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There are several ways to trade bitcoin. The most common and popular way to trade is directly from a bitcoin wallet. A wallet is a digital address that allows you to store your bitcoin. There are several trading platforms that allow you to purchase and sell bitcoin directly from your wallet. This compares to trading using contracts for differences which trade the underlying movements of bitcoin. When you trade bitcoin from your wallet, your address points to another address where you are exchanging your bitcoin for a fiat currency or another cryptocurrency.
What is a Bitcoin Wallet?
A Bitcoin wallet is a software program that allows you to store your coins using either private or public keys. The individual keys, which are basically passwords, allow you to send and receive digital coins. They also monitor your balances. If you want to use bitcoin to buy and sell products and services, you will need a bitcoin wallet to perform these functions.
When you want to acquire bitcoin, whether you are using a fiat currency like the dollar or the Euro, you direct the sender to a unique address issued by your bitcoin wallet. Your information is stored in your wallet in the same way you would store your computer files in a USB drive or in the cloud. This information only points to your cash’s location on the blockchain. This blockchain is a lspublic ledger which allows the information to be authenticated. When you spend your bitcoin, you are pointing your wallet to another address.
Using Mobile Wallets
For those actively trading Bitcoins daily, a mobile bitcoin wallet is an essential tool. Your mobile wallet is an application that runs on your smartphone, storing your private keys and allowing you to pay, buy and sell your bitcoin. This also works when you want to pay for items such as goods and services. Additionally, some apps enable users to use their smartphones’ near-field communication feature, which means they can simply tap their phone against the reader, without having to provide any information at all.
When you trade bitcoin, you are buying and selling a digital currency against fiat currencies such as the dollar or euro, versus another cryptocurrency such as Ethereum or Litecoin. The goal of trading bitcoin is to buy it lower than you sell it and generate a profit. Some bitcoin trading platforms provide margin which allows you to short bitcoin and benefit if the price falls. This is like shorting stocks. To be able to short bitcoin, you need to be able to borrow bitcoin, sell it short, and then buy it back to repay your bitcoin loan. Some trading platform provides margin which allows you to leverage your bitcoin and enhance your returns. The trading platform that you use will need access to your bitcoin address. This allows you to trade bitcoin using margin.
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