For a few years now, Bitcoin and other cryptocurrencies have become an attractive tradeable asset amongst investors. The sector's rise in popularity was fuelled by a media frenzy surrounding Bitcoin's surge in value, coming close to the $20,000 mark. Although the price has since fallen, Bitcoin trading remains extremely popular, with an average trading volume of over $18 billion. Taking the First Steps to Trade Bitcoin Before you jump right into trading Bitcoin you should ask yourself why you have chosen to invest in this sector. Cryptocurrencies, in general, are highly volatile, often changing significant value over a short period of time. Whilst this characteristic makes them extremely attractive to Bitcoin day traders, they might not necessarily fit into a low-risk investment strategy. Warren Buffett, one of the most successful investors in the world, has often shared his opinion about trading cryptocurrencies. While Buffett foresees darker times for the sector, many other analysts believe that it is yet too early to understand what lies ahead from cryptocurrencies. Looking back, digital tokens have already proven to be an exciting investment opportunity, both for those who practice trend trading and investors who short Bitcoin. Although to some extent, Bitcoin's value is linked to global events, the decentralised nature of the sector means that it is not bound to any single government or fiat currency. This means that its value fluctuates independently from the dollar or euro, providing investors with an opportunity to truly diversify their portfolios. Alternative markets, such as forex or stocks, are significantly and intrinsically linked to a particular currency, making them more susceptible to regional events. The Importance of Choosing a Good Exchange In order to trade Bitcoin, you need to open an account with a cryptocurrency exchange or trading platform. With literally thousands to choose from, you should seek to only use reputable ones, so as to avoid scams and fraudsters. Choosing amongst reputable ones is also difficult since different ones offer varying functionalities, tools, and fees. The following are a few examples which can cater to different trading requirements. eToro eToro is a reputable and global cryptocurrency exchange and trading platform. It offers users access to a diverse portfolio, including several primary and secondary cryptocurrencies, forex, stocks, and commodities. The platform is mobile-friendly and allows you to utilise a suite of trading tools, historical data, and market analysis. In addition, eToro offers a demo account which you can use to test your strategies without risking any of your funds. If you're a novice trader, you can benefit significantly from eToro's social trading platform. This unique platform lets you copy trades of other users whom you can choose base on their level of past successes. Only real cryptos are available in the US. [cta disclaimer='This ad promotes cryptocurrency within the EU (by eToro Europe Ltd. and eToro UK Ltd.) & USA (by eToro USA LLC); which is highly volatile, unregulated in some EU countries and the UK., no EU consumer protection. Investments are subject to market risk, including the loss of principal.' text='Visit eToro' href='/out/etoro'] CEX.io Through its multiple platforms, CEX.io is another great Bitcoin exchange for both new and experienced traders. CEX's brokerage service allows you to buy Bitcoin easily, using a variety of payment methods and currencies. It's trading platform, meanwhile, provides margin trading and extensive charting tools. Moreover, the platform offers higher than average limits, even if you haven't fully verified your account. CEX is a regulated platform based in the UK and licenced to carry out Money Based Transactions. The signup process is straightforward and by using card payments you can start trading Bitcoin in a matter of minutes. [cta text='Visit CEX.io' href='/out/cex'] Binance Considered to be amongst the largest and best cryptocurrency exchanges in the world, Binance has a long-standing reputation for low fees and high functionality. The exchange gives you access to over 450 different cryptocurrencies and tokens, with a range of tools to trade them effectively. Recently Binance has witnessed several exciting developments, including the introduction of fiat card payments and margin trading. Whilst the exchange is currently unavailable to certain jurisdictions, it plans to launch dedicated platforms shortly. [cta text='Visit Binance' href='/out/binance'] Investing vs Trading The next step to start Bitcoin trading is to understand whether you would like to actually trade the cryptocurrency or invest in it. Although these two terms are often used interchangeably, they have different meanings. In simple terms, investing involves long-term strategies, whereas trading is often a process done in the short-term, sometimes in a matter of minutes or hours. Investments are often associated with significant milestones in a person's life, such as retirement or paying for a child's education. Investment plans normally cover years, and they are generally diversified to reduce the overall risk. Trading takes place a lot quicker, with a position opened in the morning potentially closing by the evening. With high-frequency trading, such as that commonly found in forex trading, positions are opened and closed in a matter of seconds or less. Bitcoin's rise in popularity has led it to perform well for both traders and investors. Bear and bull markets alternate similarly to classic stocks, whilst daily price changes and margin trading allow traders to benefit from even the slightest movement. Do the Research As with any investment, you need to do your own research in order to improve your chances of success. The cryptocurrency industry has its own jargon and characteristics, and although you don't need to be an expert in the field, you should have a basic understanding before you start trading Bitcoin. For starters, you should read up on cryptocurrency guides that can help you understand different aspects of the sector. Even though cryptocurrencies have not been around for very long, with Bitcoin launch just 10 years ago, developments are taking place at a very quick pace. Apart from increased regulation and oversight by national governments, such as with Project Libra, cryptocurrencies are also evolving to meet different needs and challenges. For example, although Bitcoin's main purpose is to make peer to peer payments, Ethereum's main purpose is to create and execute smart contracts. With the introduction of advanced financial instruments, such as Bitcoin Contracts for Difference (CFDs) and Bitcoin Futures, the industry has attracted a whole new generation of traders. This is one of the reasons behind the currency's high trade volume, as well as for its price volatility. In order to do your research, you must stay up to date with the latest cryptocurrency news. The Role of Bitcoin Trading Tools Today there are thousands of different cryptocurrency exchanges and trading platforms which allow you to buy and trade Bitcoin. These volatile markets never stop trading, which makes tracking your portfolio continually a virtually impossible feat. By leaving your investment to chance you risk waking up in the morning to see a sizeable portion of it gone. This is the main reason behind many Bitcoin trading tools. These tools vary in scope, price, accuracy and reliability, with the best ones costing the most. Amongst these tools, you will find trading bots that are able to execute orders on your behalf, by analysing different price movements and other market data. What are Bitcoin Price Drivers? Image source An important ability to successfully trade Bitcoin is being able to understand Bitcoin price drivers. The two most basic drivers are supply and demand. When Satoshi Nakamoto created the Bitcoin protocol, he decided that only 21 million coins will ever be created. Today, there are over 18 million, with 12.5 new ones put into circulation every 10 minutes. However, due to Bitcoin halving, this amount will soon decrease to 6.25 created in the same time period. This decreasing supply of Bitcoin, with the corresponding increase in the cost to mine Bitcoin, should see the price trending upwards. At the same time, however, negative news emerging from the sector can diminish investor confidence, lowering the demand for cryptocurrency. News headlines involving Cryptojacking or other cyberattacks can be particularly damaging to market confidence. Hype cycles are another price driver. These normally start with widespread media attention on particular digital currencies or the entire sector. Such stories attract renewed interest in the sector, creating a hype that jacks prices. Soon after the attention ceases the price returns to its customary level, until the next hype sets it off again. One of the largest and long hype took place towards the end of 2017 and the start of 2018 when Bitcoin's price rose to its highest amount. The hype surrounding Bitcoin at the time led to several other cryptocurrencies rising in value, reaching their highest-ever prices shortly afterwards. Basic Security Techniques Cryptocurrencies, like all digital assets, are prone to cyberattacks and online scams. Many traders flock to the sector without doing their research first, and they are the ones who are most likely to get hacked. Fortunately, there are several ways to protect yourself and your investments. As a first step, you should ensure that all the accounts you hold with cryptocurrency exchanges have two-factor authentication (2FA). This security feature requires users to verify their identity using an additional step, such as entering a code sent to their phone. The few seconds it takes to carry out this extra check is well worth the increased security your account will enjoy. Naturally, you should never divulge passwords or security keys to anyone, not even employees of an exchange. It is also highly recommended that you use different and complex passwords for each of your accounts. Although most exchanges will provide you with a free in-built wallet to store your cryptocurrency, you should consider purchasing a hardware wallet. Although these are not free, they are offline except when you need to transfer funds, which means that they cannot be remotely hacked. Concluding Thoughts Bitcoin trading has proven itself to be a sustainable way to generate returns, but like any investment, it is not without risk. Whist a level of risk is inevitable, especially in such a volatile industry, you can lower your risk exposure by following the tips listed in this guide, along with proven methods explained in other guides in the series. By understanding what moves Bitcoin's price and how to capitalise on these changes you will be well on your way to trading Bitcoin like a pro.