How Does Bitcoin Trading Work?

We have heard about Bitcoin trading and how several investors made tons of money by trading in the cryptocurrency market. But not everyone knows what Bitcoin trading is or how it works. One thing is clear, you can make money trading Bitcoin (but also lose if you don’t apply profitable strategies).

In the next sections, we share with you how Bitcoin trading works and how you could start engaging in trading activities. We will also tell you which are the main differences between the spot market and the derivatives Bitcoin market. In this way, you will get some of the best knowledge that would help understand the Bitcoin market. 

Disclaimer: the information shared by AltSignals and its writers should not be considered financial advice. This is for educational purposes only. We are not responsible for any investment decision you make after reading this post. Never invest more than what you are able to lose. Always contact your professional. financial advisor.

How Does Bitcoin Trading Work?

First of all, Bitcoin trading works by buying and selling BTC in order to profit from price movements in the market. There are different types of trading options such as derivatives or the spot market. 

As you know, the price of Bitcoin fluctuates. One BTC could be worth $30,000 but just some weeks later, it might cost $50,000. Why does Bitcoin price fluctuate? Well, because there is a constant variation in the demand for the virtual currency. Although its supply is relatively stable, the demand fluctuates constantly depending on a wide range of factors. 

Traders have different strategies to trade Bitcoin. They can be scalpers, day traders, position traders or holders. For these investors, the goal is to buy when the asset is traded at lower prices and sell it when BTC moves higher. This price difference would be the profit that the trader makes. 

Is Trading Bitcoin Safe?

Trading Bitcoin is safe as long as you do so in a regulated environment and using recognized cryptocurrency trading platforms. There are several exchanges in the crypto industry that make it possible for users to trade Bitcoin. Thus, trading Bitcoin is considered a safe activity as long as you carry it out properly. 

Despite that, you should know that there are some situations in which Bitcoin trading is not profitable. Thus, if you thought that trading Bitcoin does not have risks, then you were mistaken. Bitcoin trading is a risky activity. For example, you might have purchased BTC for $30,000 and then it falls to $20,000 and stays below $30,000 for several years. This is a possible situation that happened many times in the past. 

You should trade and use stop-loss orders that would reduce your exposure to Bitcoin if it moves to the contrary direction you were expecting it to move to. Additionally, you should never invest more than what you are able to lose. 

Derivatives and Spot Market

There are two types of markets: the spot market and the derivatives market. The spot market is usually the one that most investors use. This market makes it possible for users to buy BTC for fiat currencies or other digital assets and receive the actual BTC. You can think of it as if you were trading currencies in the forex market. You give USD and you receive EUR. 

Instead, Bitcoin derivatives are contracts that derive their price from Bitcoin. However, you are not handling Bitcoin, you are trading contracts. In general, there are different Bitcoin derivatives such as futures, options and perpetual contracts. All of these Bitcoin derivatives would be great tools for expert traders that want to get access to the cryptocurrency market and deploy advanced trading strategies. 

Trading Bitcoin with Signals

Let’s now understand how we could improve our trading strategies by using trading signals. AltSignals is one of the most recognized and popular trading signals providers in the market. This company has been operating for several years and it is offering solutions to investors all over the world. 

Rather than creating your own trading strategies, AltSignals will share with you trading alerts that would tell you to buy or sell BTC at a specific price. These signals are a very useful solution for investors that want to know at which moment to enter the market or when to leave it. 

One of the positive things about AltSignals is that they do not only share spot trading signals but also derivatives. In this way, you get stop-loss orders and take profit levels information as well.