Bitcoin is the first cryptocurrency which has got so much popularity among all the cryptocurrencies. To trade bitcoin, a viable trading strategy is required. A bitcoin strategy is a plan or approach to trade in the cryptocurrency market which covers all the price points where you would enter and exit.
A best bitcoin trading strategy is the one which is impeccably aligned to a trader’s individual risk appetite, goals, objectives and available capital. There are a lot of BTC trading strategies which got more popularity than others among bitcoin traders. These strategies include:
1. HODLing
The term HODLing first introduced in the year 2013. HODLing is one of the most popular bitcoin trading strategies. The term came into existence when a trader incorrectly typed HODLing instead of holding when the price of bitcoin was falling. The trader typed the term to show that he is not interested in exiting his position.
Ever since the term has evolved and named as a strategy to maintain a long position in the bitcoin, keeping the hope that the price will increase in longer time periods. However, bitcoin is highly volatile; that means this could result in losses as well. This is the reason why HODLing strategy is hardly recommended to anyone without strict risk management taking in place.
2. Hedging Bitcoin
Investors or traders who own bitcoin already might think about hedging their BTC risk if they believe that at some time there will be a short term decrease in the market price. Hedging is a procedure of opening strategic trades to eradicate or mitigate the risk to existing positions.
It is also essential to keep in mind that there are considerable risks if you have decided to hedge your BTC by using a short-selling strategy. There are some financial assets that investors can use to hedge their BTC exposure. However, a large range of investors and traders choose to hedge with CFDs (contract for difference) instead of other instruments.
3. Trend Trading Bitcoin
A trending market is that market which reaches out consistently lower lows and higher highs. This strategy is competent for different timeframes. Because a trader holds his position open as long as he/she believes that the trend will continue, it doesn’t matter whether it is months, weeks, days or hours. Trend trading bitcoin includes opening a position when a trader believes that the price of a cryptocurrency will continue to move in the same direction or it is making a new trend.
There are various methods from which a trader can determine the momentum of a market and the direction of that market trend that generally include using technical analysis indicators. Famous trend and momentum indicators involve the relative strength index (RSI), moving averages and the stochastic oscillator.
4. Bitcoin Breakout Strategy
Bitcoin breakout trading includes entering a market as soon as possible in a trend. The main idea of this strategy is that when a market breaks throughout a resistance level or main support level, then substantial volatility will start. Consequently, the bitcoin traders will check to enter the market at these major points to ride the trend from beginning to end.
To determine resistance and support levels, bitcoin traders generally use volume levels as technical indicators and confirmation signals like MACD (moving average convergence divergence) or relative strength index (RSI). Once these levels are determined, any investor can open a position easily without any issue.
Bottom Line
The bitcoin market is notoriously volatile, that makes it very essential to get your head around the market before you apply your strategy. If you haven’t started bitcoin trading, you can start it by opening a trading account with a well-regulated broker such as ROinvesting. ROinvesting is authorised broker which is regulated by the Cyprus Securities and Exchange Commission (CySEC). It is also an official CFD partner of AC Milan.
