How Bitcoin Trading Works – A Practical Beginner’s Guide

Bitcoin trading is a way of buying and selling this cryptocurrency in exchange for other currencies or digital assets. Companies and individuals can trade Bitcoin through online exchange platforms, with the help of brokers, or directly from individuals via peer-to-peer (P2P) transactions. Spot trading involves buying or selling the cryptocurrency directly on an exchange, like the The idea behind trading is to make profits by taking advantage of price discrepancies between different markets. 

While this may sound straightforward, some people need help venturing into the crypto trading sector. That’s because the market is highly volatile and requires knowledge and experience to trade Bitcoin properly. 

Why Do People Trade Bitcoin? 

People trade Bitcoin for several reasons. The primary motivation is to profit by taking advantage of price differences between different markets. For instance, Bitcoin prices may be higher in one market and lower in another. A trader can reap profits from the price difference by trading Bitcoin on these two markets. 

Other motivations include: 

  • Speculation. 
  • Hedging risk (reducing one’s exposure to fluctuations in the cryptocurrency market). 
  • Simply using it as an alternate asset class. 

Whatever the reason for wanting to get involved in Bitcoin trading, it is crucial to understand the market before you start getting involved. 

Types of Bitcoin Trading 

When it comes to Bitcoin trading, there are two main types: spot trading and derivatives trading. On the other hand, Bitcoin derivatives allow traders to speculate on its price without owning the asset itself. 

  • Spot Trading: Spot trading is a popular form of Bitcoin trading, where you buy or sell Bitcoins for fiat currencies on exchanges. This type of trading takes advantage of price discrepancies between different crypto exchanges to make profits. 
  • Derivatives Trading: Derivatives trading involves speculating on the price of Bitcoin without actually owning it. This form of trading is popular among experienced traders as they can take advantage of the high volatility in the market and leverage their positions by using contracts like futures, options, and CFDs. 

You can choose how to trade Bitcoin depending on the approach that works best for you. Also, note that people implement different strategies, such as day trading, scalping, and dollar-cost averaging. Therefore, research various Bitcoin trading strategies to choose what works best. 

How to Get Started 

If you’re new to Bitcoin trading, there are several steps you need to take before starting: 

  • Learn about Bitcoin and understand how it works: Begin your research with our beginner’s guide. 
  • Understand different types of trading strategies: Keep learning about different types of strategies for spot and derivatives markets. 
  • Choose a reliable exchange: Read user reviews and look for a regulated exchange that provides security features. 
  • Sign up with the chosen platform: Create an account and verify your identity before you can start placing orders. 
  • Fund your trading account: Deposit funds into your trading account so you have enough money to start trading. 
  • Place orders and take profits: Open long or short positions on Bitcoin, set stop losses, and manage risk effectively. 

Always learn as you proceed with your Bitcoin trading journey. Also, start trading Bitcoin with an amount you can lose, and your life goes on as if nothing happened. 


Bitcoin trading is a great way to capitalise on price movements and profit from the volatile cryptocurrency market. Anyone can become a successful trader with knowledge, patience, and practice. Investing in Bitcoin should always be coupled with research; understanding how the cryptocurrency works and what makes price movements can help traders make informed decisions, thus minimising risks.