3 Best Bitcoin Trading Strategies- How to Trade Bitcoin Profitable

Cryptocurrency Trading
Thu, 05/21/2020 - 18:53
Alex Dovbnya
Trading strategies that will help you to improve your results, novice or professional
Cover image via U.Today

Hello, dear readers and subscribers. This is Andrew Strogoff again and I’m going to describe some interesting Bitcoin trading strategies in this article. The number of Bitcoin traders and investors has increased significantly in the past couple of years. They are trying to get profits in this volatile market. Traders and investors use different types of strategies in order to succeed.

Before I start describing the three of the best methods of trading Bitcoin, I would like to enlist them. Here they are:

  1. Fundamental Hodl strategy.

  2. Technical analysis of different timeframes strategy.

  3. Scalping.

Fundamental Hodl strategy

This is one of the easiest ways of trading Bitcoin. This Hodl strategy requires nor skills neither experience in trading. The only thing you need is money and patience. Long term Hodl strategy was a reliable one in the past and many investors think that this one will give good results in the future.

Why Hodl? This is a misspelling of the word Hold. The word appeared in 2013 when Bitcoin was falling and a drunk trader has posted his comment on Bitcointalk. Later, Hodl became popular and is used widely by many traders.

What is the main idea of this strategy and why do I like it more than the others? You need no technical analysis knowledge at all. The only thing that is important is to monitor the price of the digital asset (Bitcoin in this case).

To make it more fruitful, I use fundamental analysis as well, meaning I follow all the important news and make my own analysis thinking of how they can influence the crypto market. What are those events and why do they influence Bitcoin's price?

Bitcoin trading strategy, news and events

Well, every Bitcoin trading strategy is based on supply and demand principles meaning the price of the cryptocurrency relies on those two basic parameters. When the demand is higher than the supply, Bitcoin grows. Otherwise, the main cryptocurrency goes downwards. When the supply and demand are equal, the price stands at a place without significant changes.

The news is one of the main price drivers! They may be either positive or negative. Depending on their nature, Bitcoin's price may grow or decline. One of the most influential events was a fork. When it happened, the coin’s price decline and there is nothing strange here as the adepts and holders are also divided by the fork.

There are some other important events that I will describe here. Some data may be expected or unexpected. Being a professional FX trader, I know and understand that expected news in the cryptocurrency community is something very rare. There are no special events calendar that you may open on Monday, for example, and see that there is some important data on Thursday, e.g.

When I trade FX currency pairs, I use such calendars frequently as I want to know what events are likely to influence the market during the week. However, as for Bitcoin, there is no such a calendar at all meaning there are almost no events that may be expected or predicted in advance except those that are widely discussed by the community.

Another important group of events is related to policies towards cryptocurrencies and the whole Blockchain technology. To tell the truth, Blockchain adoption is far from being fast. However, I can see that we have huge progress in this field as compared to previous years. The situation with cryptocurrencies is much more difficult as they are forbidden in many countries where blockchain technologies are already adopted.

Let’s take China for example. Blockchain is considered to be a very promising technology by the local government, but they are fighting against ICOs, TGEs, and cryptos in general.

How to make profit trading news? This Bitcoin trading strategy is actual when important events take place. All you need is some experience and patience. This strategy is not a hodl one, but is close to it as you may buy Bitcoin, for example, and hold it for a long time period.

Technical analysis Bitcoin trading strategies

Bitcoin trading is very popular nowadays and many investors try their best in an attempt to earn money. Bitcoin is very volatile and allows gaining significant profits for everyone. However, before you start trading this cryptocurrency, you need to calculate your risks as well.

I, personally, prefer technical analysis trading as hodling is a very long-term strategy, which freezes money with undefined results. I am going to show you some interesting solutions that may help you earn money when trading Bitcoin.

Let’s take a look at the first screenshot. Here you can see a clear downtrend and a simple descending trend line. The price reaches it at one point and here we have a clear signal to sell Bitcoin. This situation is good for those traders who prefer margin trading as they may sell the currency pair BTC/USD and get profit from such activities.

This is one of the easiest Bitcoin trading strategies, but you need to learn about trend lines and how to use them. They look pretty easy on my screenshot but I have great experience in using them. You need first to learn how to put them on charts and how to deal with them as well.

Let me give you another example. On the second screenshot, you can see no trend at all, but we have a strong resistance area here. The currency pair tries to breach it several times without any chance to succeed.

This tells us that bulls re-unable to reverse the trend. This is the first signal that shows us that we will have some further downtrend in the nearest future. However, here we have some clear signal that predicts further price fluctuations.

BTC/USD forms a shooting star pattern which is a very strong candlestick model. BTC price goes downwards first but then retests the resistance area again. As you may see, bulls fail again and the price declines towards the red flag.

This strategy includes no indicators or other tools except resistance area and candlestick patterns. It seems very easy, but you need to have experience in graphic analysis before using it.

Another example of Bitcoin trading strategy is here. Take a look at the next screenshot. Here I have put Bollinger Bands indicator in order to show how it works. As you may see, I have highlighted some interesting points on the chart. Here there are signals that will help you to take profits.

Bollinger Bands indicator is a rather simple one. There are plenty of Bitcoin trading strategies that you may use when applying this algorithm. However, I would like to show you the easiest one. Here you can buy when the price is touching (or is close to) to the lowest border of the indicator and sell when Bitcoin reaches the upper one.

Pros and cons of technical analysis Bitcoin trading strategies

I prefer these strategies for the following reasons:

  1. They are illustrative. Every time you look at the chart you can see something that may give you an idea of what is happening with the price. No matter what kind of tools do you use, you always have something to look at.

  2. Wide range of tools. Bitcoin trading strategies of this type use different tools including technical indicators, graphics tools, etc. You don’t need to know all of them. You can just choose one or two in order to succeed.

  3. All data is available. Those who choose technical analysis, are able to use all data that is available for them meaning they have the current price and history of quotes that help to forecast future fluctuations.

  4. The price includes everything. This is one of my favorite advantages. No matter what type of asset do you trade all the news and events are already included in the price. The only thing you need is to understand the future direction of fluctuations.

As for the disadvantages, they are the following:

  1. Technical analysis is sometimes subjective. All the results that you have when analyzing the price using technical means may be subjective as they are coming from your head. All professional traders try to be objective, but sometimes it doesn’t work at all.

  2. Your forecasts may fail no matter what you do. Yes, it happens and I would say that such situations are frequent. You do your analysis, find signals but the price goes the opposite directions. As for me, I establish some limits for my personal trades meaning I know when to exit my positions if the forecast is wrong.

Scalping Bitcoin trading strategies

Those ones are part of technical analysis trading strategies. Scalping is also known as pips trading. The main idea of this method is that you open a huge number of positions within one single trading day. Scalping is not a new method as it was used already in Forex and stock trading for a long period of time. Those scalping traders sometimes are able to make significant gains due to the big number of positions they open.

When trading with this method, you use the very same analysis tools that you apply in technical analysis. Those are the indicators, the candlesticks and the others. This method is supposed to be the best for all traders, but I would like you to pay attention to its advantages and disadvantages before opening real trading positions using it.

The main advantages are:

  1. This method offers great opportunities for traders. You can open 10+ positions during one single trading day meaning you can win a huge amount in the end.

  2. Fast enter and fast exit. You don’t need to wait for much until the price “matures.” Once you have some 10+ pips profit, you can exit your position and look for another one.

  3. You don’t need to hold your positions for long so you don’t “freeze your money.”

  4. Bitcoin price volatility is huge, offering you many opportunities during the day.

Those are the pros of this method that are not numerous naturally. As for the disadvantages, they are the following:

  1. The main disadvantage of this method is that this one requires a full-time presence in front of the chart. This means that you are to monitor the price for several hours opening and exiting your trades. Otherwise, it makes no sense to use this strategy.

  2. You need to focus on the price. This is another great disadvantage of this method. You need to be focused on charts. Scalper traders are under significant pressure and they get tired 100-time faster than the others. They have to constantly follow the price as one mistake may lead to significant losses. Remember that scalping high volumes of your capital are involved.

  3. The next disadvantage is the exchange fees. The more positions you open, the more you have to pay. However, there is one great exception. The more volumes you do within one exchange, the more money you save as most trading platforms give discounts for high trading volumes.

Those disadvantages of scalping show that this method is not suitable for all traders’ categories. Those who use scalping are always very skilled and they know what to do in every situation.

Those are the three main trading strategies for Bitcoin. You can use them separately or even combine them as I do sometimes. I prefer to follow the news and events first, but to take the decision, I always get down to charts and look through them trying to find the best trading opportunities.

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