Bitcoin has been making waves for many years. It is perhaps the most in demand crypto currency out there. Bitcoin traders have been using various trading strategies in order to obtain large fortunes. Some of these strategies work while some fail terribly. If you are new to the cryptocurrency world and are looking to trade or make investments in Bitcoin you may be wondering if there is a particular trading strategy that could help you gain the upper edge. The answer to that is not quite simple as there isn’t just one particular strategy that every trader uses, there are several of them. Each strategy has its own unique aspects and matches a certain situation, meaning that some may come in handy for your particular trading scenario, while some may not. That being said, we will discuss some of the best Bitcoin trading strategies in this article. Following these strategies will improve your chances of gaining an edge and winning a decent fortune through bitcoin trading. Let us get started.
Top Ten Strategies for Bitcoin Trading
As we were discussing earlier, there is no strategy in particular to get you success in bitcoin trading. There are plenty of them out there and you have to choose the best one. It should align with your available capital, risk appetite, and individual goals. Mentioned below are XTRgate Top bitcoin trading strategies that have gained quite a lot of popularity with renowned bitcoin traders. They are as follows:
Breakout Trading Strategy
Breakout bitcoin trading essentially requires the trader to enter the market as quickly as he or she can whenever a trend occurs. In most cases, whenever a trend occurs, the price of bitcoin tends to breakout form its former range. This particular strategy is inspired from the idea of market breaks that occur through resistance level or key support, which ends up causing major volatility.
Therefore, bitcoin traders must be on the lookout for entering the market as points while being mindful of points like these if they want to ride that trend from the beginning to the end.
Often times, whenever a bitcoin trader wants to identify resistance and support levels he or she will utilize volume levels as technical indicators and confirmation signals. As soon as they are able to identify these levels, they are able to start a position. Let us say for instance that a level was identified and you were able to start a position. Let’s say that currently, Bitcoin was trading inside a range that falls somewhere in between eleven thousand to eleven thousand five hundred. The technical analysis that you have at your disposal suggests that as soon as it crosses the latter price point, it is bound to breakout and go into upward trend. Therefore, you have to make a decision on placing an entry if you want to start a long position of CF if the market rises above eleven thousand five hundred. Let us say that in case the price indeed rose to this level, the CFD you have will be executed an you will be able to ride the current bitcoin trend as long as your analysis displayed that it would have reversed in the future.
And, in case the market price never crossed the 11,500 limit, your bitcoin position would have failed to execute and remained the same.
This is perhaps the most well recognized strategy for bitcoin trading. It is called HODLing because it translates to holding on for dear life. As funny or strange as the term sounds the term was first known in 2013, the way the term was coined however, was indeed funny. During the mid 2013’s when the price of bitcoin was going down, one user, instead of typing holding, typed hodling in order to tell that he was not ready to exit his position. Since then, the term has evolved greatly and even become a successful bitcoin trading strategy which is based upon maintaining a bitcoin position for the long run. The reason why so many traders choose HODLing is because they hold on to the position hoping that the price of bitcoin increases in the long run and returns to its peak, which was in 2018.
That being said, every bitcoin trader is aware of the fact that this crypto currency can be extremely volatile. Therefore, you shouldn’t be surprised if using this strategy results in losses. This is one of the main reasons why anyone rarely recommends this strategy. Even if you do end up choosing HODLing, make sure that you have a proper risk management plan to abide by.
Trending markets can be defined as the markets that get to consistent low lows and high highs. This strategy for trading bitcoins is quite suitable for multiple timeframes. The reason for it is that it essentially lets the trader hold his or her position open for a considerably long period if they tend to believe that the current trend they are following will continue bet it for months, weeks, days, or even hours. For a lot of traders, the bitcoin itself happens to be a trend. As most of you may be aware, Bitcoin experienced a massive popularity surge in 2017 and the early parts of 2018. It reached the highest of highs and people who had invested their money in bitcoin won big. They essentially turned their fortunes around. That being said, that surge has not repeated itself so far. However, the world of Bitcoins or any other crypto currency for that matter is extremely unpredictable and things can change within a blink of an eye.
The trend trdading strategy or any other trend following strategy for that matter utilizes technical analysis for predicting the market momentum’s direction. To make things simple, trend trading in bitcoin essentially involves starting a position when a trader firmly believes that the price of digital currency will keep on growing in its present direction or start a completely new and extremely profitable trend.
Anyone who already owns bitcoin currency will probably think of considering hedging BTC if they thought that there would be a slight decline in the market, even if it is for the short run. Hedging is essentially the practice of creating strategic trades for eradicating or decreasing the risk for existing positions. In cases like this, you would hedge a currency holding by making a position for shorting bitcoin. It could involve selling your asset for the present price in the market, which could all but possibly decline from your expectation. In case the market price did indeed fall, you would have to then purchase it back for lower profits and prices. This would also means that any kinds of losses to the original bitcoins you held would start getting offset to the short bitcoin trade by your profit.
Traders use some renowned financial instruments in order to hedge bitcoin exposure. However, a large number of traders opt to hedge with CFDs. It is also vital to keep in mind that there are major risks involved with hedging bitcoin and utilizing them for short selling strategies. Once again, you must have robust risk management measures at your disposal to avoid major losses.
Getting a Keen Understanding of the Market
This trading strategy isn’t like the strategies mentioned above. However, it is an effective and pragmatic approach that gets things done. Not matter how much of a novice or an experienced trader you are, you must properly understand how the infamously volatile bitcoin market works. It is perhaps the simplest and the best way for creating and implementing a sound trading strategy. In order to achieve this, you have to understand elements like bitcoin supply, events, news, and various other bitcoin related things
Swing Trading Strategy
This strategy for trading bitcoin pays attention to taking a position that has a larger motive. This strategy requires the trader to hold the trade for multiple days and sometimes even weeks for gaining advantage of medium and short term movements. The main goal of this strategy is to spot a certain trend and then eventually capitalize on the peaks and dips that offer entry points.
High Frequency Trading
A lot of bitcoin trading styles need traders to give extremely quick reactions. This has resulted a major interest in HFT, which is also known as high frequency trading. This is essentially an algorithmic method that is capable of executing massive orders within seconds. Make sure that you thoroughly practice this trading method in environments that are free from risks and only then start implementing with your real bitcoin trading.
In this trading style, the trader usually opens and holds a position for a considerably short period of time. The duration usually lasts within minutes or even seconds. The idea with scalping is essentially to trade and make an exit immediately once a market is favorable. This method is quite intense and quick and often used by day traders.
The basic purpose of diversification to make sure that all of your investments are not just in one place. You essentially create a diversified portfolio to make sure that you do not loose all of you money in case there is a fluctuation. You essentially minimize your losses through diversification.
Quite a lot of bitcoin traders use digital currency wallets as a trading strategy. By making use of wallets, investors and traders can insulate their bitcoins from potential hacks. In addition, these wallets also provide a protective shield for traders in case the exchange they are utilizing goes bankrupt or out of business. It essentially safeguards there currency from unforeseen circumstances.