Bitcoin Trading Strategies
Bitcoin is a popular online currency used by millions of people currently. Since its inception in 2009, Bitcoin has quickly gained momentum and entered the mainstream with a bang. It is the hottest trading market, hotter than stock trading even— since the blockchain technology allows transactions without a central exchange. Bitcoin is primarily traded for profit, and it is one of the most prominent bitcoin trading strategies which can be used to trade any cryptocurrency available for trading.
How to start bitcoin trading?
Firstly, you will need to open a bitcoin wallet to get started with bitcoin trading. Bitcoin trading strategies can be used for trading bitcoin and other cryptocurrencies, but no matter what strategy you go by, it is possible to lose money. You risked your capital when you chose to trade cryptocurrency since it is trading that we are talking about here. Blockchain technology is a huge step ahead on how to access information. Many companies are developing an application to use Blockchain in their favor. Digital currency is also real currency, and you will have to do your technical analysis like with any other trading instrument.
What is The Free Bitcoin Trading Strategy?
Cryptocurrency is similar to the money you have in your wallet. But unlike fiat money, Bitcoins and other cryptocurrencies do not have a regulatory authority that looks over them. One can send cryptocurrency to another without any intermediary like credit cards or banks. Cryptocurrencies do not need printing to create coins.
When money is printed in abundance, inflation shoots up, downgrading the currency value as a result. With bitcoins, the amount is limited, and it is the same for the majority of cryptocurrencies. Any authority cannot increase the supply, and hence Bitcoin is a hedge against inflation. Now, let’s see what strategy can make us rich in this cryptoverse.
Which Bitcoin trading strategies are used by professionals?
Trading investments brings forth a multitude of emotions that can lead you right to irrational decisions. This makes having a set plan for every investment right at the onset critical.
3 Bitcoin trading strategies that are popular and well-practiced are:
Day trading is making several purchases and sales in one day. These intraday trades aim at taking advantage of small price fluctuations and increasing profits. The goal is to end any given trading day with the holdings going up than what they started with.
Traders can maximize their profit expectations with day trading after gaining enough experience. But one thing is that there is high stress and time factor involved in the strategy, and with numerous individual trades on exchanges, more fees are charged.
Moreover, wild price jumps can occur in small time intervals.
Crypto day trading is similar to day trading in other markets but with magnified risk and reward activity. An effective trading strategy can lead you to riches but only after having a deeper understanding of how to trade crypto, so you avoid losses.
Swing trading increases the time involved. Intraday traders are rarely made, unlike day trading. Swing traders trade multiple cryptocurrencies in one go. They always keep track of possible trends, so they can adjust their coin positions and put them as profitable as possible.
When a swing trader suspects a local high, they change their strategy to shorts. They bet against the price and sell their Bitcoin Holdings.
If they think that Bitcoin is oversold, they go long again and repurchase Bitcoin. It is not necessary to get get the absolute top of the final low in the price each time. It is wise to wait and see and ensure that the price is really low.
This is the traditional investing strategy designed for a long-term horizon. The three important points about investing are:
Apart from the initial research about different cryptocurrencies, you can sit back and wait for the prices to grow.
It is not long before large banks, institutions, and hedge funds start investing in cryptocurrency’s new asset class. Then why risk your capital today trading with hundreds of trades when you can gain high returns.
Bitcoin and trading of other cryptocurrencies are taxed with the income tax rate in Germany. So holding coins appear to be a smarter move. On the other hand, if you are not going to trade full-time, then investing is pretty attractive to supplement income only besides Bitcoin and cryptocurrencies income.
What to Know Before Trading Bitcoin
Selecting a trading platform
To start trading cryptocurrencies, you will have to own some amount of your chosen currency, say Bitcoin, and have a platform to exchange that currency.
Bitcoin is popular among day traders partly because there are many different Bitcoin exchanges out there. Finding your Bitcoin exchange relies on your home country, the preferred mode of payment, fees, limits, liquidity needs, etc.
You need an exchange where you can buy cryptocurrencies of choice and build bitcoin trading strategies. Cryptocurrency exchanges are online platforms that enable buying and trading of digital currencies. They are platforms where you can buy or sell digital currency to another entity for legal tender.
Exchange can be centralized or decentralized. Centralized exchanges need an account provider to trade cryptocurrencies. In comparison, decentralized exchanges do not need to provide personal information for trading.
Pick Your Assets
Cryptocurrencies are entering the mainstream and actively trading them. It is important you choose the right cryptocurrency to trade. You should choose coins with a substantial value and good returns. Bitcoin is the most preferred coin due to its dominance in the industry.
Other popular coins are:
There are thousands of coins you can choose from, do your own research and select one. Factor in their underlying technologies if you plan to hold them long-term since these tokens get their value from the technologies over the long term. Moreover, certain proof of stake coins allows accruing more coins with time without additional costs.
Set a Trading Strategy
One can trade cryptocurrencies in multiple ways; choosing the right strategy then becomes important. Consider risk management and trading frequency when deciding on a trading strategy. But there are various other factors that can affect your chosen trading strategy.
Cryptocurrency bot trading uses automated software that works according to market movements. Many cryptocurrency traders automate their trading by using bots. With bots, you dodge risks that come with a volatile market, such as price swings.
Understand what crypto trading bots do before you start using them. Bots are software applications that track cryptocurrency markets and manage trades automatically for you. They are also referred to as automated trading robots or trading bots.
With a trading bot, you can track the price of cryptocurrencies through specialized software. The bot can maximize profits and cut losses by executing trades on your behalf.
The long straddle, an options trading strategy, enables a trader to buy a call and put option with a similar strike price and expiration. The goal here is to cash in on a movement in the underlying asset. The traders bet on the fluctuation of the underlying asset by more than the amount invested when buying this contract.
Range trading is buying a cryptocurrency at one price and selling it at another. The profit here is determined by the difference in the price at which the transaction was made. The strategy is perfect for traders who are looking to make quick moves on coins with high volatility. Day traders use this activity since they have to execute trades quickly to not lose money while orders fill and sell their digital currency for a higher price.
Technical analysis trading is analyzing the price movement of a cryptocurrency. It can be conducted by looking at past trends, fundamental data, and various technical indicators. The approach looks at all relevant information to figure out the best price action when considering all possible factors affecting cryptocurrency prices and the market in general.
Trading with this approach allows traders to assess the risk they want to take with their investments and the rewards they want.
Scalp trading is a highly volatile trading approach where you buy and sell cryptocurrencies at short-term intervals, mostly for less than a day. Traders usually have multiple positions open simultaneously, with every position open for less than 10 minutes before closing.
Sentiment and News Analysis
Market sentiment for cryptocurrencies depends on current events and news; it is a type of algorithmic trading. Generally, market sentiment is the collective opinions of people about something. Market sentiment can be positive or negative depending on the way people feel about it.
Recently, cryptocurrency price movements have been driven by news, and traders can take this into account while making trading decisions. Traders usually use automated systems when placing trades in an economic downturn through relevant data from a news publication, process the data, and make appropriate trades.
Arbitrage is purchasing cryptocurrencies in one market and selling them at a higher cost in another. The “spread” is the difference between an asset’s buy and sell price. The difference in asset liquidity and trading volume can lead to considerable spread discrepancies. This technique requires substantial time to determine the best spreads.
“Capturing the arb” is taking advantage of the fact that an asset is being sold at lower prices in one market and at higher prices in another. When talking of crypto arbitrage, investors look for opportunities where a digital currency is being sold for a lower price on one exchange to sell it immediately for a higher price on another.
Short sell speculates a decline in a stock or other security’s price. The strategy is meant for experienced traders and investors. However, it can be used as speculation, and investors or portfolio managers can use it as a hedge against the downside risk in that same security or one that is related to it.
The speculation comes with substantial risk and is practiced by advanced traders. Hedging, on the other hand, is a typical transaction where one places an offsetting position to cut risk exposure.
Betting on Bitcoin Volatility
Crypto is wildly volatile being traded currently. You can cash in this volatility by trading in Bitcoin futures. To do this, you buy a call and put an option at the same time. The strike price and expiration date should be similar as well. When exiting, followed by a sharp drop or rise in prices, you will have to sell the call and put option simultaneously.
Here, a position is opened by borrowing shares of a stock or other asset that the investor thinks will drop in value. The investor sells the borrowed shares to buyers who are ready to pay the market price. The trader is betting on the price’s decline, and they can purchase them for a lower cost. The risk here is theoretically unlimited since the price of any asset can rise to any height.
The world is digitalizing, and so is money. There is a very real possibility that Bitcoin or any other significant cryptocurrencies can replace the way we carry out business.
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We make navigating markets easy by giving you accurate information, uniquely designed investment themes, charting tools, and expert commentary.
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Frequently Asked Questions
The portfolio competition is the change in the total value of your portfolio over the month, meaning your dollars, the current value of your crypto holdings, and the value of your open orders. You do not necessarily have to make trades for this competition, so if you are a “hodler,” you can sit it out and hope they rise by the end of the month or when the competition period ends.
Trading competitions depend on the profits you have made on your sell trades. The selling price is compared to the average cost price of your entire holding to calculate the price for that coin. Trading competitions usually require making a minimum number of trades in the period to be eligible and also trading in a minimum number of different coins/pairs. Therefore, the changes in the value of your coins do not affect trading competitions.
With the infinite liquidity at the bid and ask prices, you can trade how much ever you wish to. And since you are making virtual trades, you won’t move the market price as well.
You can win actual money only when you are successful and rank high on the competition tables.
- Globally accepted at the same rates with no risk of depreciation or appreciation.
- Fully secured and controlled by an encrypted form.
- Transparent and neutral administration mode as anyone can check data in real-time.
- Bitcoin has the lowest transactional fees worldwide.
- It has fewer risks and irreversible transactions benefitting merchants.
Make a portfolio with Blockchain Tradein and aim for success.