Introduction to Trading Bitcoin



all right hello and welcome everybody pitted hey webinar today we're going to be talking about an introduction to trading Bitcoin this webinar is brought to you by octo FX the award-winning Forex broker offering some of the lowest spreads in the industry so exciting time to be talking about Bitcoin with fresh record highs taking place and without further ado let's jump right into today's presentation a little housekeeping first of all a quick risk disclaimer trading a margin whether it's for a Bitcoin carries a high level of risk and may not be suitable for all investors you should not invest money that you cannot afford to lose secondly a hypothetical trading disclaimer the information in this webinar is provided as general market commentary and does not constitute investment advice in other words we're not giving out specific trade recommendations we will be covering some educational material on strategies but we're not giving specific trade recs let's talk about what we're going to cover today it's a complicated subject there's a lot of misunderstanding around it we're going to talk about what bitcoin actually is will cover its dramatic rise in value you're going to be amazed when you see the yearly chart for a Bitcoin this year later on this presentation we're going to talk about Bitcoin versus fiat currency and go into what fiat currency is and why Bitcoin provides some very appealing advantages over regular fiat currency and we're going to talk about bitcoin CFDs which are what allow you to trade bitcoin with a broker contact contract for differences and then finally we're going to touch on a few different strategies for trading Bitcoin we're going to talk about news a little bit and also technical training strategies so let's jump right in and talk about what is Bitcoin bitcoin is a crypto currency and it was created 2009 by a mysterious software defect in the alias Satoshi Nakamoto the initial idea was to produce a decentralized currency that is a currency that is not overseen by any central bank can't be diluted with money printing and quantitative easing so a decentralized digital currency transferable electronically with minimal transaction fees so again bitcoin is not tied to any one country central bank or external Authority quickly bitcoins are stored in a digital digital wallet which can exist in the cloud or in a personal computer so that's where you keep them they have there's no physical bitcoins where do they come from bitcoins are created through a process called mining where new bitcoins are found by powerful computers solving complex algorithms or mathematical problems there's an in there's a finite number of bitcoins it's only 21 million so there will only ever be 21 million bitcoins currently there's over 16 million bitcoins in circulation so there's still several million that have yet to be mined I was talk for a minute about Bitcoin versus fiat money first of all what is fiat money fiat money is a currency that a government has declared to be legal tender and isn't tied were backed by physical commodity such as gold so the Euro for example will be an example of the currency so Bitcoin has the advantage over fiat money and it can be sent directly from one user to another without any banks or credit cards as an intermediate without the middlemen taking a cut and making it more expensive to send money and more complicated finally most possibly most importantly unlike fiat money bitcoin cannot be printed by central banks so it's value can't be diluted by any external Authority so what you've seen over the past decade is a lot of money printing from the Federal Reserve in the ECB diluting the value of both the US dollar and and the euro and so the value of Bitcoin in a sense is is protected because it's not possible for anyone to dilute this currency in that way which in turn causes inflation and lowers the value of your money as an asset so now let's take a look at the sharp rise in value we've seen in Bitcoin it's been a spectacular year for Bitcoin here we're looking at the daily chart when goes back to about April and we can see that it's trading just over $1,000 at that time so it's in Crete it's actually increased in value this year from under 1000 to over $8,000 just in the space of the year and there's not even up yet this type of move sometimes described as parabolic in the financial markets so what you see is a move that that begins sloping up and as it the up move matures the sharpness of the OP move actually increases so we're looking at a parabolic move in Bitcoin in in 2017 now let's talk a little bit about trading Bitcoin and how you can trade Bitcoin you can trade Bitcoin in a brokerage account at a broker like octa FX and this allows you to speculate on the price movements of Bitcoin whether you think the price is going up or down so you might be bearish on Bitcoin and just think it's a bubble and it's going to go back to zero and you could profit from that idea if you're right by short selling Bitcoin let's talk about the mechanism that the brokerage firms used for this this is done using a bitcoin CFD which stands for contract for difference a CFD is a financial derivative product that allows traders to invest in an asset without actually own the underlying asset so in that sense the Bitcoin CFD is derived from Bitcoin itself so it's a financial derivative product that allows you to trade the asset with actually owning owning the underlying another feature of CFDs is they that they enable you to trade on margin in other words you're effectively able to trade a greater amount then you would be able to trade just on your initial deposit by effectively borrowing money from the broker so for example the the margin available for Bitcoin of the FX is one to five which means that with a thousand dollar deposit you would effectively be able to trade five thousand dollars worth of Bitcoin so you're able to loot use leverage in that sense which can work both for you and against you of course a little bit about more the specifics of trading Bitcoin it's most often quoted against the US dollar using the symbol BTC USD so that probably looks familiar to you forex traders who have familiar with simple eur/usd for example euro USD so if you buy BTC USD you're simultaneously buying Bitcoin and selling the US dollar so this is analogous to eur/usd in the in the forex market you buy your USD and you're simultaneously buying euro and selling dollars another thing to consider getting into the specifics of the contract the tick value the smallest price increment when you're trading Bitcoin is $10 per lock let's talk for a minute about Bitcoin and news bitcoins price can be driven dramatically by news stories and we seen this in the past couple of months for example in September there was news news came out that China was cracking down on ICS initial coin offerings there was initial coin offering springing up like crazy and that Chinese government moved in to to stop this and that had a major downward major downward pressure on Bitcoin so a major sell-off not too much later in late October this big story that the CME the Chicago Mercantile Exchange or CME Group is planning to launch Bitcoin futures which may become available as soon as December so that was huge news for Bitcoin and gave it some legitimacy in in the financial world see any group is the largest commodities exchange in the world they actually control several different exchanges they have the Chicago Mercantile Exchange Chicago Board of Trade among others so that was a major boost gave Bitcoin a lot of credibility that cm II was getting involved and planning to launch Bitcoin futures so in in terms of trading and trading strategy a very astute person following the news in in Bitcoin could trade it just off theory of fundamentals and there's a lot of interesting sources for for news about Bitcoin on the internet but now we're going to talk about technical trading strategies for trading Bitcoin cover three different strategies today first of all we're going to look at a basic moving average crossover strategy we're also going to look at an indicator called on balance volume measures volume coming in and out of an instrument and we're also going to look at correlation trading strategy looking at Bitcoin and aetherium which is another popular cryptocurrency so first of all let's talk about the moving average strategy the moving average strategy is particularly interesting because it works well the strategy works well in trending markets and Bitcoin has been trying to grow nicely in 2017 as we'll see when we pull up the charts we're going to look at kind of a classic moving average strategy it's a moving average crossover strategy that uses the five and ten period EMAS as the exponential moving strategy and looks for the crossover is the entry with the 5 crossing the 10th upwards for a buy signal and crossing downwards for a sell we can also use a filter with this so pull up the 200 period simple moving average and only take bite rates when price is above it and only take sell trades when price is below the 200 period SMA so again using the 200 period simple moving average as a filter and only take by trades that is when the 5 and 10th 5 crosses above the 10 period when prices above the 200 and conversely only take sell signals when the 5 period crosses below the 10 period and price is under the 200 period SMA so a really simple system and it'll become easier to understand when I pull up the chart in a minute and we'll see how nicely Bitcoin has been trending on certain time frames next we look at on balance volume you hear about this one quite a lot quite a lot when people are trading Bitcoin it's a popular indicator and measures positive and negative volume flow it's an old indicator and it's based on the concept that volume precedes price so in other words you see a major spike in volume you may see a reaction a corresponding reaction in price it's a couple of several ways to trade this the two main ones are to look for divergences between on balance volume and price for a possible price reversal or to look for imbalance volume to be trading in line with price and that in its case it would confirm the trend give you another reason to stay in the trend whether it's up or down loss strategy we're going to look at is correlation trading with Bitcoin and etherium the two cryptocurrencies are very highly correlated bitcoin is the larger cryptocurrency so we would expect this usually to be the leading indicator but if news comes out about aetherium something else happens it might be vice-versa a theory might be a leading indicator for Bitcoin I'm not a huge fan of short-term day trading strategies but the correlation trading is is one that I think is interesting on a shorter time frame you can going as low as say the 15-minute chart and with that let's jump over to the charts and talk about these strategies so here we can see our moving average strategy set on the chart we have the 5 and 10 purity in mas we've got the 200 period simple moving average here and we're looking for crossovers to get into the market so for example here we have at a bullish crossover the five period crossing above the ten period and we had a nice fluid up move here price was trading above our filter remember is we want to see price trading above the 200 period simple moving average for a buy signal so that's what we got so we wouldn't have taken the sell signal because we're trading above that's 200 we would only take the sell signal when price is below the 200 here we had another bullish crossover the 5 period crossing above the 10 period and again a nice fluid up move so here we're looking at the four-hour chart I looked at it several different time frames and and it seemed that the market was trending really nicely on the 4-hour chart so that was a time frame that I wanted to focus on for this trend-following moving average strategy strategies I'm talking about today I think a really most interests in struck t'v as sort of a basis a starting point for developing you know a more well developed strategy you could add additional filters on here another classic filter to add on would be to say pull up a an oscillator and look for further confirmation from the oscillator an instance of how you might do that would be to add a rule such as in order to go long you want to see the stochastics under 20 and curving upwards for a buy signal or conversely if you're looking for a sell signal you want to see stochastics above 80 and curving downwards so in this case we got something pretty close to confirmation it was stochastics were curving upwards from about the 20 level so that's a bullish indicator that would have added additional credence to this this buy signal here so there's our moving average strategy and again moving average strategies our best in trending markets and not great in sideways markets because you tend to get just chopped in and out of the market you get in to one trade and then the market turns another way it forced out of it here we're seeing these nice fluid sup so interesting strategy to look at for trading Bitcoin on the 4-hour chart next up I wanted to pull up the on balance volume indicator as we talked about this is a popular indicator for trading Bitcoin so here we say here we're seeing that the obv is trading pretty much in line with the trend and it gives credence to the the continuation of the trend suggests that it's not a fake move the volume is telling you that this is a legitimate up move if you were seeing a divergence if you saw price going up and obv going down that would be an indicator that you might expect a potential trend change in Bitcoin so in this case it's pretty much trading in line with what price is doing in Bitcoin so that's an interesting one to watch also the last strategy that we talked about was a correlation strategy here I used an overlay with Bitcoin and theorem and as we can see we're looking at the daily chart here here I've overlaid etherium it's got a ticker ETH USD and we can see that the they're very closely aligned and very highly correlated so with that in mind we're going to jump over to the last chart here where we have Bitcoin on the 5-minute and aetherium on the 5-minute chart here so if you're if you're a fan of short-term trading day trading strategies that you can look at is trading Bitcoin aetherium on the short-term timeframes and looking for one to lead the other so if you saw a big move in Bitcoin you could expect the corresponding move in aetherium and using the chart side-by-side here is it's a it's an easy way to see that and yeah I could want to practice on your demo account just to kind of get a feel for how these cryptocurrencies trade so with that everyone I'm going to wrap it up today I want to thank everyone very much for coming if you do have any questions please shoot me an email webinar at octa FX and I look forward to seeing you again at our next educational session thanks for joining us

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