So, you want to trade Bitcoin? You may be a longtime trader looking to diversify your portfolio with cryptocurrency. Perhaps you simply want a piece of that Bitcoin pie everyone is talking about. Either way, you will need to find a decent Bitcoin forex broker.
Bitcoin is a digital currency that enables instant payments between users without going through a central bank. Created in 2008, this digital coin or ‘cryptocurrency’ has sent shockwaves through the financial markets ever since. Today, there are many other crypto coins or ‘altcoins’ but Bitcoin remains the big player.
What are the best Bitcoin forex brokers?
Investing in Bitcoin before 2012 was once a complicated process involving mining or early wallets known as ‘Faucets’ and ‘BitInstant.’ Now, buying and selling Bitcoins has never been easier.
Many forex brokers are now offering cryptocurrency trading. This means that alongside trading forex, stocks and traditional commodities, you can add Bitcoin to your portfolio. Why use an online broker when you can simply buy and sell Bitcoins directly through a cryptocurrency exchange?
That is a good question, and it is true there are many crypto-exchanges where you can open an account and store or exchange Bitcoin and other coins in your ‘wallet’. What these exchanges fail to provide however, are the multitude of features and often years of trading experience offered by online brokers. Also, some established stockbrokers let you trade forex with Bitcoin, and diversify your portfolio with more than just cryptocurrencies.
Trading With High leverage
Many traders are attracted to buying and selling cryptocurrencies like Bitcoin because this is a highly volatile market. In other words, prices are likely to change quickly and often. If you buy and sell in a volatile market, this can lead to a big profit (or loss!). Not all traders will have the necessary capital to make the investments they want however, and this is where leverage comes in.
Leverage in trading
Leverage is essentially magnifying a small amount of your own money with borrowed capital from your broker. Like a lever, this will allow you to control something big (a large investment) with something small (your own capital). Many forex brokers will offer leverage to their clients. This means you can control your stocks, indices or bitcoin investments with much greater potential returns.
Say for example you have $100 but you want to control a $10,000 position. You use your own money to borrow the rest from your broker, meaning your leverage ratio is 100:1. If your investment rises by $500 the new value of the position will be $10,500. Your own capital was just $100. Closing the position with a profit of $500 would mean that the return on the investment is 500%. That’s when leverage pays off!
Remember however that leverage magnifies your losses as well as your profits. Beginner traders would be well advised to avoid excessive leverage or at least use lower ratios (for example 5:1 or 10:1).
Make the right choice
Choosing the right broker can be a daunting task and will depend on your unique set requirements. In many countries, leveraged trading is regulated by the government. The margins and ratios on offer to you will therefore depend on where you are located. Ease-of-use, account options and the portfolio available are other essential factors to weigh when choosing your online Bitcoin broker.
If you want to do more than simply buy and sell Bitcoin, look for a forex broker that lets you invest in more than crypto. Brokers like TradeOr let you trade stocks and shares, and other equities as well as Bitcoin. You can also trade CFD (contracts for difference) and speculate on price differences without needing to purchase any underlying assets. Compare leverage options too, and make sure your broker will cater to your financial needs.