A few years ago, very few people seemed to know about bitcoin, let alone have any interest in investing in it. These days, it seems that you can’t walk down the street without hearing someone talk about bitcoin.
Thanks to the internet, it is very easy for people to trade stocks, funds, and cryptocurrencies. And it seems that everyone is trying to get in on the action.
If you’re new to bitcoin, then there are several bitcoin trading strategies that you need to know about. Luckily for you, we are here to help you with just that. So keep on reading and we will take you through everything that you are going to want to know!
Day Trading
When it comes to active trading strategies, most people seem to be aware of day trading. Of course, not all active traders are day traders, but a lot are.
Day trading is when you buy and sell positions on the same day. This allows you to capitalize on fluctuating price movements.
In the stock market, the market is really only open for a small amount of time during the day. You can’t trade stocks overnight. This isn’t the case for bitcoin.
With bitcoin, you can trade whenever you want to. This can be stressful for people, as the price of bitcoin can change drastically while you’re sleeping.
If the price of bitcoin drops, a day trader might buy a lot. Then, they will wait for the price of bitcoin to go up and then quickly sell what they just bought.
As we can see, this can be very lucrative but also very risky.
Swing Trading
Swing trading is a kind of long-term trading strategy. Here, you hold your bitcoin for longer than a day but not longer than a few weeks or a month.
Swing trading is in between day trading and trend trading.
Traders who use this strategy try to take advantage of changes of volatility that can take several days or even weeks to play out. This kind of person might use fundamental and technical analysis to come up with trading ideas.
Technical indicators and chart patterns can influence how a trader will react to the market.
For people who are new to bitcoin and want to be active traders, you will likely want to start with swing trading. It is not as risky or stressful as day trading but still allows you to get your feet wet.
You will have more time to make educated decisions and won’t react to the smallest of price changes.
With day trading, you could end up making bad decisions simply because you don’t want to lose money.
Trend Trading
Trend trading is also known as position trading. It is when you hold bitcoin for a good amount of time. Usually at least several months.
A trend trader tries to see where the price of bitcoin is going over a long period of time. They then make decisions based on their analyses.
If they notice that the price of bitcoin has been going up, they will usually buy some bitcoin and wait for it to go up even more.
They will usually short bitcoin if the price keeps going down.
Scalping
One of the fastest bitcoin trading strategies out there is scalping. A scalper won’t try to take advantage of large moves.
Instead, they try to take advantage of small moves many times. For example, they will exploit gaps in liquidity or other inefficiencies in the market. A lot of people employed this strategy during the Gamestop stock surge.
A scalper doesn’t intend to hold a position in bitcoin for very long. In fact, they may very well buy and sell bitcoin in a matter of minutes, or even seconds.
Scalping can be extremely lucrative but you can also lose a lot of money very quickly. This is a very advanced technique and should only be done by professional bitcoin traders.
Buy and Hold
Buy and hold is a passive bitcoin trading strategy. Here, you buy bitcoin and then hold it for a long time, regardless of what the price does.
This is what people do when they are looking for solid, long-term investments. If you believe that the price of bitcoin is going to rise over the next five years, then you might want to buy and hold bitcoin instead of trying to time the market.
You also might have heard of HODL (hold on for dear life). This is a strategy by bitcoin believers who hold onto bitcoin even when it fluctuates wildly. They believe that bitcoin’s price will rise in the end, despite short-term volatility.
Normally, you decide when you are going to sell the position before you buy it. So you would tell yourself that you’ll give yourself a certain amount of months of years with the position and then sell it.
Make sure to learn more about bitcoin so that you can become an even better trader.
The Importance of Knowing Bitcoin Trading Strategies for Beginners
Hopefully, after reading the above article, you now have a better idea of the different bitcoin trading strategies that you should know about. As we can see, the strategies can vary greatly. So figure out what you are comfortable with and try that.
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