On this page, we will give you a detailed overview of trading with Bitcoin, the most important and most traded cryptocurrency on the market. If you already know what Bitcoin is, you can skip the first part where we will explain what it is about and how it works and start directly from the third paragraph, where we will discuss how to trade on Bitcoin. If you do not know what Bitcoins are, we recommend that you read more about this cryptocurrency before you start trading on this particular financial instrument.
You can also access the complete cryptocurrency trading guide and the list of the best cryptocurrency trading platforms.
To trade using Bitcoin right away, you can choose one of the trading platforms that offer this opportunity from the platforms in the table below.
What’s a Bitcoin?
When we refer to the singular and capitalized Bitcoin, we refer to the system, technology, and network that structure this electronic currency. When we refer to bitcoins with a lowercase, we refer to the currency.
This distinction is essential because it is important to understand that Bitcoin is a new money transfer system, which varies greatly with those of traditional currencies. In fact, bitcoins are only electronic coins and they don’t physically exist and are not minted. They are not even controlled by a central institution, as is the case with traditional currencies that depend on the decisions of a Central Bank (such as the issuance of new bills for example).
Another big difference between bitcoins and traditional currencies is that transactions are anonymous. Like other cryptocurrencies, it is composed of a bit code that allows you to exchange it and take into account the transactions, but not to duplicate it.
An analogy lies instead in the fact that they are bearer currencies as well as traditional currencies.
Instead of the central body, there is a peer-to-peer structure. Therefore, there can be no devaluations decided by a central bank with the introduction of new money. Instead of a bank, however, there are digital portfolios.
A Tidbit about Bitcoins
If you had bought $100 of bitcoin in 2009 at its birth, in 2017 you would have found yourself to be in possession of $70 million. But you don’t need to bite your hands because very few people believed on it from the very beginning and many people used it without keeping many in their wallets.
Even in recent years, when Bitcoin has become a well-known reality and traded on many levels, including those of online trading, this cryptocurrency has made great strides. In 2013, it was valued at about $500 while in July 2017, it was worth about $2700. If it’s not clear, let’s talk about individual bitcoins.
Buying a bitcoin today costs money, but bitcoins can be bought and traded even in smaller parts, particularly in millesimal fractions.
But before you start to invest in bitcoins as if there were no tomorrow, consider instead that there is a tomorrow and no one knows what will happen. Bitcoins could continue to acquire value and they could stabilize, but also it could lose its value even faster than you can think. It’s not about being optimistic or catastrophic, but rather about never losing sight of the situation and updating yourself by reading specific news about this cryptocurrency.
Trading on Bitcoins
In addition to buying or trading bitcoins through its platform (accessible from its website), there are now several possibilities for those seeking economic results, including trading with bitcoins through online CFD brokers.
CFDs are particular financial instruments that replicate the performance of another financial instrument, which serves as a benchmark. In the case of bitcoin CFDs, CFDs replicate the performance of the bitcoin price.
Note: When trading bitcoin CFDs, you do not buy bitcoins but rather, you trade securities on their value. This means that if you buy a CFD on bitcoin, you will not own any bitcoins. In addition, trading with bitcoin CFDs is intended as a short-term operation, unlike a traditional investment.
This bitcoin CFD allows you to open an upward or downward position and then close it as fitting in order to achieve an economic result. The economic result depends on the price variation that occurs from the moment the position is opened to the moment it closes. The economic result is a profit in case the market moves in the expected way or a loss when it moves contrary to the forecast.
The profits and losses deriving from bitcoin trading will be proportional to the variations of the price intervened.
For more information on CFDs, consult our comprehensive CFD guide.
Examples of Bitcoin Trading on Plus500
Here we will see two examples of bitcoin trading through two well-known platforms which offer two different types of approach to this opportunity.
Let’s start with the Plus500 trading platform. To trade with bitcoin on Plus500 you need to select bitcoin from the “cryptocurrencies” category located in the left column. Once selected, you can open a “Buy” (bullish) or “Sell” (bearish) position.
Once you have decided the type of position to be opened and have clicked the corresponding button, you will have to set the details of the position. These include:
- The amount of bitcoins to trade ( you can reduce the number by using the “-” button and thus go on to trade with a smaller budget). You will always see the amount of the initial margin, i.e. the share you are actually trading for. In fact, you should always consider that CFDs are leveraged so you will use a much smaller amount than a traditional investment. In the case of bitcoins on Plus500, the leverage is 1:2 so with $10 of initial margin, you can trade a total value of $20. The amount on which to trade is the only factor that is not optional in the sense that all other orders that follow below are optional instead.
- Stop Loss: allows you to set the maximum loss that you are willing to suffer for the operation at which point the position will be closed automatically
- Stop Limit: allows you to set the desired profit level that you are willing to settle with and at which point the position will be closed automatically.
- Guaranteed closing: not available for all instruments (with the exception of bitcoins), it’s an order type that allows you to automatically close a position in case of sudden and drastic changes in prices.
- Operational stop: this is an optional and advanced order and can be accessed by clicking “advanced”. Checking this box allows the platform to automatically change the stop loss bar if the market moves in its favor.
- Buy only when the rate is: check this box and enter a value if you want to set the buy or sell (sell only when the rate is) position only if the rate or quote reaches a certain level. Note that if this box is checked and cannot be changed, it means that the market is temporarily closed (during those hours when no trading is done).
Once you have set the desired values, you can click on the “Buy” or “Sell” button to open the position.
The open position will start to affect the available capital immediately.
As soon as the position is opened, your profit/loss account will also start in the negative due to the broker’s spread deduction as compensation for opening a position as a broker and CFD provider.
When the position is closed, it will no longer have any effect on the capital. The maintenance margin will be returned, as will the initial margin (the amount you are exposed to) net of profits and losses.
IQ Option for Buying Bitcoins (CFDs)
Another way to trade with bitcoin is by the famous broker IQ Option, which, in addition to binary options, now offers classic options, digital options and even the ability to buy bitcoin CFDs directly from the market.
But what differentiates IQ Option’s bitcoin CFDs from Plus500’s bitcoin CFDs?
The difference is that with IQ Option, you can buy bitcoins (CFDs) without leverage so the user exposes himself to an amount equal to the quotations, but includes the spread.
To trade bitcoins on IQ Option, just click the “+” button at the top to choose the bitcoin in the Krypto category as shown in the following figure.
Once selected, you can decide the amount to be used for the purchase and then click “buy”. The variations of the quotation will have an effect on the invested capital. You can resell at any time and recover the amount based on the new exchange rate between dollars and bitcoin CFDs o nIQ Option.
Note: There is no leverage in IQ Option. The purchase will be made at the market price reported by the primary broker, Thomson Reuters.
But is it better to buy bitcoins or trade? These are two different things.
Keep in mind that trading is a type of financial activity in which you can trade figures much lower than the actual ones (for example with plus500, that will be 30 times lower because of the leverage of 1:30) but at the same time have an economic result that depends on the effects of the changes that occurred on the asset, which in this case, is the bitcoin.
Also, take into account (indeed, remember) that buying CFDs does not mean buying bitcoins, which instead are available only from the official Bitcoin platform with the same name.