There is one fundamental indicator, however, that signals the benchmark cryptocurrency is laying the groundwork for a major push higher in the weeks and months to come. Bitcoin Caught Below Key Near-Term Resistance as Momentum Stalls At the time of writing, Bitcoin is trading down just under 1% at its current price of $11, This is around. Using these different techniques, Bitcoin investors and traders are able to analyze key price determinants, which are referred to as “fundamentals”, to . Aug 27, · Before you jump into day trading, you need to be aware of a couple of basic truths: It is theoretically possible to make more money day trading bitcoin than simply buying and holding. Statistically, most day traders lose money. Let that sink in. To increase your chances of success as a day trader, here are some of the fundamentals you should know.
Bitcoin trading fundamentalsBitcoin Day Trading: The Fundamentals - Bitcoin Market Journal
Day trading is mostly focused on exploiting market inefficiencies which bring about such price movements. Technical analysis is the main tool on the day trader, though fundamentals do come into the picture every now and then as well. Trading the news is a popular approach.
Volatility and volume are friends of the digital asset day trader. Thankfully, bitcoin provides both in abundance. Bitcoin Day Trading Entails a Set of Variables Successful bitcoin day traders use strategies capable of yielding consistent profits.
Bitcoin can be traded directly, by buying and selling it through digital asset exchanges. Some people trade it through derivatives such as CFDs. Such derivatives are offered by most Forex brokers these days. The liquidity behind these CFDs is often questionable, however. Brokers are also oft-accused of spread manipulation, stop loss hunting, and slippage. You will need a secure exchange that offers a solid trading platform. Fees will bite into your profit margin.
The types of fees you are likely to encounter are exchange fees, trading fees, and fees associated with transfers of funds deposits and withdrawals.
Exchange fees are the fees the exchange charges you for using its service. Trading fees come down to maker and taker fees, depending on whether you act as a market maker or simply make use of the offers posted by other users. Deposit and withdrawal fees depend on the exchange you use and your preferred money transfer method. Understand the laws that govern virtual currencies in the jurisdiction where you reside.
Your digital asset day trading profits may qualify as capital gains. As such, they may be subject to a better tax regime than normal income. Educate yourself in this regard. Be aware that you can use trading bots to automate your profitable trading strategies. Such an approach may save you time and it may increase your overall profit potential. It does come with some serious caveats, though. For instance, if you do resort to automated day trading, never leave your bot on full autopilot.
Bitcoin Day Trading Strategies There is a lot of contradictory information out there regarding bitcoin day trading strategies. Understand that: You need volatility. The good news is that most digital assets are extremely volatile. You need proper trading volumes to avoid slippage. Slippage is possibly the most frustrating component of the day trading equation. Having a basic grasp of blockchain technology is useful. You will need it to be able to trade news and announcements properly.
Source: Coinmarketcap. Trading Trends and Corrections This is probably the simplest day trading approach. MFI-Based Technical Trading Applying various technical indicators to the charts is a common practice among bitcoin day traders. Pick the 5-minute time frame and apply the indicator. Set the MFI period to 3. Keep your eye on it as it hits two times. See if the price drops following such a hit. Following the third move to , watch for the candlestick to be a bullish one.
If it is, you are ready to place your Buy trade. As described here, this strategy only works for long trades. With some tweaks, it can, however, be adapted to shorts. Technical Analysis in Bitcoin trading requires traders to read charts and it is an essential skill in trading Bitcoin successfully. Although it may seem intimidating and daunting at first, with time and practice it begins to make a lot more sense.
Bitcoin trading is like stock trading with the difference being the asset itself. Both use the same fundamentals and traders are advised to spend some time studying some of the greatest stock traders in the world to provide some edge. The most important thing is to understand the psychology associated with the market and this requires research into existing strategies of established traders who have mastered their trading skill through the years.
The biggest benefit with conducting a timely technical analysis in Bitcoin trading is that it aids both investors and traders in being able to predict the market. It also helps investors and traders determine when the best and most profitable entry and exit points may be. When approaching a Bitcoin technical analysis, it is imperative to note that there are various groups of chart patterns with the most well-known patterns occurring on all timeframes.
Bullish patterns on a chart indicate the likelihood of a trend going upwards while a bearish pattern indicate that the price is likely to move more downwards. The third pattern involves reversal patterns which signal that the predominant trend is about to end and a price breakout in the opposite direction can be expected. Despite these distinctive patterns, they cannot fully guarantee certain market behaviour as they only show the likelihood of movements that can be expected.
Technical analysis and chart analysis can be used by traders to create their trading plan in advance which can be based on the analysis on where orders should be set depending on what the trader expects the market to do.
Among an array of analysis tools, Fibonacci retracements are often used in conjunction with chart patterns as they indicate the likelihood for certain reversals and breakouts of price. There are numerous ways in which Bitcoin can be traded with two of the most predominant ways being the trading of Bitcoin and other cryptocurrencies on Forex and thus through a Forex broker , or by trading through a cryptocurrency exchange platform. There are numerous Forex brokers who allow traders to deposit, withdraw and trade on a Bitcoin-based account.
There are, however, some legal implications involved for some traders, such as Americans, as CFDs are not allowed in the United States. Bitcoin CFDs are traded on a variety of trading platforms that are designed for just the purpose, with the most popular being MetaTrader 4. It is one of the best trading platforms which provides traders with an array of tools such as:.
A lot of traders may prefer to make use of a Forex broker that offers cryptocurrency trading as a tradable financial instrument for various reasons, one of the main reasons being that regulation. Bitcoin and cryptocurrency trading are, for the greater part, unregulated and this means that client funds cannot be secured.
Forex brokers, through regulatory requirements, must keep client funds in segregated accounts. In doing so, the funds may only be used for trading activities and it must be withdrawable at any given time. Cryptocurrency exchange platforms do not keep client funds, although some make provision for proprietary hot and cold wallets.
A hot wallet is a type of storage which is kept online while cold wallets can be kept and managed offline. When considering that cryptocurrency platforms often fall prey to hacking attempts, traders are not advised to make use of hot wallets to store great amounts of funds, but rather to keep enough funds in these wallets for everyday purchases.
Cold wallets are recommended as they are more secure and traders are, in addition, not advised to easily make use of wallets provided by exchange platforms due to the level of security threats that they face frequently.
Numerous Forex brokers have started making provision for the trading of Bitcoin by offering cryptocurrencies as a financial instrument in their portfolios of assets offered. But before traders can start with selecting a broker, there are some key points that need to be considered in choosing the right broker namely:. Both these ways in which Bitcoin can be traded have distinct differences such as:. When trading Bitcoin through a Forex broker, traders must not only pay attention to the price of Bitcoin, but to that of the fiat currency as well and this involves fundamental knowledge of how fiat currency prices are affected and by which factors.
Trading cryptocurrency and trading Bitcoin as a CFD does not mean that the trader owns the asset, and this is where there is a distinct difference between trading and investing. Trading only allows traders to benefit and profit from price movements. After selecting a Forex broker to facilitate the trade in Bitcoin and other cryptocurrencies, traders can follow the following steps to start trading Bitcoin:.
Bitcoin and Cryptocurrency exchanges allow for the sale and purchase of Bitcoin. It can either be bought or sold through regular, or fiat, currencies, or it can be done by using cryptocurrencies.
To select a cryptocurrency exchange, a similar process has to be followed as with selecting a Forex broker and this involves key factors that must be considered such as safety, transparency, record, user experience, and the fees involved. Cryptocurrency exchange platforms are not regulated by regulatory entities as Forex brokers may be and thus client funds are not held or secured by the exchange.
It is imperative for traders to test and rate the level of security that the exchange platform offers along with seeing what their record is in terms of hacking attempts and how they mitigate and manage such attempts. It is important to gain insight into the experience of other users when considering a platform as it may highlight any issues that other traders have, or have had, with a platform. The fees involved need to be considered and it is imperative for traders to first understand their own trading needs and any financial limitations that they have as they have to compensate of trading and non-trading fees along with any losses that they may suffer.
Traders must know what their budgetary needs and requirements are before they start trading Bitcoin. This needs to be laid out in their trading plan as it provides a good idea of how much can be put towards trading. In addition, it also helps traders avoid spending more than they can afford along with compensating for any losses which may occur. Should traders put more on the line than they can afford to lose, they risk losing everything and there is always a chance that the trading account can go into a negative if the trader does not have negative balance protection.
Learning to trade in small amounts and to control position sizes is a key element that beginners need to learn from the start. It would be detrimental for traders to start trading blindly as there is no framework provided for the needs and objectives of the trader and essentially traders also have no idea where their entry and exit parameters are.
Traders need to formulate a trading plan to ensure that they know when and were to buy, and when and where to sell, or exit a trade, to lock in profits and minimize losses. Earlier in this article, hot and cold wallets along with the issues surrounding security on exchanges was discussed. Traders are cautioned in never leaving funds on an exchange that they are not actively and currently trading with. Should traders leave funds on exchanges, it takes away from the control that the trader has over it and should the exchange experience a successful hacking attempt or the exchange goes offline or out of business, traders may lose their funds.
These are two emotions that tend to control and drive the actions of traders. Both emotions may be detrimental as traders may experience fear and prematurely close their trades when they hear disturbing news or a rumour which may affect their trade.
Greed may also be based on the fear of missing out when traders are informed of new trends, or new opportunities and it may lead to opening trades too soon, or a delay in closing existing trades.
Traders need to be aware of the psychology involved with trading and they need to understand their own emotions and emotional triggers to avoid making mistakes that may lead to substantial losses. Regardless of whether traders are successful or not, there are lessons to be learnt in trading. No trader will ever only experience profitable trades and in the art of making profits, traders will lose some along the way to becoming more profitable.
Traders need to focus on the insights that can be gained while trading, not only on making profits as learning lessons can lead to improved skills, knowledge, and experience. Firstly, traders need to learn the basics of Bitcoin trading followed by what both fundamental and technical analysis entails and how it must be done. This will allow traders to get to know the Bitcoin market and more proficiently analyse the trends as Bitcoin prices are extremely speculative and they do not agree with traditional financial theories.
Traders will need to consider the factors which impact the price of bitcoin such as the demand, supply, news, and events. By collaborating both fundamental and technical analysis, traders can more accurately learn when to buy and when to sell Bitcoin.
Bitcoin trading needs to be done at a set pace as it is not a sprint to see who can make the most profit in the most efficient or fastest way.
Traders need to map out their long-term goals and adapt their strategies to work for them especially where manual trading is concerned. Traders need to determine the time that they can put into trading along with what they want to achieve over a long period of time and whether they can sustain those goals as well. Trading involves a lot of risks and it is imperative for traders to ensure that they have risk management protocols in place to minimize their losses. The Bitcoin and cryptocurrency market is extremely volatile and when trading, it is important to make use of stop loss orders to avoid substantial losses that may exceed the capital of the trader.
Leverage is a useful tool in trading, despite the financial instrument being traded, as it allows the trader to open larger positions despite their initial capital. Where there are great profits to be gained, there are also substantial losses which can be incurred. Leverage in itself has a lot of risks while cryptocurrency trading has its own as well and traders will find that Forex brokers do not offer a high level of leverage while most cryptocurrency exchange platforms do not offer any leverage at all.
When using too much leverage, traders run the risk of becoming reckless and losing more than their initial capital while too little leverage may hamper the trade performance as premium trades cannot provide traders with their expected returns.
This involves experience, skills, and knowledge in coding as it opens a new world for traders to refine their trading skills and to tailor their strategies to precisely what they need. By learning to create strategies from scratch, traders can make use of algorithms as they trade based on finite parameters and there are thousands of ways to incorporate various factors and parameters into conducting analysis and executing trades.
There are various ways in which Bitcoin can be traded where strategies, utilities, and methods are concerned, and traders should take time in exploring different options to find ways which cater specifically to their needs and objectives. While trading, traders are urged to put the correct amount of funds into a trade while keeping tabs on specific sizing methods to ensure that the risk and reward ratios are correct and to avoid putting too much funds at risk.
Before selecting a Forex broker to facilitate trades or a cryptocurrency exchange platform through which to buy, sell, or trade, traders need to identify their trading needs and objectives. This allows traders to refine and narrow down their search on finding a broker or exchange that caters more specifically for them. Before trading in a live environment or choosing a specific broker or an exchange, it is imperative for traders to make use of demo accounts to test the platform and offering of a broker or an exchange.
These trading bots are able to open and close trades without the trader intervening and provide traders with peace of mind that they will not miss out on opportunities when they are not able to trade manually and look for trends or changes in the market. This strategy forms part of the trend-following aspect of Scalping and features two moving averages which can be utilized in identifying the short-term trend of Bitcoin. The cross of a shorter period moving average is placed above the longer period moving average which signals an uptrend while the shorter moving average below that of the longer signals a downtrend.
The Stochastic oscillator is used by traders to identify market conditions where overbuying or overselling is present. This signals the trader of a turning point in the current trend. Should the faster period moving average cross over the lower period moving average, the trader is signalled of a short-term uptrend in bitcoin. Stochastic values above 80 signals the trader to overbought market conditions while anything below 20 signals oversold conditions. A short signal is returned when the period moving average crosses below that of the period moving average.
This signals the trader of a short-term downtrend. When using this strategy on short timeframes such as 1M or 5M, it tends to return the best result. Traders should ensure that stop losses are placed just above the recent swing high in case of short positions. Stop losses can also be placed just below the recent swing low in case of long positions. The profit targets of the trader should be the approximate size of the Stop Loss so that the trader can at least have a return to risk.
When using this strategy, the focus is on identifying breakouts around familiar price ranges and chart patterns such as:. When a breakout occurs, it is often followed by a substantial buying or selling momentum in the direction of the breakout with traders attempting to catch the momentum to profit from it. This day trading strategy is based on the trade of the underlying trend of Bitcoin. This used to be a profitable approach when the cryptocurrency market knew only an upward direction but with ranging cryptocurrencies, a breakout approach would be better.
Although, should a new trend in Bitcoin be established and it is characterized by higher highs and higher lows in uptrends, or lower lows and lower highs in downtrends, this trading strategy may yet again become more viable. This strategy refers to catching price corrections which may go against an established trend. This strategy is not recommended for beginners as it involves a substantial amount of risk associated with the level of volatility in the cryptocurrency market. The name of the strategy is self-explanatory.
Automated trading involves making use of AI technology such as trading robots, or Expert Advisors, to trade on behalf of the trader. There are numerous trading bots available with different parameters programmed which can be downloaded or purchased. A lot of Forex brokers and crypto exchanges also provide such robots to traders. The trading bots are programmed according to different strategies and when choosing a bot, it depends on the traders trading needs, objectives, and parameters in deciding which one to use when trading.
This strategy is, however, notoriously risky as the cryptocurrency market is volatile and in using this strategy, it may lead to substantial losses. This strategy is rarely recommended, and it requires a strict risk management plan. In Hedging Bitcoin, traders open strategic trades to decrease or eliminate the risk of existing positions. Traders hedge an existing holding by opening a position to short their current position. This involves the selling of the asset on the current market price in the expectation that it will decline.
Should the market price fall, traders will then buy their asset back for the lower price and coin profits from the difference. This means that, when using this strategy, traders will be trading on times when massive news breaks.
This includes instances where the news reports events such as natural disasters, terrorist attacks, and others which cause assets to fall. However, this is a risky strategy as there is a likelihood that prices on these assets may fall even lower. This strategy entails that a trader enters a position as the price dives should the expectation be that the current trend will endure.
This also involves a lot of discipline in trading psychology as it may trigger the overwhelming urge to close the position should the price continue declining in a downward trend.
Trading, and Bitcoin trading, deserves a lot of consideration and tactic with the goal on making profits and minimizing any losses. Therefore, it is imperative for traders to ensure that they start with a basic understanding of Bitcoin trading first before trading.