average. Stochastic oscillator has two curves - a line measuring the current market momentum and a moving average of this line. On the chart for stochastic you will see some horizontal lines drawn. When the values drop below 20 the price is too low for the current value of bitcoin. When it jumps up to 100 and then starts heading down the price is peaking too much up and should fall. The crossover also plays a part. (Read it better on Investopedia)

Why this matters? See the image below. It is the typical bitcoin thing, a sudden pump. In the upper part of image you see moving averages of different time lengths and their crossover. You see that the crossover came a bit late. In the bottom part there is the stochastic oscillator. You see there was a buy signal soon enough.

Hence, some use the combo of stochastic and moving averages to determine the buy and sell signals.

Click for larger image

Bollinger Bands

On bitcoinWisdom they are in Main Indicator > BBANDS.

Bollinger bands are used to measure volatility and strength of a trend.

But as you probably know bitcoin is very volatile. Of all indicators, moving averages will probably be of best use to you.

More about bitcoin trading

TIP: Always make notes about all your trades. A good paper notebook with hardcover is best for that. Trust me, one gets lost very easily in how much one bought for which price. Note where you bought how much at which price and write down the order number. If you plan selling later, you will know “which coins” to sell how dear.

Bitfinex BUY 1 x $378.88 CGHTD56 fee $0.4

Learn more about bitcoin trading


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