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The Best Cryptocurrency Trading Strategies to Minimize Risks

BitForex Editor
Aug 17, 2020

The cryptocurrency market place, for many, has remained one of the uncertainties. Several market factors come into play all of which determine the rise and fall of these currencies. Not understanding these factors can result in a huge loss while trading these cryptocurrencies. However, for a select few, they have mastered the art of trading with specific strategies, tested it over a certain period, and have found it effective. These select few individuals use these strategies to make huge profits trading cryptocurrencies. To help you as a beginner or one who is finding it difficult to make profits trading cryptocurrencies, we have put together some helpful trading strategies.

Trading Strategy Guides

To start trading in cryptocurrencies, the first step is to create an e-wallet. An e-wallet lets you send and receive cryptocurrencies and also trade with them. There are several e-wallet platforms you can make use of and they include, Coinbase, Luno, and Binance among others.

To trade in cryptocurrencies, you have to focus on the best possible solutions for trading and investment. This will require hours of tireless research and careful study of the platform you are making use of. You also have to pay attention to changes that occur, how they occur, when they occur, and what influences these occurrences.

To access information about cryptocurrencies, you have to leverage the blockchain technology. Digital currency may seem unreal, but they are real and can be developed on the blockchain technology. However, before you buy and trade in any cryptocurrency, you must have a solid plan, a back-up plan, and a comprehensive technical analysis of crypto trading.

Best Bitcoin Trading Strategy

Cryptocurrencies in your e-wallet are similar to monies you have in your physical wallet. The difference is that while cryptocurrencies in your e-wallet are pieces of data, monies in your physical wallet are pieces of paper. For money to increase in value, you have to invest or trade it. For cryptocurrencies to increase in value, you will need to trade them. You either engage in stock trading or crypto trading.

Crypto trading, unlike stock trading, is very volatile and that makes it more lucrative. So, while holding Bitcoin positions for extended periods is the regular strategy, it is not the best. You can make big Bitcoin trades every day all through the week with low overhead. You can also seize any of the many multiple trading opportunities available in a 24-hour trading period.

The volatile nature of Bitcoin makes it a more tradeable asset than many other cryptocurrencies. By using technical indicators, you can predict when the price will increase. At this point, it is best to refrain from buying and focus more on selling. With the same technical indicators, you can tell when a price decrease is likely to occur. Here, you can buy Bitcoin in bulk to stock up and make profits off sale when the prices increase again. Technical indicators that can be used to measure increase and decrease in Bitcoin prices include volume, relative strength, and oscillators among others.

Best Day Trading Strategy

Many crypto trading strategies focus more on the night time to study the market and trade on it. However, there is a Bitcoin trading strategy that can be used to trade in the day and make huge profits from cryptocurrencies. This strategy is an 85% price action and a 15% cryptocurrency trading strategy. It relies on one of the best indicators and that is the On Balance Volume (OBV). This indicator is used when analyzing the total amount of money that flows in and out of a crypto instrument.

With this indicator, you can measure up the volume of a particular cryptocurrency available in the market as well as its price activity. By knowing how much money goes in and out of the market, you know when to key in, make your trade, and make your gain. Many MT4 trading platforms offer the OBV trading indicator. The more information you read from the OBV indicator, the more knowledge you get about making a profit from trading during the day.

Professional Trading Strategy - 5 Basic Tips to Consider

1. Create an overlay of the Bitcoin chart, Ethereum chart, and OBV Indicator

To understand how the market works, start by creating a chart with these 3 important windows - Bitcoin, Ethereum, and OVB. You might be wondering why Bitcoin and Ethereum? These two digital currencies are the most popular and have the largest market cap respectively. The first of the 3 windows should be for the Bitcoin, the second for the Ethereum, and the third should be for the OVB indicator in that order.

2. Find the smart money divergence between the prices

The reason for creating an overlay of these 3 windows is to see if one cryptocurrency confirms the action of the other. Where the action of one crypto is confirmed, there is no smart money divergence. Where Bitcoin fails to confirm the action of Ethereum for example, there is a smart money divergence. In a trend, the crypto market is expected to move in the same direction as a whole. The smart money divergence helps you figure out if this is happening or not.

3. Ensure the OBV increases in the direction of the trend

Having established that the cryptocurrency market as a whole is expected to move in the same direction, you need confirmation before buying. The OBV indicator is what gives you that confirmation. Any currency that is lagging behind the other sooner or later will break above the resistance. To ensure that the OBV increases in the direction of the trend, you have to ensure that it is moving beyond the resistance level the currency you want to trade in was previously moving. When this is done, you are about to boost your profit!

4. Place a buy limit order at the resistance level to catch the possible breakout

Don't just be aware that there is a possible breakout, you should be ready to place a buy limit order when this happens. Once the OBV indicates a positive signal, immediately place an order to catch the possible breakout. Orders placed, should be done at the resistance level of the currency.

5. Take profit once the OBV reaches the required amount

The best way to trade after a possible breakout is to place your stop loss below the breakout candle. As soon as the OBV reaches 105,000 take profits immediately because anything above that is extreme.

Bitcoin trading, just like many other cryptocurrency tradings, no doubt involves a lot of risks. However, with the best trading strategies and guides, these risks can be reduced. Other ways to reduce and manage risks are to diversify trades, minimize trading costs, watch trading times, and stay updated with trading news among others.

About BitForex:

BitForex is an exchange service platform that can be classified as one of the Top 10 cryptocurrency exchange services. It is focused on providing millions of users with a digital currency trading and investment tool that is not only safe but also professional and convenient. BitForex has a high customer-oriented culture and state-of-the-art financial technology.

BitForex is programmed in a way that it can quickly adapt to the changes of the Crypto market while introducing new features like margin trading, enhanced trading charts,  derivatives, and a host of others. The headquarter of BitForex is located in Hong Kong, while there are branch offices in countries like the United States, South Korea, and Singapore.

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