Bitcoin trading made simple

Don't swap your Bitcoins for magic beans – understand the basics of trading with this simple guide.

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Learning to trade Bitcoin successfully can be a powerful way to grow your investment without spending any additional money (i.e. buying more BTC).

However, becoming a successful cryptocurrency trader isn't easy – which is why we've put together this overview of the basics to help you work out whether trading Bitcoin is the right move for you.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade.

Compare Bitcoin exchanges and trading platforms

Name Product Deposit methods Fiat Currencies Cryptocurrencies
CoinSpot Cryptocurrency Exchange
Bank transfer, BPAY, Cash, Cryptocurrency, POLi, PayID
AUD

308
cryptocurrencies

CoinSpot is an Australian exchange that lets you easily buy, sell and trade more than 290 cryptos.
Swyftx Cryptocurrency Exchange
Bank transfer, Credit card, Cryptocurrency, Debit card, Osko, PayID
AUD, NZD

284
cryptocurrencies

Finder Exclusive: Receive $10 BTC on Sign up and Verification.
Buy and sell a wide range of cryptocurrencies at competitive rates on this Australian exchange.
Digital Surge Cryptocurrency Exchange
Bank transfer, Cryptocurrency, POLi, Osko, PayID
AUD

276
cryptocurrencies

Finder Exclusive: New members get $10 bonus after verification. T&Cs apply.
An Australian based exchange with a focus on simplicity that allows users to purchase a range of cryptocurrencies with AUD.
Binance Cryptocurrency Exchange
Credit card, Cryptocurrency, Debit card, Osko, PayID
USD, AUD, GBP, CAD, EUR, CNY, RUB, TRY, NGN, UAH & 40+ more

272
cryptocurrencies

Promo: New users earn up to USD 100 in bonus rewards on qualified deposits and trades. Valid till 31 December 2021. T&Cs apply.
Binance is the world’s largest exchange by trading volume. Get started with instant zero fee AUD deposits and withdrawals in Australia, and enjoy low trading fees, a wide selection of cryptocurrencies and 24/7 local customer support.
Independent Reserve Exchange
Cryptocurrency, SWIFT, Osko, PayID, EFT
AUD, NZD, USD

27
cryptocurrencies

Trade AUD and other fiat currencies against a wide range of cryptos at competitive rates.
Cointree Cryptocurrency Exchange
Cash, Cryptocurrency, POLi, PayID, Online banking
AUD

166
cryptocurrencies

Finder Exclusive: New members get $10 bonus after first trade. T&Cs apply.
Buy 160+ cryptocurrencies with fast-growth portfolio insights, and the ability to swap any coin to any other instantly.
Coinstash Cryptocurrency Exchange
Coinstash Cryptocurrency Exchange
Bank transfer, Cryptocurrency, PayID
AUD

123
cryptocurrencies

Buy 120+ different cryptocurrencies using AUD with competitive trading fees in the Australian market.
eToro Cryptocurrency Trading
Bank transfer, Credit card, Debit card, Neteller, PayPal, Online banking, Skrill
EUR, GBP, NZD, USD, AUD, CAD, HKD, SGD, CHF, NOK & 5+ more

27
cryptocurrencies

Disclaimer: Volatile investment product. You should consider whether you can afford to take the high risk of losing your money.
Copy the trades of leading cryptocurrency investors on this unique social investment platform. $50 minimum deposit.
FTX Cryptocurrency Exchange
FTX Cryptocurrency Exchange
Credit card, Wire transfer, Silvergate Exchange Network (SEN), Signature SIGNET
USD,EUR,GBP,AUD,HKD,SGD,TRY,ZAR,CAD,CHF,BRL

69
cryptocurrencies

FTX is an exchange built by traders for traders, with a range of derivatives markets such as options and futures with deep leverage, in addition to standard spot markets. Note: Not available for US customers.
Gate.io Cryptocurrency Exchange
Cryptocurrency
USD, EUR, GBP, HKD, SGD, AUD, CHF, MXN

825
cryptocurrencies

Finder exclusive: New users get $90 worth of Gate.IO points and an airdrop of $5 in GateTokens if trade volume exceeds $100 in their first week. T&Cs apply.
A feature-rich exchange with over 700 tokens including derivatives, yield farming and lending products.
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Compare up to 4 providers

Name Product Payment Methods Supported Fiat Currencies Cryptocurrencies Minimum Deposit
Plus500 Cryptocurrency CFDs
Credit/debit card, Bank transfer, PayPal, Skrill
AUD
BTC,ETH,ADA,LTC,XLM,EOS,NEO,IOTA,ETHBTC,Crypto10,BAB
AUD$200
Disclaimer: CFD Service. Your capital is at risk. Volatile investment product. 80.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Trade CFDs on top cryptos as well as Australian and international shares, indices, commodities and more.
TradeDirect365 Trading Platform
Credit card, Debit card, POLi, BPAY, Bank transfer
AUD, GBP, USD, JPY, EUR, CAD, CHF
BTC, ETH, XRP
None
Disclaimer: Volatile investment product. Most clients lose money trading with this provider.
A trading platform which offers cryptocurrency CFDs where traders speculate on the price movement of cryptocurrencies such as BTC, ETH and XRP.
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Compare up to 4 providers

Trading vs investing

The main difference between a trader and investor is in how they approach making profits. A trader is frequently buying and selling an asset (i.e. BTC) in order to make a profit in the short term, while an investor purchases and HODLs (cryptocurrency slang for holding) the asset for a long period of time to eventually sell for a profit at a later date.

The goal of trading Bitcoin then is to learn how to increase the amount of BTC you own through a cycle of buying low and selling high. This will prevent you from having to spend additional capital to grow your investment.

But keep in mind that the opposite can happen just as easily – your BTC holdings can shrink when trades are unsuccessful and the market moves against you.

Trading is about the law of averages – not every trade has to be a successful one; as long as the value of successful trades outweighs that of the unsuccessful ones over time, then you will still be in profit.

Despite its apparent simplicity, trading is a high-risk activity and requires a thorough amount of learning and preparation. While amateur traders may have a string of successful trades early on, especially in bull markets, profits can easily be lost without suitable planning and discipline.

How to get started trading cryptocurrency

How to trade Bitcoin

Bitcoin functions like most other assets in that it is bought and sold on exchanges where traders can use a range of tools and techniques to turn a profit, just like they would in equities or forex markets.

Below are some of the most popular methods for trading Bitcoin.

Day trading

Day trading is one of the most common approaches to trading. Day traders look for buy and sell opportunities over short timeframes, ranging from hours to sometimes days. Typically a day trader is making small profits over many trades executed over the course of a day, potentially across several markets.

Day trading takes lots of experience to master, as a successful trader will need to use technical analysis and charts in order to time their entry and exit prices. A successful trader will also need to learn to identify losing trades and determine when to close them to prevent further losses.

Trading Bitcoin is a lot more accessible than it once was, thanks to the development of advanced cryptocurrency exchanges which offer products like margin, futures and options to allow traders to go "short" on a trade. Going short, or short selling, means that a trader is betting against the price of Bitcoin and makes a profit when the price drops, instead of only being able to profit off upwards price action. Short selling is a fundamental part of day trading.

Swing trading

Swing trading focuses on identifying when the price is trending towards one extreme and is likely to return in the other direction if given enough time – a reversion to the mean. In terms of Bitcoin, a swing trader is looking for moments when the price is unusually high or low and makes a profit when the price returns to the mean. Let's look at an example of how this works.

Linda has been watching Bitcoin for several weeks now, with the price being range-bound between $11,000 and $12,500. Over one week, the price breaks out to reach a top of $16,000. Given the rapid ascent, Linda suspects that the market will correct and that the price will come back down. As such, she opens a swing trade by selling 1 BTC for $16,000 and placing an order to buy back in at $14,000.

If the price of Bitcoin eventually declines back to $14,000 or less, Linda will have made a successful trade by buying the same amount of BTC for less than what she sold it for, either pocketing the profit as cash or keeping the BTC to grow her trading fund.

Swing trading tends to rely on longer timeframes which makes it a more casual process than day trading. As such, it may be more suited to traders who are still getting a feel for the market or looking for a hobby rather than a full-time commitment.

Scalping

Scalping is a very short and quick trading strategy that aims to take advantage of tiny price movements over very quick timeframes, as short as a few seconds. To make this strategy worthwhile, traders typically make lots of these rapid trades over a day or use leverage to amplify their returns.

One of the ideas behind scalping is that it can be a relatively low-risk strategy, by exposing the trader's account to the market for only a few seconds or minutes at a time, limiting exposure to big price swings.

Bots and automation

An increasingly popular approach to Bitcoin trading involves using a computer program, known as a bot, to do the hard work for you.

Cryptocurrency trading bots explained and compared

Bitcoin trading bots essentially come in two flavours – those with pre-programmed trading strategies, or instead with a toolkit to build your own strategy.

Regardless of which you choose, you will have to have some knowledge about how markets work in order to select the right strategy and maximise the bot's efficiency. Because market conditions are dynamic and change over time, you may need to monitor how your bot operates, despite the bulk of the work being automated.

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Features of Bitcoin trading platforms

Once upon a time the only way to trade Bitcoin was to buy and sell coins using a specialised cryptocurrency exchange.

While this is still the most popular method for retail investors, there are now a range of investment vehicles available for cryptocurrency traders to take advantage of such as CFDs, margin trading and futures contracts.

Knowing the various options available is important as it will affect which trading platform you choose and may influence your trading strategy.

Buying and selling coins

The stock standard method of trading Bitcoin is through buying and selling coins, or fractions of a coin (known as satoshis) on what is called a spot market.

A spot market is where buyers submit how much they want to pay per BTC to the exchange orderbook along with the amount of money they want to spend. Sellers do the same, submitting how much BTC they want to sell and for how much.

Matching prices are then automatically traded by the exchange.

Picture not described

A standard cryptocurrency spot market with the orderbook on the left and price graph in the middle.

Bitcoin CFDs

Contracts for difference, known as CFDs, are a financial tool that allows traders to bet on whether an asset's price goes up or down. It's basically betting whether the price of Bitcoin will go up (go long) or down (go short), and profiting accordingly.

Bitcoin CFDs are rarely found on cryptocurrency exchanges; instead, they are found on more traditional digital trading platforms which usually deal in stocks such as Plus500 or IG markets.

A key thing to know about Bitcoin CFDs is that you never own the underlying BTC. Instead, you are purchasing a contract that exposes you to the value of Bitcoin, with profits settled in fiat currency.

CFD trading platforms tend to include leverage, which allows you to trade with more money than you have through the use of a margin account.

Bitcoin margin trading

Margin trading is a feature available both on cryptocurrency exchanges and traditional trading platforms which allows a trader to amplify their gains or losses by multiplying the purchasing power of their account. This is done through a loan which is borrowed from other users (lenders) or the platform itself, purely for the sake of trading on said platform. As such, this is not like a loan from the bank which can be withdrawn and spent.

The borrowed money is known as leverage and the amount of leverage available is expressed as a multiple, for instance 2x, 5x or 50x.

Margin is a powerful tool for traders as it allows them to earn profits in excess of the limits of their own capital. Keep in mind that margin also amplifies losses.

Using a margin account on a cryptocurrency exchange also enables the trader to go long or short on a trade. This is important because going short, or short selling, gives the trader the ability to make profits in a bear market, by betting the price of Bitcoin will go down. Without a margin account, short selling is not possible on a cryptocurrency exchange as it requires borrowing funds to execute.

Keep in mind that every platform has its own rules for margin accounts and leverage, so it's important to read them thoroughly before placing any trades.

Bitcoin futures contracts

Futures contracts allow traders to speculate on what they think the future price of Bitcoin will be, by a given date. Futures contracts are uncommon on retail exchanges, with only a handful such as Kraken offering them.

Risk management

Risk management is a mixed bag of rules, tools and strategies unique to each trader to help mitigate any losses while trading.

Some effective risk management strategies include:

  • First and foremost, never risk more than you can afford to lose. Bitcoin trading is not a get rich quick scheme, and even experienced traders can lose their account in one go when the market moves against them.
  • Making a plan and sticking to it. If changes need to be made, make them outside of your trading window, not during.
    Start a trading diary and log your trades. This will help you refine your trading strategy over time.
  • Using stop-loss orders. These help prevent further losses by setting a lower limit at which a trade should close if the market moves against you.
  • Setting a take profit limit. Set a profit target for each trade and stick to it. This helps ensure you take a profit instead of letting the trade run and risk losing any gains.
  • Staying unemotional. By creating your own set of risk management strategies and rules, you will help prevent emotion creeping into your trading, which can affect your judgement.
  • When and when not to use margin. Margin is one of the most effective tools in a trader's arsenal; however, it can amplify losses just as much as gains and is not recommended for beginners.

Watch: Risk management 101 with eToro

What to watch out for when trading

Exchange security

Cryptocurrency exchanges vary in terms of security and funds insured. Given you will likely be leaving your coins in your account while you trade, you will want to opt for an exchange with a good security record. Additionally, some exchanges guarantee user funds up to a certain amount in the case of an exchange-wide hack.

Scams

Every time Bitcoin grows in popularity, so do the scams surrounding it. Beware of social media influencers selling trading courses promising guaranteed returns and large profits. If you branch out beyond trading Bitcoin into other cryptocurrencies then you will need to avoid altcoin pump and dump schemes. WhatsApp and Telegram groups can be valuable places to learn more about cryptocurrency, but beware of unsolicited trading "advice" from strangers.

Regulation

Cryptocurrency regulations vary greatly across the globe and laws are constantly being reviewed and adjusted. The cryptocurrency industry in Australia has a solid track record and healthy dialogue with policy makers; however, keep in mind that you are also affected by the laws of whichever country the exchange you use is based in.

Disclaimer: Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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