How to Trade and Sell Bitcoin in 5 Simple Steps

golden bitcoin laying on several coins

Cryptocurrencies exploded in value last year.

Many investors are interested in the untapped markets they represent but aren't sure how to get started investing in them.

Where do you trade and sell Bitcoin? How do you hold it?

Use this introductory guide to learn how to start trading Bitcoin and other cryptocurrencies.

Choose an Exchange

The first step to trading Bitcoin is to choose a cryptocurrency exchange. There are literally hundreds of exchanges, each with different pros and cons. Some of the most important features to consider are:

  • Fees and purchase options
  • Supported coins
  • Security
  • Liquidity

Fees and purchase options are the things most people first look at when they're considering an exchange.

Cryptocurrency exchanges can charge anywhere between 5 percent and 0.1 percent. Finding one with a favorable fee structure can save you a lot of money.

How you can buy cryptocurrency is equally important. If your chosen exchange doesn't allow fiat currency transactions, you'll need to buy your Bitcoin elsewhere and then transfer it to your account.

If you want to get serious about trading cryptocurrency, an exchange with a variety of supported coins is essential. The option to move your funds back and forth between dozens and hundreds of altcoins allows you to make significant gains over time.

If you're just looking to buy a few Bitcoin or Ether and hold them, a more basic exchange will work just fine.

We can't stress enough the importance of security when looking at an exchange. Since cryptocurrencies began to be traded, there have been several major hacks, resulting in the loss of millions of dollars.

At a minimum, the platform should require a secure password, two-factor authentication, offline cold storage of the majority of user funds, and high-quality encryption.

This one probably isn't obvious at first, but it's really important to choose an exchange with good liquidity. There's nothing worse than trying to make a trade and being forced to wait to be paired with a transaction.

Major exchanges like Binance, Coindesk, and KuCoin all have daily trading volumes in the hundreds of millions of dollars.

Create a Wallet

So you know where you want to trade bitcoin. The next step is to create a Bitcoin wallet to safely store your cryptocurrency. Many exchanges will provide you with a wallet as part of their services, but it's not a good idea to leave your Bitcoin there any longer than it takes to make a trade.

This goes back to the security of exchanges. Even the most highly secured systems can get hacked. You don't want to find out you lost thousands of dollars because of someone else's mistakes.

At the very least, you should set up your own wallet. There are hundreds of wallet providers available today. In general, one software wallet provider is just as good as the next.

The most important thing to keep in mind is the security of your private key. This is what actually allows a transaction to be carried out.

If you don't plan on spending or selling your Bitcoin anytime soon, you should store it offline. You can do this the old fashioned way using a 'paper' wallet. This is just a piece of paper, plastic, or metal that has both the public and private keys of a Bitcoin wallet printed on it.

A word of warning -- you must protect this carefully. If lost, it's impossible to recover your Bitcoin.

You can take this one step further and purchase a hardware wallet.

These are small devices that kind of look like USB flash drives. They allow you to transfer your Bitcoin onto them, and then encrypt your wallet for long-term storage. Some of the most popular options include the Ledger Nano S and Trezor wallets.

Buy Bitcoin

Once you've picked out an exchange and created a wallet, it's time to buy your first Bitcoin.

If your chosen exchange accepts fiat transactions, you can go right ahead and fund your wallet that way. If it doesn't, then you'll need to go through another company or buy them directly from an individual.

An exchange like Coindesk is often used in the U.S. because of the ease with which you can set up an account. It allows you to purchase Bitcoin using your credit card or bank account. Once you've got your Bitcoins, you can move them to your personal wallet or trading wallet at a larger exchange.

If you'd prefer to keep your cryptocurrency and invest anonymously, you may use a peer-to-peer exchange or even a Bitcoin ATM.

Trade and Sell Bitcoin

Now that you have a Bitcoin Wallet, have purchased your first coins, and have chosen and funded a cryptocurrency exchange, you're ready to get trading. Here's where trading strategies and other useful tools can really give you an edge.

If you want to make money selling Bitcoin, you're going to need a well-planned trading strategy. You're also going to need to follow through on this strategy with discipline.

A good rule of thumb is to never put more than 5 percent of your total portfolio on a single investment. This prevents you from losing substantial sums from one bad strategy. It also lets you practice your trading methods and develop a system that works for you.

More advanced traders will often use a Bitcoin trading bot. These are based on automated day trading software systems. They allow you to run your strategies 24/7 without having to be physically present.

If you've got a complex strategy that requires large numbers of small trades, a bot can be a great way to carry it out.

Never Invest More Than You Can Afford to Lose

Investing in anything always has risks. If you want to trade and sell Bitcoin, it's important to remember that markets go up and down all the time. Make sure you don't risk more on an investment than you can walk away from.

If you're new to cryptocurrency and investing in general, check out our useful articles on investment basics.

 

Share this article!

Follow us!

Find more helpful articles: