The Best Bitcoin Trading Strategies (That Still Work in 2020) – Bitcoin Magazine
This is a sponsored article provided by NordikCoin.
Bitcoin trading has never been more popular than it is now, and the market doesn’t show any signs of slowing down. So, if you’ve considered getting in on the action, now is the time to strike.
While there are numerous bitcoin trading tools available, you still need an understanding of the basic strategies to succeed.
We’ve created this guide to introduce newcomers to some of the most common trading strategies. But seasoned traders may also wish to refresh their memories and adopt new strategies for 2020.
Here’s what we’ll cover in this trading strategy guide:
- Trend trading
- Breakout trading
If you’re eager to get started, then we suggest you head over to NordikCoin and create an account now. It only takes a few minutes, and then you’re ready to buy and sell bitcoin.
The term “HODL” was coined on the Bitcointalk forum back in 2013. It’s not an acronym for a complex trading strategy — it’s simply the word “hold” misspelled. The author of the original post mused that traders who were new to the game or unsure of their trading skills were better off HODLing their bitcoin in a bear market.
Back in 2013, bitcoin saw a surge from less than $15 per BTC to over $1,000 toward the end of the same year. The term “HODL” has appeared in numerous cryptocurrency memes and is now a widely-recognized trading strategy.
The premise is simple: Hold onto your bitcoin and hope that the price will surge again so you can sell with massive gains. It’s not a very elaborate trading strategy, but it can be sound advice for new traders.
It’s worth noting, however, that the bitcoin price could also dip instead of rising. That’s why we advise you to have a plan for risk management in place if you choose to go this route.
Ever heard of the term “hedge your bets”? That’s exactly what this trading strategy is all about.
Since bitcoin is volatile, there’s always a chance that you’ll lose money on trades in the short term. That’s why it can be a good idea to hedge your bets by opening a trade that’ll mitigate that risk.
There are a few ways to go about that.
You can short-sell, which means you sell your bitcoin with the expectation that the price will go down so you can buy it back at a lower rate. Many traders will borrow bitcoin from a broker, trade it on an exchange and then return the amount they borrowed.
But that can be risky if the price goes up instead of down.
You can also hedge with contracts for difference (CFDs), which are derivatives rather than actual cryptocurrency. In that case, you’ll hold your bitcoin in the hopes that the price will go up in the long run, but open a CFD that bets on the price falling. Whether the price actually goes up or down, your gain on bitcoin or the CFD will offset the loss on the other.
Finally, you can hedge your bets with bitcoin futures. These are contracts between two parties who agree to trade bitcoin at a certain price on a specific future date. Whether the price of bitcoin has gone up or down on that date, you’ll make the trade and take either the win or the loss.
3. Trend Trading
Trend trading is a strategy that relies on the current trends in the Bitcoin world. You’ll need to keep a close eye on what others are talking about and plan to do.
For example, bitcoin became incredibly popular in 2017, when the price rose to almost $20,000 per BTC. There were many reasons for that, but the main one was that bitcoin received a lot of publicity. That meant more people wanted to get in on the action, which increased demand — and thus increased the value of bitcoin.
You can engage in trend trading over any period of time, whether that’s days, weeks, months or years.
You just need to have an idea of what will happen next.
For that purpose, you can use technical analysis to help make an educated guess. Some of the indicators in technical analysis include relative strength index (RSI) and moving averages over time.
Although trend trading can seem less risky than other strategies, it’s worth remembering that there are hundreds, if not thousands, of factors that influence the price of bitcoin. These include businesses adopting bitcoin, other cryptocurrencies entering the market and governments implementing new trading regulations.
4. Breakout Trading
Breakout trading is similar to trend trading; the difference is that you aim to buy or sell bitcoin at the beginning or end of a trend.
You need to understand support and resistance levels, which are often referred to as the floor (support) of the bitcoin price graph and the ceiling (resistance). In other words, these are the price points bitcoin won’t drop below or rise above.
The points at which those levels are broken either upward or downward are called “the breakout points.” Once this happens, you can usually expect the price to become very volatile.
Again, the trick is to correctly anticipate what will happen next.
If you’re able to do that, then you can make some really good deals. There are different ways to identify the support and resistance levels, including to look at volume levels, RSI or the moving average. Once you know that, you can create an order to buy or sell at a specific price point that makes sense.
As with the other three strategies we’ve covered, breakout trading is not without risk. So even though you’re able to create an automated buy or sell order, it’s wise to keep a close eye on the market movements rather than to remain passive.
What to Know Before You Trade Bitcoin
Before you dive headfirst into bitcoin trading, there are some last points we need to touch on. As mentioned, it’s easy to get started with bitcoin but not as easy to become a master of the art.
1. Research Your Chosen Trading Strategy
There is more to each of the four trading strategies than we’ve covered in this guide. Make sure that you do proper research before you commit to any of them.
Fortunately, there are many resources online, including e-books, e-courses and videos that will teach you how to trade bitcoin.
Just remember that none of the strategies, regardless of how popular they are, come without risk.
2. Create A Bitcoin Trading Plan
Once you know which strategy you want to pursue, you should create a trading plan. Just like any other business venture, it’s important to have your criteria for success and failure in place.
Without a plan, you could become the victim of your own greed for more or fear of losing. The plan should include realistic goals for how much you hope to make and a risk profile that includes how much you’re willing to invest or lose.
3. Make Sure You Mitigate Any Risks
We’ve mentioned risk a few times now, and there’s a good reason for that.
All trade, whether it’s stock trading or bitcoin trading, involves a certain element of risk. One of the main risk factors in bitcoin trading is the volatility of the bitcoin price.
One of the ways you can mitigate risk is to put limit-close and stop-loss orders in place. That way, you can secure any profits or limit any losses before the market gets out of hand.
4. Find A Safe and Reliable Bitcoin Exchange
Finally, you should carefully consider your options when it comes to bitcoin exchanges. Not all exchanges are equally fast and safe to use, so we recommend you do your research.
NordikCoin is a convenient and secure bitcoin exchange. We enable you to buy and sell within minutes so you don’t lose out on a good opportunity.
Ready to Make a Killing in 2020?
We hope you’ve found a Bitcoin trading strategy that’ll make you rich in the new year. The four approaches we’ve covered are all tried and tested. But remember to do some further research, and don’t be afraid to reach out to us at NordikCoin if you need some extra advice on how to open an account.