How to Trade Bitcoin Gold In 2021
As cryptocurrencies become more and more relevant in the modern world, prices of Bitcoin Gold (BTG) and other digital currencies have seen a tremendous increase during the last few months. The prices are also driven by the investment activities as both new and experienced traders are now interested in trading cryptocurrencies looking to buy at a low price and sell high.
This guide will explain how to trade Bitcoin Gold so you are in a better position to make informed decisions. You'll learn about basic and technical analyses, predicting future price and minimising your financial risk when trading.
Table of Contents
What is Bitcoin Gold Trading and how is It Different from a Standard Purchase?
If you are looking to trade Bitcoin Gold, the first thing you need to know is that investment and trading are two different strategies to make money. Investment is more long-term where you buy BTG coins and hold onto them for a while until the price is high enough to sell. That's not the case with trading which enables you to speculate on BTG price movements through derivatives such as futures and options. You don't have to buy and own the cryptocurrency to capitalise on price fluctuations.
Three types of derivative contracts are widely used for BTG trading and these are:
- CFDs—Contracts for Difference, which are commonly known as CFDs, are contracts that entitle you to the principal you invest in Bitcoin Gold plus the profits and losses you make on your position when it is closed. If the price responds according to your prediction, you make a profit, otherwise, you have to settle for a loss.
- Futures—These are derivative contracts that obligate the trader to close their position on a specific date. If BTG price moves according to their expectation, they make a profit. If it doesn't move according to their expectations, they've to bear losses.
- Options—The trader has an 'option' to execute their order but they are not obligated to do so. If the price increases or decreases according to their prediction, they can close their order and take profits. Otherwise, they can choose not to close the position.
One of the major benefits of trading derivatives is that you don't have to deal with the issues associated with buying and owning Bitcoin Gold. You neither need a cryptocurrency wallet nor have to worry about the security of your coins. Trading allows you to make money in a simple and more convenient manner.
When you select a broker, ensure that it's not only registered but complies with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. This helps you avoid any scams or frauds along with minimising your financial risk. Keep in mind that the type of derivatives and associated features depend on the country you're in and your selected broker is registered in.
There are many traders who believe that copy trading will yield consistent results so they mirror positions opened by high-profile traders. That's not a sound strategy. Remember that prominent trader's trade in high volumes and hedge their positions. Their transaction costs also make for a very small fraction of their total investment. That's why their risk is low and they can absorb losses. This is usually not the case for a new trader.
Where Can I Trade Bitcoin Gold?
For your convenience, we thoroughly reviewed some of the most popular trading exchanges and brokers taking a multitude of factors into account and here are our shortlisted Bitcoin Gold trading platforms below.
Broker services offer Bitcoin Gold trading allowing you to buy at a low price and sell high to make a profit. One thing that you need to be aware of is that when you trade through a cryptocurrency broker, you aren't actually buying BTG. What you're buying is a contract that gives you the right to the capital you've invested along with any profits or losses you make when the position is terminated or closed. Most crypto brokers offer derivatives for their users.
Benefits of Using a Broker to Trade Bitcoin Gold
Trading with brokers comes with many advantages as you don't have to buy and hold Bitcoin Gold. It means that you don't have to be concerned about the security and managing a BTG wallet. You can earn in the short-term and also increase the profitability of your trades through leveraged trading. You can start your trading journey with as little as $100. Brokers are also registered and comply with AML and KYC regulations to provide you with a safe and secure trading environment. One more advantage is the presence of seasoned traders on the platform which can help you learn and copy trades through social trading.
When exchanges were created in the beginning, they only supported buying and selling Bitcoin Gold and other cryptocurrencies. Because of the trading popularity of cryptocurrencies in the last few years, almost every crypto exchange today now offers derivatives to its users. That's why if you already have an account on a top exchange like Coinbase, you don't need to sign up for a brokerage service. Many popular exchanges like Binance, OKex, Bitmex and Huobi offer derivatives for their users. Exchanges also facilitate leveraged trading which allows you to invest more capital than you have in your account.
Benefits of Using an Exchange to Trade Bitcoin Gold
When it comes to features and versatility, exchanges offer more advantages as compared to brokers. You have access to a wider range of cryptocurrencies including niche coins that you won't find on a brokerage website. You also have the option to withdraw your BTG coins whenever you want and the platform interface is more intuitive and user-friendly. On a crypto exchange, you can also take high risk through leveraged positions.
Our Step-by-Step Guide on Bitcoin Gold Trading
To make your BTG trading process much easier, we have created a summary of key points that you should be aware of.
1. Combine Fundamental and Technical Analysis
There are two different types of analysis you need to master. The first one is a basic or qualitative analysis and the second is technical or quantitative analysis. Let's discuss what basic analysis entails.
- News—Being one of the most popular cryptocurrencies, there are numerous factors that can affect BTG price. As a BTG trader, you have to ensure that you are keeping up with the Bitcoin Gold related news, developments, and updates. One more aspect that you need to cover is the opinions and analyses of industry gurus who have proven to be right in the past.
- Supply and Demand—Another key factor that can drive the price of Bitcoin Gold or any other cryptocurrency is demand and supply dynamics. Just like Bitcoin, Bitcoin Gold also has a maximum limit of 21 million coins out of which more than 17 million have been mined and are in circulation. Any substantial increase or decrease in that quantity can impact the price accordingly.
- Follow the General Rule of Economics—When the demand for BTG increases, the price will follow and surge. On the other hand, if the supply of BTG increases, the price will decline.
The basic analysis gives you the big picture but you also need to take technical analysis into account which includes crunching numbers and studying stats, charts and graphs. This enables you to make evidence-oriented trading decisions that have a higher chance of profitability. While there are hundreds of technical indicators, some of the most critical and popular ones are discussed below:
- Moving Averages—This indicator is calculated by taking historical BTG prices at regular intervals into account. It's called moving average because the indicator is constantly changing depending on the performance of BTG price. Moving average enables traders to find out how BTG price moves and use that information to make future trading decisions.
- Relative Strength Index—Using overbought and oversold indications, the relative strength index enables traders to find out what the market sentiment is about BTG. If BTG price is witnessing an increase with an overbought signal, it means that price might take a hit. On the other hand, if BTG price witnesses a decline with an oversold signal, it means that price might climb.
- Moving Average Convergence Divergence—This particular indicator determines the difference between a 12 and 26-period exponential moving average, usually known as EMA. It is known as Moving Average Convergence Divergence (MACD) which signifies when the traders are expected to buy Bitcoin Gold.
2. Choosing a Trading Strategy
Here are some of the most popular strategies you can use according to your trading goals.
- HODL: The incorrect spelling of 'hold', HODL is a long-term investment strategy where you buy Bitcoin Gold and secure the coins in your wallet until the price has reached a point where you can make substantial profits. This may take from a few months to a few years.
- Day Trading: This is when the traders use BTG token's price volatility for speculation using derivatives such as CFDs, Futures and Options. Due to constant increase and decrease in prices, BTG opens up a lot of opportunities to place bets. The trades last for a day.
- Swing Trading: This is exactly like day trading except for trades last more than a day. You have to trust your basic and technical analyses to engage in swing trading.
- Hedging: This trading strategy is used to minimise your financial risk. You open a supported position against your original one so you can sell off your BTG tokens if the price doesn't move according to your prediction.
- Scalping: In scalping, the trades generally last from few seconds to a few minutes. You don't make a lot of profit per trade but you can make a lot of trades throughout the day which minimises your overall risk.
When we talk about trading strategies, there are several practices that you can use such as copy trading and news trading. Each trading strategy comes with its own advantages and disadvantages. At the end of the day, you've to make the final call.
3. Select an Appropriate Platform for your Needs
The first decision that you need to make is whether to choose a dedicated broker or a cryptocurrency exchange. With a broker, you get a more trading-focused platform, the ability to trade in bigger volumes, and more security and transparency when it comes to your funds' management. On the other hand, crypto exchanges offer a more diverse range of digital currencies, the ability to take higher risks through leveraged trading, and are more versatile. Just ensure that whatever way you go, the platform isn't only registered but complies with regional regulations.
Trading platforms that are either unregistered or don't comply with regulations are susceptible to being shut down and they are also more prone to illicit and fraudulent activities.
4. Setting Up Your Account
Once you've chosen your platform, sign up and verify your account through email. You'll also need to verify your identity by providing a government-issued ID. This is done to ensure compliance with KYC and AML regulations. After the verification process, you will be allowed to deposit your funds using digital currency or fiat money subject to the platform you are on. All you need to do is go to the platform's account wallet and choose the right payment mode.
5. Prepare your Trading Position
Once you have set up your account and deposited your funds, you can begin trading BTG by clicking on the 'Trade' button. Here, you will see various types of UIs on different platforms but there will be some common elements including book order, buy and sell, etc.
Below are some examples of interfaces:
We will now discuss some of the terms related to trading in detail below.
Short or Long Positions?
You open a long position when you believe that the price of BTG is going to increase. You buy at a low price and sell high. On the other hand, you open a short position when you believe that the price of BTG is going to decrease. You buy at a high price and sell low. This is also called shorting and can be quite risky as you stand to lose a lot of money. That's why shorting should always be carried out with risk minimisation.
Limit or Market Order
Any position that's opened using the BTG token's market value is referred to as a market order. You don't set the price and only see buy and sell options. If you want to set the price, limit order enables you to do so. You've to provide the price at which you want to initiate an order along with the number of BTG coins you want. Market orders can be fulfilled right away but limit orders may need time until the market reaches your desired price.
Trade Position Amount and Leverage
The total sum you put in trade is referred to as the trade position amount. You have the option to improve your returns on your trade position amount through leveraged trading which is offered by brokers and exchanges in terms of ratios. For example, if you invest $1,000 with leverage of 1:10, your profits or losses will be calculated as if you've invested $10,000.
Risk Management: How to Decide the Right Stop-Loss and Take Profit values for Your Bitcoin Gold Trade
The stop-loss order allows you to minimise your risk when the market doesn't perform according to your prediction. To use a stop-loss order, you have to specify two values including the stop value at which your position initiates and the limit at which your position is automatically terminated.
Review and Execute Your Bitcoin Gold Order
Make it your habit to check all the values and features before you initiate an order or open a position. Human error can prove to be highly risky when it comes to trading, especially when you've leveraged your position.
Close Your Trade for Profits or Limit your Losses
If you have done the comprehensive technical and fundamental analysis, you are more likely to make financial gains. You can close your order yourself or use the take-profit feature which terminates the position automatically when the specified price is reached. Using take-profit along with stop-loss can enable you to minimise your trading risk.
There are many other factors that can impact your decision related to platform selection including security history of the website, transaction costs including deposit and withdrawal fee, visual insights and data provided by the platform.
Other factors that might come into play include the latest cryptocurrency news, new legislation or regulations, mainstream acceptance, increased supply or demand etc. You need to keep all of these factors under consideration as they can directly impact your trades.
Frequently Asked Questions
More than 85% of BTG have already been mined and the reward to resources ratio has decreased significantly. It means that mining BTG isn't as profitable as it used to be.
If you are trading futures, you are obligated to terminate your order at a predetermined date. On the other hand, options enable you to choose if you want to execute your order or not.
Yes. These regulations help in providing a secure environment for all users.
If you are using an exchange, you don’t necessarily need to convert your BTG tokens into fiat money.