Good evening Steemers,
Today I'd like to share everything I've learnt about bitcoin trading on localbitcoins.
For reference my profile: https://localbitcoins.com/accounts/profile/jaideep1000/
For those of you who don't know, localbitcoins is a website which provides a platform for peer to peer escrow enabled trade.
It only supports bitcoin as of now and you will be exchanging bitcoin for fiat and vice versa.
So basically anyone can setup an account on localbitcoins to buy and sell bitcoins with a wide variety of payment methods.
This includes a bank transfer, cash, mobile wallets, paypal(not recommended), transferwise and anything else you can think of.
A person who wants to buy or sell can either post his own advertisement or start a trade with someone else who has an advertisement active.
If you are running your own ad, then any trades made would cost you a 1% fee collected in bitcoin.
If you are buying or selling by starting a trade with someone through their advert then you do not pay any fees.
So bottom line is that the advertiser pays a 1% fee on the trade amount.
Personally I believe a 1% fee is a little too much. Should be lowered down to 0.5% or so.
At the time of writing this I've paid around 1.2 BTC in fees. (Around 2% of my volume, 1% for buying and 1% for selling)
Anyway getting back to topic.
While trading you need to define a few parameters.
The Spread: This quantity should ideally be measured in percentage. Its the difference between the price at which you buy and the price at which you sell. So if I was buying at a rate of 100 bucks per bitcoin(assume) and selling at 120.
Then my spread would be 20%. or a 20% profit margin.
Now 20% is huge and you will hardly ever sell at such a hiked up price.
Also a 20% spread is effectively about 18% after fees included.
Typically you will operate mostly on a spread of 1-5% for payment methods such as bank transfer.
And can go about 5-10% for some other payment methods like a mobile wallet.
Paypal rates are pretty high because of the chargeback risk involved and so you may see even 15-20% profit margin there.
The kind of payment methods you would like to use : Some payment methods carry high risks of chargeback. Others are very common so the profit margin is lower thanks to all the competition.
Usually the safest is a bank transfer or a cash deal.
Try to stick to irreversible payment methods as bitcoin itself is irreversible in nature.
I usually only deal with bank transfer and a mobile wallet called paytm.
Have done Paypal in the past too buy have had bad experiences. Did a post on that which you can read here:
https://steemit.com/trading/@jaideep1000/my-story-trading-bitcoin-with-paypal-and-why-you-should-shouldn-t-do-it
Security: Perhaps one of the most important factors. Whenever trading with a user who is new or with questionable feedback, it is best to ask him for some identification before you start the trade. So for example, if you are trading through bank transfer, A person could send you funds from a hacked banked account. If this happens then the account receiving the funds might get frozen by law enforcement and then you'll have explaining to do.
Usually whenever I'm trading with a new user, I ask them to send a photo ID and a picture of their bank page that shows the account holder's name.
Third party transfers are a big no no. Keep this in mind.
After setting up an ad, you can start to trade. If you are a new seller then you might have to sell for little to no profit to build up some initial feedback.
These days there is tough competition and very tight margins to work with. It will become harder as bitcoin becomes more popular and more people get into the trading business.
The general process for a trade is(where you are the seller):
A user opens up a trade request through your advert
The trade amount equivalent of bitcoins are transferred to an escrow account and held by the website.
You send the buyer the payment details.
The buyer sends you money and marks payment complete. (The trade does not expire if you mark payment complete)
Once the buyer sends you the money, you check and release the escrow and the trade is finished.
If case of any problems, you can start a dispute and the localbitcoins staff does a good job resolving it.
Now another bad practice that is done by competing sellers(atleast my competition) is that they make new accounts and then start a trade for a large amount and mark payment complete.
This results in your bitcoins being locked up in escrow and you can only get them back in like 6 hours after starting a dispute.
So a good practice is to set a minimum prior trade volume so that new users can't trade with you.
I usually prefer this as new users are a little bit of a pain to work with and it gets rid of the coin lockup problem mentioned earlier.
After you have started doing a few trades smoothly you will receive good feedback and build up repo. As time goes by, more people will use your services if you are fast and complete trades within minutes.
Then once your volume grows, you can lower your profit margin and start selling in bulk and make some serious money.
Also if possible look for options to trade internationally. Some countries have little to no competition.
Also its advisable not to keep to much in bitcoins as if the price ever falls you will lose a good amount. I usually only buy an amount I'm sure I'll be able to sell by the end of the day.
Play safe and follow strict goals and you will make money.
Happy Trading