Forex market is the only market in the world that gives you the benefit of trading 24 X 7; which means you can attend your office with full concentration and then trade in the free time!
Initially, the currency trading was done using the normal currency with your bank account linked to the broker’s platform to do the transactions. But now forex is changing the way currencies are being traded by adding a new dimension of trading using bitcoins. Without a doubt, it is a lucrative option for those who have collected bitcoins by hard mining.
As I keep on receiving a lot of queries on bitcoin and forex, I have decided to dedicate this piece of writing on how trading is done using Bitcoins:
An Overview of the Standard Forex Trade
As I have already mentioned, a standard forex trade is done using the normal currency that we use in our day to day life. Let’s take an example of how it works. Suppose the selected currency pair to trade in is EUR/USD assuming that the price of €1 = $1.10. Now, you plan to invest €1000, and for this, you will receive $1100.
Suppose the price of EUR/USD changes to 1.20 and you decide to close the position and bag your €1200 giving you a profit of 16.7%.
How is it done Using Bitcoins?
To trade with bitcoins, first of all, you have to search for a broker that provides the facility to trade in cryptocurrency. Not all brokers support the cryptocurrency, so you have to do a little search. Some of the agents who accept bitcoins are Liteforex, eToro, and AvaTrade.
Suppose, the rate for 1 Bitcoin to US Dollar is 2730, and you deposit one bitcoin in the broker’s wallet. Now, you select GBP/USD currency pair to trade at the price of 0.79 ($1 = £0.79); so you will receive £2156.
Now the price of the currency pair changes to 0.82 and you decide to close the position by bagging a profit of £82.6 [£2238 (after price change) – £2156 (before price change)]. So the new amount in dollars would be approx. 2836 making a profit of $106.
Remember we are trading in bitcoins, so there is one more transaction that is to be kept in mind. It is the conversion of dollars to bitcoins. The price of bitcoins is highly volatile, and that is why it may change even when you are trading.
Now, suppose the price of 1 bitcoin further increases to $2880. So when you finally channelize your money back to the wallet, you will receive ($2836/$2880) = 0.984 bitcoins!!!
This means after converting back to bitcoins (after all the hard work of analyzing and transacting in the market), you lost 0.016 bitcoins (1 – 0.984). However, had the price of Bitcoin dropped to 2600, you would have made ($2836/$2600) = 1.013 bitcoins which mean a profit of (0.013 bitcoins). This is basically double trading.
There are many benefits and risks related to currency trading with bitcoins which we will discuss in the later articles.