Should you start trading Bitcoins on a whim? That would be a gross blunder because without a proper trading strategy in place you could end up losing everything. A trade strategy includes rules that are going to dictate when you should enter and exit a trade. So, Bitcoin trading strategies are geared to minimize the guesswork in buying and selling Bitcoins and maximize profits.
A Bitcoin trade strategy will specify when you must enter a specific trade, which are the factors that can trigger such an entry, what are the conditions that will justify your exit from such a trade, how the money will be managed for the trade to happen, and the time-period that you intend to follow. Trading is therefore more of an art and similar to other art forms, there is no one-size-fits-all approach for Bitcoin trading. Every new trader will have to find out which is the best strategy for you. Here are some of the best profit-making trading strategies:
- The buy-and-hold strategy or HODLing, as it is popularly known as, is very popular amongst Bitcoin traders. This is a long-term trading strategy that is based upon the belief that holding onto your crypto coins will see a rise in its prices with time. This means that when you eventually sell the Bitcoins, you could make a good profit. This time-period may be months or years.
- Active trading strategy is the exact opposite of buy-and-hold strategy in that the trader will engage in buying and selling Bitcoins every single day, sometimes within hours or even minutes. Due to the invention of automated bitcoin trading apps, the speed of trading has increased; check this detailed bitcoin pro review to learn how the automation technology works. The maximum time frame can be a few days or weeks and in this time the trader seeks to buy coins for low prices and sell them at high prices. Profits are therefore made in short spurts and factors like market volatility, trailing stops, stop-loss and stop-limit etc will influence the order execution.
- In fundamental trading, the trader uses fundamental analysis for assessing the value of assets that are to be bought. This analysis involves checking for a variety of metrics.
- In technical trading historical data and metrics like trend lines or moving averages are going to be evaluated. Data is tested under different kinds of market conditions with a simulator. A time frame is calculated for trade entry and exit and the technical trader will allocate funds to hedge or speculate based upon his findings. So, in technical trading, you will monitor the market, keep track of the numbers and make decisions based on this data. Trades are carried out based upon a powerful mathematical strategy.
- Day trading is what happens in a single day and this involves either long or short trades capitalizing on prices in one day. You get to conduct trades throughout the day and then you close them all by the day-end to avoid having positions kept open overnight. This strategy is highly technical and demands a lot of skill and experience.
- Swing trading will relive you of the hard work of staying glued to your computer screens throughout the day. Such traders will hold open positions across short time-periods; they buy and sell the Bitcoin when there are noticeable spikes and falls in the prices. Swing trading can run into big losses as you will hold onto your trade positions for long periods.