Education - Understanding Bitcoin
Learn about Bitcoin and how to trade them with Rockfort Markets
What exactly is Bitcoin?
Bitcoin uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by a network of peers. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part. You can trade bitcoin as a CFD from your Rockfort Markets MT4 trading account. Or take a position with popular indices, metals and commodities.
What Affects Bitcoin’s Volatility?
It is safe to say Bitcoin is a fairly volatile product to trade. Remember volatility can be your friend in a CFD market as long as you apply sound risk management and money management. According to Forbes, Bitcoin gained popularity back in 2013 with some exchanges leading market movements by up to 20%. Itr was understood many retail traders would move back and forth between the border of China, moving from Hong Kong into Shenzhen and back again making a profit from front running the market selling bitcoin using their mobile phones on Chinese Exchanges, withdrawing real money through a bank account and buying back bitcoin on the Hong Kong side where prices were more aligned globally.
BTC displayed huge momentum that can be viewed if you zoom out your weekly charts. At the start of 2017 Bitcoin was trading at approximately USD $1,500 and by the end of the year it reached a high of approximately USD $28,000. Safe to say trading Bitcoin has yielded many excellent opportunities for traders since it’s inception into the market.
How to Trade Bitcoin CFDs
Trading Bitcoin CFDs is probably not much different from trading any other currency pair, commodity, or CFD showing a strong trend. The beauty of trading lies in its diversity, and through price action studies, traders should be able to make profits that make them financially independent and stable. Bitcoin CFD traders should be focused on:
- Follow the trend (uptrend until proven otherwise);
- Proper risk management;
- Focus on the major trading sessions
When speculating on Bitcoin, looking to buy a dip in the market is often seen as the smartest move. Seeking opportunities when the market will dip and following the trend until this move or trend begins to weaken. Finding these entries and exits can produce excellent returns on your trading investment.
Good risk management is of paramount importance in the world of trading and when applied correctly in strong markets with a lot of volatility can safeguard you and your trading capital.
When trading Bitcoin it makes sense to follow the major trading sessions as these sessions will provide the highest volatility and present good trading oppotunities in BTCUSD.
|YOU DECIDE TO TRADE LONG ON BTC/USD|
|BTCUSD Price: The price of BTC CFD against the USD is 6930/6980|
|OPENING YOUR TRADE|
|Trade Size: You decide to buy 2 contracts.|
|Value: Value of your position is USD $13,960 (6980*2)|
|Margin Required: With a maximum leverage of 1:2, the required margin to open this position is $6,980 (13960 / 2).|
|CLOSING YOUR TRADE|
|2 weeks later, the price of Bitcoin CFD has increased to 7320/7370 and you decide to close your trade. You make a profit selling your 2 contracts at USD $7,320|
|CALCULATING YOUR PROFIT|
Opening Price: 6980*2 = USD $13,960.00
Closing Price: 7320*2 = USD $14,640.00
Gross Profit on Trade USD $14,640.00 - $13,960.00 = $680