A trading strategy is a framework of an extensive plan to organize the various trading activities so that it ultimately leads to profit. It helps in eliminating all the unnecessary decisions and thus mitigates financial risk to a large extent. The best crypto trading strategy is one that can be customized to meet the individual goals, available capital, and risk-taking abilities of the traders.
Some of the popular bitcoin trading strategies are discussed below:
Strategies for Bitcoin Trading
The most popular bitcoin trading strategy began when a user incorrectly typed “HODling” instead of “Holding” amidst bitcoin’s falling prices. Since then, the term has been used by traders to indicate holding Bitcoin (instead of exiting the position) for the long term in the hope that its prices will increase over time and reach their 2018 high. However, this strategy often leads to heavy losses and is not recommended without a proper risk management plan.
Hedging refers to opening strategic trades for an already existing bitcoin holding position to mitigate the risks associated with them. If traders believe that there might be a short-term decline in the crypto market, they can hedge their bitcoin risk that involves selling the bitcoins at the existing market price.
- Trend Trading
Trend trading strategies take advantage of the directional trends when traders hold positions for a longer period in the hope that the assets will continue moving in the direction of a particular trend. However, there can also be a trend reversal that the traders need to keep in mind.
- Breakout Trading
This strategy involves entering the crypto market at the starting point of the trend so that it gives traders a golden opportunity to ride the trend from the very beginning. If traders manage to enter the market just at the “breakout” point, they can easily follow the trend because the “breakout” point is the ultimate point beyond which the market is highly volatile and therefore riskier.
- Day trading
This strategy involves entering and exiting the holding positions on the same day or within 24 hours or less. It is a short-term bitcoin trading strategy and thus recommended for advanced traders.
- Swing trading
It is a long-term trading strategy that involves holding bitcoin positions for a time longer than a day but shorter than a few weeks or a month. This strategy is best suited for beginners as decisions are more rational and less hasty.
It is an advanced trading strategy that requires a deep understanding of market mechanics. Instead of taking advantage of big moves or drawn-out trends, scalpers focus on exploiting small moves over time.
Tips for Bitcoin Trading
- Understand the Bitcoin Market
With the infamously volatile crypto market, it is very important to understand the market before implementing any strategies. Bitcoin prices can be affected by several factors like its supply cap, news- both positive and negative, events like regulatory changes, macroeconomic conditions or security breaches, etc.
- Choose How to Trade
There are 2 ways to trade bitcoin – either by directly buying the coin through a cryptocurrency exchange and then taking ownership of the coins and storing them in a wallet until they are ready to be sold, or by speculating on its price with derivatives through CFDs and spread bets; traders need to choose accordingly. Also you can choose an auto trading platform like Bitcoin Code. Check out authentic Bitcoin Code Reviews to know more about this trusted platform.
- Build a Trading Plan
Building a proper trading plan and sticking to it helps to avoid emotions like fear and greed affecting trading decisions that often lead to heavy losses to traders. Traders should stick to an achievable goal that should motivate them.
- Manage Your Risk
Traders should be aware of the inherent risks in crypto trading well before they start trading. Keeping a proper risk management strategy in place helps to set out limits for traders beyond which trading can be even riskier.
Finding a crypto trading strategy that meets both the financial goals and trading styles of a trader is difficult. It is a good idea to allocate different parts of your portfolio to different strategies. This way, you can track the individual performance of each strategy while exercising proper risk management.
- How Do You Successfully Trade Bitcoins?
The safest way to trade bitcoins is through any reliable cryptocurrency exchange.
- Is Trading Bitcoin Profitable?
Yes, trading bitcoin is profitable, but there are risks associated with it.
- What Is the Most Profitable Trading Strategy?
What trading strategy traders choose depends on their preferences, their goals, and risk-taking appetites.