What do you think about Bitcoin trading?

Bitcoin’s legendary price volatility can excite many investors and traders—especially day traders. But because cryptocurrencies are such a brand-new asset class, even experienced investors may find themselves asking, “How do I trade bitcoin?”

Is Bitcoin Trading Just Like Foreign Currency Exchange?

Bitcoin is a digital currency, so investors may think of it in terms of the foreign currency exchange (forex) market. Forex is far-and-away the world’s largest market, with daily trading volumes around $6.6 trillion, according to the 2019 edition of the Bank for International Settlements’ (BIS) triennial survey.

To exchange Bitcoin, visit: bitcoin to euro

For comparison, the value of global stock trading is estimated at only a few hundred billion dollars per day. Meanwhile, bitcoin's daily trading volume is typically valued at less than $100 billion per day, though it rose slightly above $1 trillion on two days in 2018.

Bitcoin Trading Is More Straightforward Than Forex

But even though bitcoin exchanges talk about “trading pairs” just like forex traders, trading bitcoin is not like a forex in important ways. Mostly, those ways have to do with the fact that bitcoin was invented in 2008, not centuries ago like most forex-traded currencies.

Consequently, bitcoin trading is simpler and more straightforward than forex. Another key difference is that the IRS treats bitcoin as property, not currency, for tax purposes, so the tax consequences of bitcoin trading may be different from trading fiat currencies.

Trading Bitcoin Is More Like Buying Assets

So, today, it’s better to think of trading bitcoin (BTC) more simply: it’s like buying an asset, watching its price rise or fall, and choosing to hold or sell it at a later time. If you’re familiar with forex trading, trading bitcoin is most like “spot” trading a currency pair.

In addition to these differences, experts like Investopedia recommend trading bitcoin at a regulated cryptocurrency exchange, such as Gemini Trust, rather than a traditional forex exchange, because cryptocurrency exchanges understand the market and security requirements better than forex markets.

Why Should I Trade Bitcoin?

Bitcoin attracts investors because its volatility offers the potential for profits. Of course, that volatility also offers the potential for losses just as easily. If you want to trade bitcoin, it’s important to educate yourself about the bitcoin market—and make sure to assess your own risk tolerance.

How Do I Start Trading Bitcoin?

1. Start at a Licensed Exchange

The first step toward trading bitcoin is to create an account at a cryptocurrency exchange. Gemini, for example, is a licensed cryptocurrency exchange and custodian regulated by the New York State Department of Financial Services.

Note: Check out our companion article, “How Can I Buy Bitcoin,” to learn how to set up an account, link it to your bank, transfer funds, and buy your first bitcoin.

2. Choose Your Trading Currency

Once you have an investment account at a digital asset exchange and have funded it with US dollars or another accepted currency, you’re ready to trade. To get started at Gemini for instance, you could buy USD $10 worth or less.

If your account is at Gemini, and you’re logged in via a web user interface, you start trading bitcoin from your homepage screen.

Select bitcoin from the list of various cryptocurrencies available to trade, which is shown on the far left side of the homepage.

Two pull-down menus will appear, allowing you to Buy, Sell, or Create an Alert; and set the frequency of the order.

3. Begin the Trading Process

To start trading: - Select buy and once or recurring, type the dollar amount you want to buy into the next box, and click “Review order.” - You’ll see the quantity of BTC you’re purchasing and your fee (full fee schedules are available for web (desktop) and mobile users). - Click “Place order”; you’ll get a “Success!” image along with your transaction details.

At Gemini, besides bitcoin, you can use USD to buy ether (ETH), Zcash (ZEC), litecoin (LTC) and bitcoin cash (BCH). Though bitcoin and bitcoin cash share a history up to their split in 2017, today it’s best to think of BCH simply as another separate cryptocurrency. It trades independently and has its own market price. For example, on one late-2019 trading day, BTC was trading at around $8,400 while BCH traded at about $265.

4. Begin Trading Cryptocurrency Without Dollars

Once you’ve bought your first cryptocurrency, you can begin trading in currency pairs without dollars, if you wish—for example, buying ether or Zcash with bitcoins. To do so, you have to request Gemini’s more advanced ActiveTrader user interface, an upgrade from the basic tier homepage you’ll see when you first log in.

Setting Up Bitcoin Trading Alerts

Gemini’s web exchange homepage or mobile app lets you set up alerts to inform you when the price of bitcoin (or another available cryptocurrency) passes a certain threshold, up or down. You can determine the trading alert threshold by typing in a dollar value above or below the current trading price, or by typing a percentage change (which the system translates into a specific dollar value).

Once your alert is established, you’ll get an email immediately when the price hits or passes the threshold you set. Alerts help you act on particular trading strategies you may choose to pursue.