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Top 5 Bitcoin trading strategies

Home - Blockchain Academy - Top 5 Bitcoin trading strategies
top 5 bitcoin strategies

If you intend to enter the crypto market, it is worth adopting one of the trading strategies. There are many concepts, so it is difficult to choose the right method. What to do to not lose money? How to achieve success by investing in Bitcoin? Want to know more about it? We are already explaining.

Hodling

This strategy has been developed over a long period of time. The assumption is simple – you buy a digital currency and simply wait until its price is much higher than at the time of investment. If you want to use this method, study the market carefully, perform a technical analysis of the chosen digital currency and remember to be patient. These aspects are particularly important given the volatility of the digital asset market. It is best to determine the exact price at which it is worthwhile to sell the virtual currency and simply wait. In this strategy it is worth taking into account all the unpredictable and unavoidable fluctuations in the value of cryptocurrency.

The deadline itself was set in 2013, when BTC’s price dropped significantly. At that time, users often typed the wrong slogan “‘hodling” instead of “holding on” into the search engine to emphasize that they have not left their position. This mistake has evolved into a strategy that is based on storing Bitcoin for a longer period.

bitcoin holding

Source: hackernoon.com
 

Hedging Bitcoin

Bitcoin owners may consider hedging their covert investment if they suspect that there will be a short-term decline in its market price. Hedging is the practice of opening strategic transactions to reduce or eliminate risk to existing positions. It is mainly about the price the price spread on the exchanges concerned. What’s that? It’s just the difference between the buying price and the selling price. It also involves selling the asset at its current market value because it is expected that its quotations will fall. If the price really falls, we can buy the crypto at a lower price. This allows us to generate profit.

In this case, existing capital can be hedged using a Bitcoin short. This involves selling the asset at the current market price because it is expected to fall in value. If the price actually falls, then the asset can be purchased at a lower price.

Most investors choose to hedge their investments using price difference contracts – CFDs. This is an agreement between two parties who are obliged to settle an amount equal to the difference between the opening and closing price of a position.

Want to start practicing Bitcoin hedging? Build your strategy in a risk-free environment with a demo IG account. Remember that there are risks if you decide to hedge your investment with a short selling strategy. Reason? When you sell BTC, there is no limit to how much the market can shape and how much loss you can suffer in this case. It is important to have the means to manage risk.

Trend trading Bitcoin

The trending market is characterised by steady growth. This strategy is correct for different time frames because you essentially keep your position open as long as you think the upward trend will continue.

For many traders Bitcoin itself is a good example of a trend. BTC became extremely popular in 2017, which resulted in a sharp increase in its value. The trend came about because people did not want to miss a new, interesting investment. The crypto market is still developing, so it is important for investors to be kept up to date with all the news, as they may affect the price of a given asset.

number of bitcoin transation per month

Source: wikipedia.org
 

The strategy using the trend is based on technical analysis. The main goal is to predict the direction of market dynamics. A Bitcoin trading trend is to open a position when you think that the value of a virtual currency will continue to move in the same direction or create a new trend.

Crypto Arbitrage

What is this strategy? Arbitrage is simply the purchase of a given asset, on a market where its price is lower, in order to resell it on a market where its value is higher.

In the case of a cryptocurrency you can use the example of stock exchanges. Imagine a situation where on one exchange platform you can buy a Bitcoin crypto for $8,000. On another exchange, the price of this virtual currency is $8,100. What could be the difference? There are many reasons for this. One of them may be a higher volume and demand on the market, which translates into a jump in the price of a given crypto. This is an interesting strategy, which allows you to make a simple profit.

We can use trade bot in the arbitrage strategy. This is a very interesting option, which allows you to generate a profit on the price between the exchanges, thanks to the robot’s functionality. The main advantage of this solution is saving time and energy of the trader.

crypto arbitrage

Source: medium.com

Scaliping

The strategy is to make extremely short trades. In the krypto scalping market, trading takes up to several dozen seconds – usually from 1 to 5 minutes. A trade requires high efficiency and knowledge of technical analysis. This method is noticed by a growing group of enthusiasts of cryptocurrencies trading.

The amount of capital is important in this process. If we act in the short term, it is known that the percentage of the transaction will not be high. Therefore, scalping makes sense when we have more capital. It is important that the trader who scales has his game psychology outlined. It is also worth remembering about patience, acceptance of loss and time that has to be spent on observing the market.

Crypto trading requires appropriate skills. A well-chosen strategy helps to achieve appropriate profits. Of course, you must take into account the positive and negative aspects of each method. It is important to find out which strategy is most suitable for you. Now that you know something about trading concepts, you can choose one of them.

Magdalena Aleksander

About The Author

Magdalena Aleksander
Junior Marketing Specialist

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