What if you want to enter positions multiple times a day using a trusted cryptocurrencies trading platform, and need to keep a close eye on the smaller, narrower timeframe charts – the five-minute charts or the one-minute chart for example?
You can do this in the equities market; can you do it in cryptocurrency? Of course, you can.
Let us make use of Coinbase to illustrate the point.
During 2017, in anticipation of market demand for this kind of shorter-term cryptocurrency trading, Coinbase created a platform called GDAX.
GDAX is very similar to the platforms that traders use to buy and sell more traditional financial assets. Think of it as a cross between ETrade’s Active Trader platform (for the equities traders out there) and MetaTrader 4 (for Forex traders).
The platform allows for rapid order filling on purchases and sales of a wide variety of cryptocurrencies (including bitcoin) and also offers a comprehensive charting package that includes all the standard features – different chart types, multiple time frames, on the chart order placement, all that sort of thing.
In the interest of balance, it is worth noting that there are many other platforms that also, offer charting facilities similar to that of GDAX, but the latter is quickly becoming the industry standard.
So, how can you gain access to GDAX?
Again, this is a relatively simple process. First, you need to sign up to the platform and open an account. Once you have an account in place, you need to fund your bitcoin wallet with BTC.
Once funded, you are free to open and close positions just as you would with any other financial trading platform.
If you expect the price of bitcoin to rise in relation to Ether, for example, you can go long the BTCETH pair, simultaneously buying bitcoin and selling Ether. When you want to close out the position (so, in an ideal world, once the pair has risen by a certain amount), you sell bitcoin and buy Ether simultaneously, returning to a net flat exposure. The profit you’ve made is calculated by the difference between the amount of bitcoin you paid for the Ether and the amount of bitcoin you received when you subsequently sold the Ether you temporarily held.
Most Cryptocurrency exchanges will offer to buy and sell access to a pretty substantial number of cryptocurrencies. Some will even provide cross-asset pairs, meaning you can trade ICO tokens off against one another.
For now, let’s just stick with bitcoin.
There’s another way to trade bitcoin, however; one that doesn’t necessitate you buying the underlying asset at all.
This is through bitcoin exchanges.
The best way to think of this concept is a sort of hybrid between contracts for difference and forex. It’s similar to CFDs in the sense that you can take a position on the asset in question (in this case, bitcoin) without actually taking ownership of it. It’s like forex in the sense that you take a position based on the fluctuations in valuation between a base and a quote currency and – generally – it’s done through a platform that operates very similar to (or, in many cases, also is) a currency trading platform.
This is why we’re referring to this method of trading bitcoin as doing so through a bitcoin broker. It’s not technically a bitcoin broker that you are going to be using – at least not in the vast majority of cases. Instead, it’s a forex broker that offers bitcoin (as measured against another asset, generally USD but also sometimes other cryptocurrencies) as a CFD.
The mechanics of the trade, of course, are almost identical to those with which you would trade bitcoin using a bitcoin exchange. If you think bitcoin is going to increase in value against the USD, you buy the BTCUSD pair and close out the position when you think it’s done increasing.
Just as with the bitcoin exchange platforms, the most used method of tracking the price fluctuations is through the use of price charts, which practically every forex broker is going to offer you free of charge.
So, if the process is so similar, why would anyone use a forex brokerage to trade bitcoin as opposed to a bitcoin exchange?
Well, because through a forex brokerage you can very quickly go short on bitcoin.
Until recently, going short on bitcoin was a pretty tedious process. Sure, you could sell once you though the price was done increasing, converting your capital to fiat and then buying bitcoin once you believed price had corrected to an optimal point.
Through this just described method, however, you’re not actually profiting from the decline. You can visit Rubix on Bitcointalk as well.
If you use a forex broker to short a bitcoin CFD, however, you can profit from downside action. With the help of website builders like Weebly, brokers have a presence online.
With a short sell position through a forex brokerage on a bitcoin pair CFD, you are actively profiting from the volatility. Visit here to find out: https://cryptoexchange2019.wordpress.com/
This is really the only technical distinction between the two types of trading but, for many, it will be enough to justify foregoing the ownership of the underlying asset and opening an account with a forex brokerage that offers access to cryptocurrencies.