Trading is a simple business but it is never easy. That means if you look at the whole operation of the trading process it is very simple. You can buy bitcoin at a certain price point and sell it at a higher price. To do this, there are many platforms that allow you to execute the orders very easily.
However, the trading process is simple but making money through analysis is not only difficult but also risky. There is a high probability that you can lose all your money if something goes wrong. So keep it in mind that, if you are investing in bitcoin then make sure that you are ready to lose the whole amount invested. Here you will learn some of the best bitcoin trading strategies.
Bitcoin Trading Strategies
The best bitcoin trading strategies is always determined by your risk appetite, trading goals, and investment amount. However, you can apply the following trading strategies according to your requirement.
- HODL Strategy
- Trend Following Strategy
- Range Breakout Strategy
Now let us understand each strategy in detail.
HODL strategy is the oldest and most popular strategy which means buying and holding it for a long time and sell when the price increases. There is an interesting story behind the naming of the strategy.
It was first coined in 2013 when there is a fall in the price of bitcoin. A user typed “hodling” instead of holding by mistake in an online bitcoin forum. Since then it was termed as HODL strategy. This strategy is not always safe because the market is highly volatile.
However, many people have earned a lot of money from this strategy without realizing that this is a strategy. They invested and forgot that they have ever invested.
Hedging is a bit complex strategy than “HODLing”. In this strategy, if you anticipate that the price of bitcoin is going to decline in the near future. Then instead of exiting your position, you will take a short position for hedging.
That means you are taking a new position to reduce the risk of the existing positions.
Trend Following Strategy
A trend is a movement of the price points which makes higher highs in case of an uptrend. Whereas the pricepoints make lower lows in case of a downtrend. The trend can exist for different timeframes.
The timeframes in bitcoin market vary from a few seconds to months. If you are short term or day trade you can use small time frames to follow the trend. On the other hand, if you are a long term trader you can use higher timer frames.
If you are using a trend following strategy then learn technical analysis to trade effectively. Technical analysis allows you to know the entry and exit points and where to place the stop loss to avoid major loss. According to crypto trading, the trend following system has the highest success rate than other trading strategies.
Range Breakout Strategy
The range breakout strategy is entering the market when the trend breaks a critical level. That means take a short position when a trend breaks a support level. Whereas taking a long position when a trend is breaking a resistance level. Early entry can give you more profits as a trend starts when it breaks a critical level. So be alert when a range breaks and take a position quickly to earn maximum profits.
Hopefully, the above trading strategies helped you to understand how to trade bitcoin. Never take impulsive trade, prepare your own strategy, and try to execute it without any emotions. Practice emotional control and discipline to make money from the market. Remember, bitcoin trading is highly risky so invest the amount that you can completely lose without any disappointment.