Bitcoin trading can be highly profitable for professional investors as well as beginners. The market is new, highly fragmented and has huge spreads. It is open to arbitrage and margin trading. Thus, it is possible for many people to make money trading bitcoins.
Arbitrage in bitcoins
Arbitrage is basically buying a security or asset like bitcoin in one market and simultaneously selling it in another market at a higher price, making a profit from the temporary difference in prices.
Margin trading in bitcoins
Margin trading is the process in which a trader borrows money from the broker to either buy or sell more stock or bitcoins than that trader would have been able to with his funds. It is like a short-term loan that increases the leverage and buying power of the trader.
Each bitcoin bubble drums up a hype that puts Bitcoin in the news. The media attention makes more people interested in bitcoins, and the price rises until the hype dies down.
Trading in bitcoins
Trading in bitcoins is simple as bitcoin is global currency and easy to send anywhere. Bitcoin has very little barrier to entry. In many cases, even verification is not required for trading in bitcoins. Because of steep increase in bitcoin prices, investors and speculators are attracted to trading to make profits.
There are no official bitcoin exchanges or official bitcoin price. This makes arbitrage trading possible. Unlike other stock trading, bitcoin trading works 24/7.
Bitcoin trading is exciting because of Bitcoin’s wild price movements, its global nature, and 24/7 trading. It is important, however, to understand and remember the risks that come with trading in Bitcoins.
Types of trading
When we enter the trading system, there are two ways we work. One is trading on a day-to-day basis or doing long term investing, where there is buying and then waiting for their value to appreciate over time.
These two strategies can be followed simultaneously by day-to-day trading in some bitcoins while investing in some other bitcoins for long term gains. In both cases, we have to open an account on one of the several crypto-currency exchanges.
Coinbase and trading
One of the best options is to open an account on Coinbase, a safe and reliable crypto currency exchange. On Coinbase, we can buy Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC) currencies either by making a transfer in Euros, or by direct purchase using a credit card. The fee for each transaction is a nominal 4%.
Coinbase is extremely simple and intuitive, and this makes it the perfect choice to start trading in important cryptocurrencies now on the market. mt.gox used to be a popular Japanese exchange in bitcoins till a scam led to its closure.