There are tons of cryptocurrency trading strategies. All of them promise to make you richer. We choose the bitcoin for today’s article because it is the hottest trading market right now. It is hotter than any other market: gold trading, stock trading, oil trading, and any different market at this point. Thanks to the blockchain technology, bitcoin will continue to be the hottest asset. The blockchain allows transactions to happen without a central exchange.
A universal cryptocurrency trading strategy is trading bitcoin for profit. You can exchange any of the 800-plus cryptocurrencies available to exchange today. If anyone is not familiar with cryptocurrencies, there will be a brief introduction.
First of all, you have to open a bitcoin wallet. If you don’t have one already, you can open it at the biggest wallet called Coinbase. The strategy we will teach is picked up through trial and error. The methods we provide doesn’t depend on the bitcoin price. These methods can be used independently of whether bitcoin is going down or going up.
Naturally, it is possible to lose money. While trading with cryptocurrency, your capital is at risk as it is still changing at the end of the day. If it were not at risk, then everyone would get rich quickly. But if you have what it takes, if you will follow these rules, and if you can understand our tips, then you have a high probability of winning. Besides, before risking any live money, we always recommend you demo trade before.
Strategy for Bitcoin Trading
These strategies can be applied for trading bitcoin cash as well. Furthermore, you can use this strategy as a trade guide for any trading instrument. A big step forward for how to access information is a Blockchain strategy. Many companies start developing applications to use Blockchain in their favor. Always remember that it may seem like it is not a real currency when trading with digital money.
Nevertheless, it’s real. It is not a Ponzi scheme. Have a solid plan in place, and don’t underestimate the cryptocurrency markets before you buy bitcoins. As if you were going to day trade any other instruments, you must do your technical analysis.
Among day traders, Bitcoin is so popular because there are many different Bitcoin exchanges available. Many various factors depend on finding the best Bitcoin exchange. That includes a preferred method of payment, limits, fees, liquidity needs, your home country, and other factors.
Here are some top cryptocurrency exchanges in the market:
- Coinmama – allows you to sell and buy quickly. It has an extensive global reach and accepts credit cards.
- itBit – operates as both a global exchange platform and OTC (over the counter).
- GDAX – United States-based exchange that allows users to trade Ether, Litecoin, Bitcoin, and other cryptocurrencies.
- OKEx – Hong Kong-based exchange. It’s trade ranges over 145 different cryptocurrencies.
- Robinhood – a new exchange with six million users and takes trading zero fees.
- Bittrex – Ex-Microsoft security professionals founded the US-based exchange.
- Bitmex – Great for margin and short selling trades. It only trades BTC and is the third-largest exchange.
- Binance – has low transaction fees (0.1%). Trades over 130 different currencies and is the second-largest exchange.
- Coinbase – Available in Canada, the United States, and the majority of European countries. It offers different payment options and is the world’s largest crypto exchange.
How Bitcoin Works
All in all, cryptocurrency is no different than the money you have in your wallet. Real money is just pieces of paper, while real money is just bits of data.
Cryptocurrencies and bitcoins don’t have a central bank that controls them, unlike flat money. It means that user can send cryptocurrencies to the user without any banks or credit cards acting as the intermediary. Unlike central banks who create flat money, you can’t print cryptocurrencies, and it is its significant advantage.
If you print lots of money, inflation will rise. In turn, this makes the currency value decline. Bitcoins are limited, and it holds for the majority of cryptocurrencies as well. Bitcoin is less prone to be affected by inflation.
Not let’s see how a trader can profit from the cryptocurrency mania.
Long-term traders prefer to hold their Bitcoin positions for a long time. While day traders have discovered Bitcoin is lucrative for many reasons:
- Within 24 hours, multiple trading opportunities emerge.
- The most liquid form of cryptocurrency is Bitcoin.
- Bitcoin can make big trades with low overhead.
- Twenty-four hours a day, seven days a week, Bitcoin can be traded.
- Crypto trading is more volatile than stock trading.
There will be a high number of profitable trading chances occurring each day because Bitcoin is more volatile than any other tradeable asset. Thanks to the technical indicators, it is elementary to tell when price increases will occur. Relative strength, oscillators, volume, and moving averages can all apply to Bitcoin day trading.
It is crucial to pay close attention to developing trends and technical indicators. We will talk about OBV trading also and how to get started selling and buying cryptocurrencies.
The best strategy of Bitcoin trading is an 85% price action strategy and a 15% cryptocurrency trading strategy that uses an indicator.
The On Balance Volume and Bitcoin
The only indicator you need is OBV (On-Balance Volume): for day trading bitcoin, it is one of the best signs. It analyzes the total money flow in an instrument. The On Balance Volume uses combinations of price and volume activity. It tells you the total amount of money going in and out of the market.
On most trading platforms, for example, MT4 and Tradingview, the OBV indicator can be found. It is effortless to read the information from the OBV.
If the OBV is trading down and Bitcoin is trading up, it indicates that people are selling into this rally. It would not be sustainable to move to the upside. The same goes for the reverse situation; If OBV is trading up and Bitcoin is trading down.
There is no technical indicator that it is 100% efficient every single time. The next step is the Ethereum trading strategy. It is used to identify Bitcoin trades.
We always recommend taking a pen and a piece of paper. Draw a chart and set it up with three windows. Make one chart for the Bitcoin and the second one for the Ethereum. Also, make one window for the On Balance Volume indication.
Now we are going to look after the price divergence between Ethereum and Bitcoin. When one cryptocurrency fails to confirm the action of the cryptocurrency, a smart money divergence occurs.
Consider this, if, for example, Ethereum’s price will swing high or breaks above a significant resistance, and Bitcoin fails to do the same, we will have a smart money divergence. It means that one of the cryptocurrencies is “lying.” That is the main reason why we use cryptocurrency trading strategy. Moreover, this is the reason why we use the Ethereum trading strategy as well.
Thanks to both strategies, we can quickly notice when Bitcoin’s price fails to break above the resistance while Ethereum’s prices break above and reach a new high. It is the first sign that the Bitcoin trading strategy will signal a trade.
When we are in a trend, the cryptocurrency market as a whole should move in the same direction. It is why the smart money divergence concept works. For all the other major asset classes for decades, the same principles were working. The same goes for the cryptocurrency trading strategy.
If Bitcoin price is lagging behind the Ethereum price, it means that later or sooner, Bitcoin will follow Ethereum and break above the resistance.
For now, that’s enough information.