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13:05 28.05.2021
2021-05-28
ikrom Ergashev (Neironix)
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Bitcoin Trading Strategies | Which One Should You Use?

Bitcoin has come a long way and quickly became one of the most premium asset classes. So much so that financial analysts are comparing it with gold. In the current market, you’ll see many investors jumping in to cash in on the massive gains, but it is important to note the trading strategies they’ve used and what their plans are for the currency. Let’s take a look at what kind of strategies they employ, how they can benefit you as a new investor, and what their pitfalls are.

Hodling

Hodling is the slang term for holding. Oddly enough, it gained recognition when a drunk trader went on a ramble about how it’s an effective strategy during the early years of Bitcoin. It turns out, he was right. Those who invested in Bitcoin early on and didn’t sell till now can see magnitudes of returns on their investment. Is this strategy still applicable today, though?

Yes, but there’s a catch. You can invest in Bitcoin now and liquidate it after years, but with the current price of Bitcoin, at around $60,000, you’ll need massive investment, to begin with. Say the price of Bitcoin jumps from its current value to double by the end of 2022, you’ll need to buy $60,000 worth of Bitcoin to get a substantial return.

If you can afford it, then go for it. Current predictions point towards a rise in its prices, so you can be sure to receive at least some profit by holding.

News Trading

Checking up on the news regarding Bitcoin is one of the trading strategies under fundamental analysis - where you look at external factors that motivate price movements. In Bitcoin, your main source of news should be none other than Twitter.

Twitter is perhaps the stronghold of crypto enthusiasts. Some of them are famous and have a massive fan following. A popular example is famed electric manufacturer’s CEO, Elon Musk. Just a couple of months ago, he added #bitcoin to his bio, causing a massive buying spree in the Bitcoin market. A few days later, his company officially announced its plan to secure $1.5 billion worth of Bitcoin.

However, this strategy is not 100% accurate. It depends on your source of information and how reliable it is. But, it can give you entry and exit points in the Bitcoin market. Additionally, you need to look at local events to see what kind of policies are being enacted by your government and discern whether or not it’ll have an impact on Bitcoin’s price. This may take some brainpower and financial prowess. Hence, this strategy may not be the most suitable for trading Bitcoin. You can get more info about bitcoin trading through the bitcoin code

Scalping

Scalping is a trading strategy with small returns; however, it’s the most effective. The reason it has short returns is due to the fact that traders only look out for small price changes as they hit a profit. They quickly cash in on it and move on to the next trade. Hence, the cumulative trades can get you a hefty profit while minimizing risk, as it is unlikely for a price of an asset to dip suddenly.

Scalping is an ideal strategy to take advantage of Bitcoin’s volatility. In addition to this, Bitcoin exchanges process trades very quickly; hence you can be sure that very small changes in price get accounted for.

However, there are drawbacks to scalping, the first and foremost being that it requires time and effort. You need to constantly keep track of price changes and do it enough times to break even. This makes it more of a day job and less of a side hustle. 

Final Word

Whichever trading strategy you employ must be done at your own risk. If you jump in on trading Bitcoin and don’t keep its nature in mind, you’ll end suffering hefty losses. Make sure to do your homework beforehand and don’t invest more than what you can afford.

The article does not contain investment recommendations, or recommendations to use the service described in this article. All the opinions expressed express exclusively the personal opinions of the author and the respondents. Any activity related to investing and trading in the markets carries risks. Make your own decisions responsibly and independently. Neironix is not responsible for the safety of your investment and does not make any recommendations

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