Popular Bitcoin Trading Strategies
Bitcoin trading is all the rage, as the currency is reaching new highs. You can manage your crypto assets and make a profit in a variety of ways. Before learning about the most common strategies, accept the risks. Despite its popularity, Bitcoin is still highly unstable. Skepticism should not prevent you from taking action altogether, but precautions are necessary.
Most market experts admit there is no universal recipe for success. One thing is certain: without a plan, your assets are likely to vanish quickly. If you have little or no experience trading Bitcoin, consider these famous methods. Please note that they are described for illustrative purposes only — we do not give any advice.
Prerequisites for Trading
To begin trading BTC, you need two things. First, get an account with an online charting tool. Examples include Yahoo! Finance and TradingView. Secondly, you need to understand how candlesticks are read — at least, the basics of it.
1. Dollar Cost Averaging (DCA)
This strategy requires you to take a long view, and it is based on the wise division of assets. For instance, if you have $5,000 to invest in BTC, you will divide the sum into 10 equal parts (lots), so each portion is worth $500. This is the initial setup.
Next, you pick a time and day for trading. For example, this could be noon on Monday. Then, you buy a single lot every week at the specified moment. In 10 weeks, you will have invested the entire amount ($5,000). So, what is the point?
When you spread your investment over an extended period, this eliminates some of the effects of volatility. During these 10 weeks, the value may rise and fall steeply, but you should get more Bitcoin than you would if you have invested everything at once. On average, this holds true.
2. Golden Cross/Death Cross
This method is built around Moving Averages — indicators that are also widely used in the trading of fiat currencies. They reflect the average price of an instrument over a certain period (e.g., 10 days, 50 days, etc.).
Bitcoin traders may focus on two MAs — for the 50-day and 200-day periods. On daily or weekly charts, these lines may cross, which pinpoints a favorable moment for entry. The term ‘golden cross’ refers to the situation when the 5-day MA crosses above the 200-day MA. This means that the prices are on the rise, and you ought to buy.
If it crosses below it, you are looking at the ‘death cross’. Here, selling is recommended. This pattern is observed when the number of sellers is growing, so the value is likely to drop further.
These are popular strategies but do not consider them infallible. They may or may not work for you. remember that the financial market is beyond any individual’s control. Proven methods make your forecasts more accurate, but professional advice is still recommended.