People are now making money through bitcoin trading. Bitcoin is a relatively new digital currency that enables instant payments to anyone, in South Africa and any location around the world. Bitcoins use peer-to-peer technology to operate with no central authority; managing transactions and issuing money are carried out collectively by the network.

The computational process known as “mining” is how Bitcoins are generated. Although it was created to be a digital currency, Bitcoin’s behaviour is identical to that of the traded commodities like gold or silver. Due to its finite nature, there can only ever be 21 million units, the currency is for all intents and purposes, inflation proof, the exact argument that is put forward by advocates of gold and silver bullion.

The initial pricing was US$ 1.00 = 1,309.03 BTC on 5 October 2009. In the space of just four short years Bitcoin’s value increased by a staggering 18400%.

The interesting thing is that BTC can be traded as a currency. USD/BTC can be traded like every other Forex trading pair, just like EUR/USD or ZAR/USD. However because of the limited amount of Bitcoin that can ever be generated, the Market’s liquidity will be relatively low and therefore very volatile. And as many a South African bitcoin traders know, there are large profits to be made, however, where there are large profits to be made, there may be very large losses to be suffered.

There are now a number of Bitcoin exchanges, the largest being Mt Gox. As awareness and popularity of trading Bitcoin has grown, so has the number of Forex trading platforms that now offer USD/BTC trading as well as options and binary options in the currency. The Forex market has now become aware of Bitcoins and there are some very big players trading in the Dollar/Bitcoin pair. One thing to keep in mind is that as yet there is no way to go short and there is certainly leverage when it comes to trading in the Bitcoin / Dollar market.

A number of Forex traders are trading the new pair but many have pointed out that there are very few alert programmes let alone credible charts, and up till now they have been trying to trade with “Heath Robinson” improvisations.

An introduction to Bitcoins

Bitcoins have been one of the media sensations of recent times in South Africa and around the world. It really is a currency made for the computer age. What Bitcoins are and how they work can be hard to understand for the beginner.

What is Bitcoin?

Bitcoin is a digital currency created in 2001 by Satoshi Nakamoto, This is a pseudonym and no one really knows who Satoshi Nakamoto is or are. The whole thing is based upon open source software and person to person (P2P) networks with no central authority or issuers. Bitcoins are saved on your computer in a wallet file or in a third party wallet. They can be exchanged with anyone that has a Bitcoins address. The database of transactions is spread across a peer to peer network, and use digital signatures to ensure they are only spent once and by the person who owns them.

This digital currency is created by a process called Bitcoin Mining. The CPU power of a computer is used to generate the currency, having said that the CPU power and the amount of electricity used to perform the initial mining operation is huge to say the least, and to mine with just a single personal laptop or desk top is nigh on impossible. The generation of Bitcoins also generates the encryption keys which keeps Bitcoins secure. By generating the encryption the miner is rewarded with Bitcoins for his efforts.

While the transactions are public, the transactions themselves are pseudonymous. There are many people who like to use this new digital currency to maintain their privacy, just for that reason.

There is now a growing list of establishments that accept Bitcoins as either payment or exchange this medium for the traditional currencies such as the US Dollar, Pound Sterling or Euro. As time goes on this list is now growing, with many financial institutions now actively trading Bitcoins in the Forex markets. As the major banks have adopted the Bitcoin as a trading instrument, so opportunities have opened for the private forex traders.

Unlike other Forex currencies, Bitcoins have no central control and therefore cannot be manipulated or controlled by any government or authority. There are also no chargebacks.

There is a limit to how many Bitcoins can be created; the maximum number is set that there can only be 21 million. This limit has been set to avoid the currency becoming worthless from over production like fiat money (paper money).

Trading Bitcoins on the Forex market must be done with care, as trading USD/BTC is very volitile. There are now a number of reputable online Forex trading platforms that do offer the USD/BTC pair. A lot of profit can be made, but in the same breath, large losses can also be realized.

Guide to Bitcoin Trading in South Africa

If you are about to dive into the world of Bitcoin Trading, it’s lucky you found this guide. Are you looking to trade Bitcoin in South Africa, but not sure where to start? Perhaps you’re looking to Day Trade Bitcoin, or just exchange some money into the ever growing digital currency?

After weeks of researching and trying different services, we have created this definite guide to buying, selling and day trading bitcoin in South Africa to point you in the right direction from the get go.

Use this article and save hours of searching through forums and reviews so you can find the best services that won’t rip you off. We honestly believe that Bitcoin could be the future of currency and the ones who benefit are the ones who are early adopters and worst comes to worst we would have a bit of fun day trading it.

When people want to start trading bitcoin, they spend a lot of time trying to find services that would allow them to deposit money and turn that money into Bitcoin. There are many international sites and dodgy looking websites so we did a lot of research prior to getting involved. We’re dealing with cold hard cash here, so it’s best to be safe than sorry.

Steps for starting bitcoin trading

Step 1: Open a Bitcoin Wallet

The first thing you need to do is get yourself a Bitcoin Wallet. We suggest that you open with a broker who accepts bitcoins (like AvaTrade, eToro or Liteforex). Create a wallet, deposit money from a South African Bank account and turn it into Bitcoin in no time at all. After opening your Bitcoin wallet, deposit your first investment and then trading it for Bitcoin.

Next make sure you verify your account with your details, scanned and uploaded to the system. This is standard process for any type of online merchant, don’t freak out these guys are allow traders from South Africa and completely legit.

Step 2: Deposit ZAR/USD/GBP Into the account

Go back to the dashboard and click on Deposit ZAR/USD/GBP. After you have verified create a deposit slip.

Go to your bank’s online platform and transfer the money to the bank details provided by broker. Each deposit slip has a unique reference number that the broker uses to match your deposit. Make sure you use that reference number.

Step 3: Buy Bitcoin

Next step we want to buy some Bitcoin! What we can do here is simply go to quick buy bitcoin. Then place how much you want to buy which can be up to the amount you deposited. Then once the order is confirmed you should have some Bitcoin in your wallet within a few minutes.

How easy was that? Now you can either keep those coins in your wallet, wait for the price to rise and sell them or you can start trading them on a day trading Bitcoin exchange.

Step 4: Day Trade Bitcoin

So let’s say you want to start to read the charts and begin to trade Bitcoin on a much more active basis. This is where the fun begins.

In this case use the broker you signed up as your Bitcoin wallet so you can exchange South African Rand for Bitcoin, but as well as that you also need to use a trading platform that allows you to trade on margin and profit whether the price of Bitcoin goes up or down.

We did our research and at first most traders were using a service called Bitfinix, but it turns out they did not have enough liquidity. So when traders were placing orders they were suffering a thing called slippage. This means that when you enter a trade it would take so long to fill the order that the price would move by the time the order would go through – which meant they have a worse off entry point for the trade.

Apparently everyone was moving over to OKcoin which is largest liquidity provider in China, with one of the fastest trading platforms in the world.

So let’s just recap on what we have done so far, we have opened a Bitcoin wallet with a broker who accepts bitcoins (like AvaTrade, eToro or Liteforex), we’ve deposited money into our account, we then traded it for Bitcoin. We then opened another account with a trusted broker so we can day trade Bitcoin.

Step 5: Learn To Trade

Well, forex trading strategies work quite well, trading breakouts, standard patterns all apply to Bitcoin just as much as to forex.

If you haven’t learnt any strategies before we recommend you check out babypips.com and go through their free training school. This is a fantastic resource for new traders.

Start small, stick to a trading plan and remember never risk more than 1% on your account on one trade. Trading isn’t a get rich quick scheme, it takes patience and determination.