Bitcoin trading strategies
Cryptocurrencies such as Bitcoin have captured the public’s imagination and investors’ fancy as a new pathway to wealth. Bitcoins traded as high as $4,000 in the last years but as recently as 2010 you could have purchased a Bitcoin for a few pennies.
Part of Bitcoin’s mystique is its high technology, high security, and the massive computing power required to mine (or create) another Bitcoin.. We might think of Bitcoin as a type of artificial currency, an imaginary currency, or even a counterfeit currency, but, of course, it goes by the moniker “cryptocurrency.”
The brilliance of Bitcoin is actually the block-chain technology that underlies the currency. It is among the most secure online technologies available; it is virtually impossible to hack, manipulate, or thwart.
In addition to artificial currencies, block-chain technology offers great promise as an extremely secure system for online interchanges and transactions..
The technology that underlies Bitcoin and other cryptocurrencies is part of the allure, the rationale, and the story. The technology mystique tends to make cryptocurrencies seem like something completely new, something legitimate, and something we should take seriously.
Let’s suppose, however, that we didn’t have any super new technology. Could we invent a new currency similar to Bitcoin? If we should find a large hickory tree with an extraordinary, one-of-a-kind chemical signature, then we could cut off some limbs and carve out a supply of wooden coins. Let’s call them “Hickcoins.”
The ultimate supply of these Hickcoins would be fixed or quite limited. As the price of our Hickcoins goes up, we might cut off more tree limbs to make more Hickcoins, but the overall supply would be quite limited (at some point we wouldn’t have any more limbs to cut, and we would have to wait on new ones to grow).
So now we have created a new currency very similar in concept to Bitcoin. Its supply is very limited. It’s very secure (remember the unique chemical signature). Only one ingredient is missing, and that ingredient is faith.
Faith is what gives a currency its value. If a large number of people begin to have faith in our Hickcoins and start buying and hoarding them, the price of Hickcoins would start to rise. We could occasionally carve a few new Hickcoins, but we must remember to limit the supply for the price to rise. As the price rises, more people would want to buy Hickcoins, so the price would continue to rise.
Of course, the price would bounce around a lot, because sometimes some people lose faith.. We have created, in this little example, an artificial or counterfeit currency just as legitimate as Bitcoin.
The creator of Bitcoin, whoever she or he is, wowed the world with dazzling new technology and used technology’s “smoke and mirrors” to overcome our doubts and boost our faith. Rising faith in Bitcoin led to its rising prices.
These rising prices created more credibility and more faith, and even higher Bitcoin prices. Faith becomes easier and easier as the price rises higher and higher. And, when we want to believe – when we want the story to be true – our faith becomes even stronger.
As our collective faith grows, the price of Bitcoins (or Hickcoins) will continue rising, until one day the price will crash. It continues to fluctuate towards loses and gains but different strategies determines your success in crypto trades.
— Jerry W. Thomas —
Currently we’re in a trending market, and we adjust our strategies according to market conditions. If we look at alt-coins, some of them would have huge spreads on many exchanges. Thus your stop loss could get triggered a lot of your trades. Therefore, while trading we look at huge liquidity. The appropriate volumes in bitcoin right now, combined with the uptrend, make for a long trade with a stop loss on the downside.
The strategy that can be implemented depends on what kind of trader you are. Traditionally in markets you can be categorised in one of the
following trading styles:
A trade is opened and closed within a few seconds or a few
minutes at the most. The objective is to grab very small pip movements repeatedly. It is generally a reliable strategy to follow in a range bound market.
A trade lasts for a few hours and isn’t carried forward to the next day. Since the crypto market is 24-7, a trader can define his/her hours according to their respective trades. The buying price is really important in intraday trading as the stop loss is set not to far away from it.
A swing trader generally carry forwards a trade for a few
days looking for a substantial gain. The strategy involves actively seeking out peaks and troughs in the price of the underlying.
A positional trade is taken for more than a few weeks. Here, the stop loss is kept more deeper than other trading strategies
to adjust for daily volatility and avoid false triggers.
Another way to look at your trading style is the following:
It refers to trading with the general direction of the market i.e. buying when the market is going up and vice-versa.
It refers to taking a position when the trader thinks that the market trend is going to turn. Timing is more critical in contrarian trading than in trend following.
Crypto Expert Describes the Different Types of Trading Strategies
First of all, it’s vitally important to do extensive research before investing.
In terms of strategies, it all depends on what kind of trading you want to do.
Long term trading
It refers to buying stock and sitting on it until the price is right to sell. These trades are often a bit riskier because it’s difficult to predict whether or not your stock will increase or decrease in value over time. Those who participate in long trading do a lot of research before investing.
Short term trading
This refers to buying and selling multiple times each day. This strategy is of lower risk, but you don’t stand to get as much back in returns. The idea behind short term trading is to make several small profits over a long period of time.
Make sure you’re using an exchange what works well for you and offers an agreeable fee. Having access to a good exchange and a fast internet connection will help you stay on top of the prices in real time. When day trading or long term trading, you can’t afford to miss a spike or drop.