Best Way to Make Profit With Bitcoins

Successfully trading in any market requires serious study, a keen ability for pattern recognition, and deep knowledge of historical trends and evaluation systems. This section covers the basics of trading only.

Surprisingly, applying basic trading principles often produces the largest profits. More sophisticated trading techniques, sometimes called scalping systems, require more effort and yield small profits, if any at all.

We will proceed from the simple mechanics of buying and selling Bitcoins, to decision criteria for when to buy or sell (the essence of trading), all the way through Bitcoin trading robots or trading services.

Trading Bitcoins

We can buy or sell Bitcoins with anyone who is willing to transact with us. For instance, we could buy Bitcoins locally with localBitcoin.com

Here is a sample screen:

Notice a few interesting and critical developments in this market:

1. Online prices are more consistent, as we would expect.
2. Local prices are both over and under the online price.
3. There is as much as a 24% difference between the lowest and highest prices approximately. Ignore the wild $256.20/BTC. Everyone else will.

This is key information for day trading scenarios. We could conceivably buy Bitcoins for $122.96 in lots up to $1000. Then we could sell them all day long for $140.81.

Our profit works out to about 8 x $17 = $136 (We will neglect gas costs, and buying fractional amounts of Bitcoins)

We could also simply buy Bitcoins online and then sell them locally for a small mark-up. This seems to be the simple trading system of choice for the $153 and $147 sellers.

All we need to do is follow the early steps described in the section How to Use Bitcoins. Briefly, we buy Bitcoins using our Dwolla, Coinbase, Blockchain, or other wallet with a custom produced address from a Bitcoin exchange. We can choose MtGox, Bitcoin-24, Bitcoin7, or others.

Then we sign-up for LocalBitcoin. Post our price on their “Sell Bitcoins” section, and we are in the Bitcoin trading business. While this “arbitrage” method of trading can deliver a reasonable profit, there are bigger profits available for more aggressive profit seekers.
Our best opportunity for trading with Bitcoins involves online only trading. We will buy BTC with our national currency through a trading exchange, and then sell BTC for either our own national currency, or another national currency.

Switching currencies may not be allowed on certain exchanges or in certain countries. Switching currencies between the buy side and sell side of our trade can also add significant complication to our trade. A better move is to stick with one national currency unless we are experienced with FOREX trading already.

Here is what a BTC Buy Order with MtGox looks like for a new account that has not been funded yet:

We can enter any amount under “Amount of BTC to BUY” that we have funded. For this new account, that is $0.00. It could be initially as high as $4000 for most new accounts. Some exchanges have no limits, and some have staged limits over time.
The “Price per coin in USD” is set automatically here at 127 and change. It will move up or down as we wait to execute the order. This is extremely important to consider. Speed, timing, and execution all affect the price we pay.

Read More: The Bitcoin Secret Trading Full Giude

After we enter the Amount of BTC to Buy, hit the BUY button, there will be a lag sometimes, but often the order gets executed immediately.

Presto! We are a Bitcoin trader!

Now, for the nuts and bolts of selling Bitcoins, much is the same in terms of fields, with a key difference. When we sell Bitcoins, the exchange takes a slice of the transaction in the form of a reduced selling price. Other exchanges operate differently.

The difference between the BTC Buy price and the BTC Sell price is called the “spread.” It is also sometimes known as the Bid/Ask spread. Bid for what buyers are willing to pay, and Ask for what sellers are willing to sell at.

For this case the BUY/SELL is about $0.40 USD. Not a large spread, amounting to less than 0.5% of the trade.

The good news here is that trading Bitcoins is not administratively expensive. The In/Out costs or round trip are less than 1% of the trade, and often free. Some stock, options, and commodities traders can see In/Out costs between bid/ask, commissions, and exchange fees of closer to 3% or higher.

Trading on other Bitcoin exchanges operates in a similar fashion to MtGox.

This is all manual entry trading, not automated or computerized trading. Manual trading can deliver fantastic returns so long as we time our trades and our directions correctly. That is the focus of the next section - answering the question of up or down and when.

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