Bitcoin trading has been gaining a lot of popularity in the past years. Although many traders would rather stay away because of its volatile nature, some others take the risk with expectations.
As a good bitcoin trader, you need to understand different strategies that work best for you. Furthermore, you’re supposed to know how and when to practice each strategy to get the most out of it, even though there are never zero risks.
Soon as you understand the way the crypto market functions, you’re already halfway there. What affects the price of bitcoin? How is the efficiency against inflation? What could result in a long bearish? These are some of the many basic questions for any bitcoin trader.
Afterward, it would help if you looked at the different strategies, highlight which ones have a history of giving better results, and choose what works to build your trading plan around it. Not all stock trading practices will be very useful in crypto trading. While some people would prefer to buy and hold crypto for the long-term on exchanges or preferred wallets, some other traders hold different positions in a day or as long as weeks.
Should a trader opt to trade bitcoin on the stock market as derivatives, there is no need to open an e-wallet. They need to have a valid account on a trading platform; any plan built around your strategy must have a valid core aim and not just due to greed or fear. It is best to enter any action with boldness, no matter the risk. It’s not easy to find a trader that doesn’t like their profit.
However, making the mission and the journey about money alone is a good avenue for greed and FOMO (fear of missing out).
While compiling preferred strategy and trading methods, it is also important that you do so from a broad point of view, knowing the different trading strategies there are. [Not all of them would be very efficient for crypto trading.])(https://remitano.com/forum/ng/series/6-how-to-trade-cryptocurrency)
All of the trading strategies still carry a good amount of risk. Therefore it is always necessary to plan for and manage the risks involved. Adding the Stop-loss and Take-Profit to your orders on any trading platform will see to it and make sure that your trade stays within the plan.
Out of the many trading strategies in existence, we have assembled a few of them with more likelihood of generating profit in the bitcoin market, either being traded as CFD or actual fungible tokens.
Your perfect strategy may not be among the top most popular strategies of seasoned professionals. You may be able to master a more difficult approach down the line better than you did with the easier methods.
Here are some investors to keep an eye on.
A lot of global CEOs and Execs are gradually adopting the use of digital assets, mostly Bitcoin, as an alternative to holding their excess reserve as cash or gold. Among those leading the propagation of this “drop-gold” gospel is Michael Saylor, CEO, and founder of Microstrategy.
According to him in an interview with Coindesk, the company is ready to HODL bitcoin for the next 100 years, and that also goes to show the extent to which they believe in Bitcoin. Microstrategy also became the first U.S registered corporation to invest its fiat treasury into bitcoin.
After doubling the company’s Bitcoin investment, Saylor has reportedly bet almost half a billion dollars from the idle asset that his company had in excess cash, on Bitcoin. He believes that the only good use of excess cash is in buying stocks or bitcoin, else it slowly melts away like an ice cube, due to inflation.
Surprisingly, the same man called bitcoin a bubble barely a decade ago. Today, he is on a mission to convince other CEOs and execs to do the opposite and HODL bitcoin as a long-term alternative to fiat and even gold.
Another popular CEO pushing the gospel of bitcoin is Elon Musk. Convinced by Michael Saylor’s publicity, he can be seen as another long-term HODLer, after he bought $1.5 billion worth of bitcoin through his company; Tesla, and solidified his stand on the topic of crypto. He also revealed, not long ago, that Tesla is powering its own bitcoin node, thereby having a direct link to the bitcoin network.
ARK Invest, the well-known investment firm has also mentioned that if all S&P 500 companies followed in the footsteps of Microstrategy, and invest only about 1% of their excess revenue in BTC and held the asset, its market value will go up by up to $40,000 and investing 10% will see the value add up to $400,000.
It's clear beyond doubt, the fact that trading crypto is tricky and needs a solid, long or short strategy. The strategy should be backed by discipline and patience. According to Luis Sarmiento, a Venezuelan trader and co-founder of the telegram trading group, AltSignals, which has over 50,000 members; The best way to know your technique is to patiently study your character, emotional behavior, and thought process. This is probably because market movement is affected by the same traders trying to speculate and predict its movement.
Leaving the world of Execs and CEOs and entering the world of professional traders, we also noticed that most traders prefer to predict the market movement in a few months, rather than a few years. In an interview with Cointelegraph, professional eToro trader, Jay smith (Jaynemesis) said that he still believes in Bitcoin’s long-term value, but he prefers to keep his predictive focus on the few months ahead of him through technical and fundamental analysis.
Mostly because anything could happen in the long run and alter a lot of factors, take Covid-19 for example. For him, trading crypto and stocks entail pretty much the same thing and so he uses a basic strategy; Look for the disruptive businesses, people, and products that stand out.
Kevin Stanely, a crypto enthusiast and host of the popular crypto podcast; Crypto 101, also had similar views as Jay Smith, and said that he believes the price predictions for bitcoin will happen way earlier than expected. According to him, it’s best to “Sell half (capital) on a double (profit). “At that point” he goes on to explain, “You enter a risk-free position...where you don’t have to trade with your emotions (fear, etc)”
While these guys are reputable for their sduccess in the crypto scene, basically, the goal is to find your strategy and work on mastery. There are many crypto trading strategies any trader can employ, some of the most popular basic trading strategies that can be applied to crypto and Bitcoin trading include;
This has to be the most popular strategy for gaining on the crypto market. Whether a pro or a beginner, no one is too experienced to use this method.
HODL is a misspelled way of saying HOLD. This lingo started as a mistake on a crypto forum in 2013 when the prices were fluctuating at a lower rate and even dropping. A user wanted to announce that he wasn’t going to sell just yet, and used the phrase “...hodl my position” in a sentence. Everybody understood the message, but the slang also stuck and coined this easy strategy. It eventually became an abbreviation for; Holding On For Dear Life.
To hodl doesn’t require anything other than buying crypto and storing it in your wallet for the long-term.
This trading strategy is similar to Position trading. When hodling, positions are typically held for over a year. Like all the other strategies, there is no 100% guarantee of profit, but this is probably the safest. Owing to the fluctuations that crypto prices have in general, this strategy can also lead to heavy losses and shouldn’t be embarked on without a proper risk management strategy.
This is another great trading strategy that has been around for a long and proved successful among stock market traders. This trading strategy is also indispensable if you want to Hodl any crypto.
Here what the trader does is prudently study the crypto indicators, in this case, Bitcoin, and after that, they can tell the potential value of that asset in a few years. This strategy uses different factors like past performance, news, and in the case of crypto, what solution does the blockchain offer?
All of these are important to consider before you can decide whether an asset has good potential value. As earlier stated, this strategy requires meticulous groundwork and background study. Even at that, an asset’s predictions might turn out wrong.
Because Bitcoin and most cryptos are decentralized, it’s pretty hard to predict where the trend goes. Therefore, this strategy is usually accompanied by a long-term plan. Buying an asset-based on fundamental analysis means that you believe the asset has great potential and a long way to go.
This is also another old trading strategy that keeps the user on the safe side. A trader who is already holding a position on Bitcoin, or any other crypto, may be convinced that the trends will go the opposite direction. This conviction may be backed by [proper analysis(https://remitano.com/forum/ng/series/2-price-analysis) by the Trader or any other factor. In this case, instead of selling or buying the original position, the Trader creates new ones that support the opposite direction of the first.
Hedging has proved to be one of the safest strategies. However, it will also lead to a sure loss. If the trends continue with your original positions, then your new positions will lose. If your new positions win, then the old positions will incur a loss. There is also the case where, if a trader is very observant, they can pull out of a position early enough not to incur further losses and still ride the wave of the new position.
Either way, it is done. One thing for sure is that the strategy is probably the safest but not the most profitable because you’ll only be making back what you lost. Albeit, top trading CEOs and Execs consider this method when trading bitcoin as CFD since there is enough leverage to do so without necessarily buying or selling your real crypto asset.
Just like with all other strategies, there is no guarantee of zero risks.
This one is quite popular among crypto traders. The Trader does in Bitcoin arbitrage trading to buy and sell the coins between exchanges with a collectible difference in prices. The profit made isn’t usually as much as a high unit figure but just high enough to make some profit, and when done at a fast pace through the day, you can get something tangible.
This type of trading is possible as a result of the volatile and decentralized nature of bitcoin. It has also been a popular type of trading in the shelves of top traders of the stock market, but having a more stable and centralized nature, it is not as feasible as it is in the bitcoin market.
This is a Bitcoin trading strategy a trader uses when they believe a trend will continue for a while or will soon break out, they can then sell or buy that position depending on what they analyzed. This is slightly different from a breakout trend in that the Trader doesn't have to ride the resistance. They can place call orders when the trend has already started and leave it for as long as they think it will go; days and even months.
This trading is popular with bitcoin because of how some of its trends can last up to months. It has happened several times, and not just with bitcoin but also other coins. As we previously mentioned, speculations and popularity are two known factors that affect the prices of crypto. In other words, those that jump on the trend because they are afraid of losing out (FOMO) are the ones that drive the crypto prices up to a large extent.
There are multiple ways a trader can guess the momentum of the market's current trend to good accuracy and take advantage of it. They have calculated guesses and can never be 100% accurate, however.
Traders that use the breakout strategy enter their positions earlier than the trend traders. They enter as early as possible when the trend is at resistance level, hoping that the volatile period will be in their favor after its breakout.
The goal is to jump on the trend from start to finish and not playing it safe till you're pretty sure; after all, the trading market is built on probabilities.
The Trader must be skilled at reading indicators and predictions on the forex market to use this strategy. These positions are a bit harder to call when doing Bitcoin trading, but when done right, they can bring such great profit in a short time because of how bitcoin moves.
As soon as they can identify the key support or resistance levels, they take their positions and wait for them to play out. This strategy is used best on trading platforms where your asset is traded as CFD.
This strategy is efficient for traders who are good at short-term price predictions. Traders that prefer to use fundamental analysis will not necessarily perform at their best doing swing trading. The idea is to jump on different trends for only a short time no matter how long the trend lasts, usually a few minutes or an hour, and in some cases even days.
If it lasts long enough, they can place multiple short orders on a particular trend. Therein lies the difference between Trend trading and Swing trading.
Given the volatile nature of the crypto market, this is one strategy that will work pretty well if done right. Given the difficulty in calling such trends, trading bots are usually used to assist in analysis. Although nothing is still 100% guaranteed, using a bot reduces making costly mistakes when taking positions.
Another strategy that is pretty much like the Swing trading is Scalping. Just like Swing Trading, it requires a level of quickness in catching on to trends, and this comes with good background knowledge of Price Analysis.
The difference is that scalpers make much more trades within the timeframe for a typical swing trader to open and close only one trade. Scalpers can close as many as 100 positions in a day, each being really small profit margins but adding up to a bigger amount. Their target is usually smaller, and so they'd read more of the minutes and seconds chart. Swing traders will typically read one hour+ charts.
When trading the stock market, it is best to go for what strategies fit your schedule and plan around it. The same goes for crypto trading; always pick what strategy is best for you. Although not all trading strategies are brilliant on the crypto market, some work perfectly in the ever-fluctuating crypto market trend. It all depends on what strategy you can harness.
