Today’s article is all about a cryptocurrency trading strategy and day trading bitcoin. You’ve probably been hearing so much about it. There are tons of cryptocurrency trading strategies that promise to make you rich. Our team at Trading Strategy Guides understands that now everyone wants a piece of the pie. That is the reason why we have put together the best Bitcoin trading strategy PDF.
We also have a complete strategy article with a list of all of the best trading strategies we have created.
The truth is that bitcoin is the hottest trading market right now. It is hotter than stock trading, oil trading, gold trading and any other market at this point. The reason people believe this is going to continue to be a hot market is because of blockchain technology. This is what allows transactions to happen without a central exchange. Here is another strategy on how to draw trend lines with fractals.
Trading bitcoin for profit is actually a universal cryptocurrency trading strategy. It can be used to trade any of the 800-plus cryptocurrencies available to trade as of today. If you’re not already familiar with cryptocurrencies it’s best to first start with a brief introduction.
How to Start Trading Bitcoin:
The first thing you need to get started trading bitcoin is to open a bitcoin wallet. If you do not have a bitcoin wallet then you can open one at the biggest wallet called Coinbase. We have arranged a special deal for everyone wanting to get started in bitcoin to get a free $10 at Coinbase. Get your free $10 by opening your Coinbase account here.
Bitcoin traders are actively seeking the best possible solutions for trading and investing in bitcoin. We have some of the best methods explained right here in this article. We have learned this bitcoin wisdom by trial and error and we are going to show you what is working right now. The methods we teach are not dependent on the price of bitcoin. They can be used whether bitcoin is going up or going down.
Keep in mind that it is possible to lose money. Your capital is at risk while trading cryptocurrency because it is still trading at the end of the day. We always recommend that you demo trade before risking any live money. Also, read the trading volume guide.
These bitcoin strategies can also be used for trading bitcoin cash as well as other cryptocurrencies. In fact, you can use this as a trade guide for any type of trading instrument. Blockchain technology is a big step forward for how to access information. Many companies are starting to develop applications to use Blockchain in their favor. Remember that when trading digital currency, it may seem like it's not a real currency. But it actually is real. This is not some Ponzi scheme. Before you buy bitcoins, have a solid plan in place and don’t underestimate the cryptocurrency markets. You must do your technical analysis just as if you were going to day trade any other instruments. You can also read our best Gann Fan trading strategy.
Top Exchanges for Trading Bitcoin & Cryptocurrencies
One of the reasons why Bitcoin is so popular among day traders is that there are many different Bitcoin exchanges available. Finding the best Bitcoin exchange will depend on many different factors. These include your home country, the preferred method of payment, fees, limits, liquidity needs, and other factors.
Here are some of the top cryptocurrency exchanges in the market:
- Coinbase is the world’s largest crypto exchange. Available in the United States, Canada, and the majority of countries in Europe. Offers several payment options.
- Binance is the second-largest exchange that trades over 130 different currencies. Has low transaction fees (0.1%).
- Bitmex is the third-largest exchange and only trades BTC. Great for short selling and margin trades.
- Bittrex is a US-based exchange founded by ex-Microsoft security professionals.
- Robinhood is a new exchange with 6 million users and takes zero trading fees.
- OKEx is a Hong Kong-based exchange. Trades over 145 different cryptocurrencies.
- GDAX - United States-based exchange that allows users to trade Bitcoin, Ether, Litecoin, and other cryptocurrencies.
- itBit operates as both a global over-the-counter (OTC) trading desk and a global Bitcoin exchange platform.
- Coinmama - allows you to buy and sell easily. Accepts credit cards and has a large global reach.
What is This Free Bitcoin Trading Strategy?
A cryptocurrency is really no different than the money you have in your wallet. They have no intrinsic value. And cryptocurrency is just bits of data while real money is just pieces of paper.
Unlike fiat money, Bitcoins and other cryptocurrencies have no central bank that controls them. This means that cryptocurrencies can be sent directly from user to user without any credit cards or banks acting as the intermediary. The major advantage of cryptocurrencies is that you can’t print them like central banks do to create fiat money.
When you print lots of money, inflation goes up which makes the currency value going down. There is a limited amount of Bitcoins. This holds true for the majority of the other cryptocurrencies. The supply side can’t increase which makes Bitcoin less prone to being affected by inflation.
Now, let’s move forward and see how we can profit from the cryptocurrency mania. We will use our best Bitcoin trading strategy. We also have training for the best short-term trading strategy.
How to Day Trade Bitcoin
While long term traders prefer to hold their bitcoin positions for extended periods of time, day traders have discovered that Bitcoin is lucrative for many reasons:
- Crypto trading is more volatile than stock trading.
- Bitcoin is traded 24 hours per day 7 days a week.
- Bitcoin allows for big trades with low overhead.
- Bitcoin is the most liquid form of cryptocurrency.
- Multiple trading opportunities emerge within a 24 hour period.
Because Bitcoin is more volatile than other tradeable assets, there will be a high number of profitable trading opportunities occurring each day. Like ordinary currencies, using technical indicators will make it easier to tell when price increases are likely to occur. Volume, relative strength, oscillators, and moving averages can all be applied to Bitcoin day trading.
It is important to pay attention to technical indicators and developing trends. In this next step, we will talk about OBV trading and how to get started buying and selling cryptocurrencies.
The Best Bitcoin Trading Strategy – 5 Easy Steps to Profit
This is a cryptocurrency trading strategy that can be used to trade all the important cryptocurrencies. Actually, this is an Ethereum trading strategy as much as it’s a Bitcoin trading strategy. If you didn’t know Ethereum is the second most popular cryptocurrency (see figure below).
The best Bitcoin trading strategy is an 85% price action strategy and a 15% cryptocurrency trading strategy that uses an indicator.
Before we move forward, we must define the mysterious technical indicator. You'll need this for the best Bitcoin trading strategy and how to use it:
The only indicator you need is the:
On Balance Volume (OBV): This is one of the best indicators for day trading bitcoin. It is used to basically analyze the total money flow in and out of an instrument. The OVB uses a combination of volume and price activity. This tells you the total amount of money going in and out of the market.
The OBV indicator can be found on most trading platforms like Tradingview and MT4. How to read the information from the OBV indicator is quite simple. Here you can learn how to profit from trading.
In theory, if Bitcoin is trading up and at the same time the OBV was trading down, this is an indication that people are selling into this rally. The move to the upside wouldn’t be sustainable. The same is true in reverse if Bitcoin was trading down and at the same time the OBV was trading up.
What we really want to see is the OBV moving in the same direction as the Bitcoin price. Later on, you’ll learn how to apply this information together with the cryptocurrency trading strategy.
No technical indicator is 100% effective every single time. In this regard, our team at Trading Strategy Guides uses the OBV indicator with other supporting evidence to sustain our trades and gain more confirmation. The next step comes from the Ethereum trading strategy which will be used to identify Bitcoin trades.
Now, before we go any further, we always recommend taking a piece of paper and a pen and note down the rules of the best Bitcoin trading strategy.
Let’s get started…..
The Best Bitcoin Trading Strategy -
(Rules for a Buy Trade)
Step #1: Overlay the Bitcoin chart with the Ethereum chart and the OVB indicator.
Your chart setup should basically have 3 windows. One for the Bitcoin chart and the second one for the Ethereum chart. Last but not least, make one window for the OVB indicator.
If you followed our cryptocurrency trading strategy guidelines, your chart should look the same as in the figure above. For now, all should be good, so it’s time to move forward to the next step of our best Bitcoin trading strategy.
Step #2: Look for Smart Money Divergence between Bitcoin price and Ethereum price.
What do we mean by this?
Simply put, we are going to look after price divergence between Bitcoin price and Ethereum. Smart money divergence happens when one cryptocurrency fails to confirm the action of the other cryptocurrency.
For example, if Ethereum price breaks above an important resistance or a swing high and Bitcoin fails to do the same, we have smart money divergence. It means that one of the two cryptocurrencies is “lying.” This is the main reason why we have used this cryptocurrency trading strategy. And the Ethereum trading strategy as well.
If you’re still struggling to identify support and resistance we’ve got your back, simply read our guide on this topic here: Support and Resistance Zones – Road to Successful Trading.
In the above figure, we can notice that Bitcoin's price fails to break above resistance while Ethereum's price broke above and made a new high. This is the first sign that the best Bitcoin trading strategy is about to signal a trade.
The reason why the smart money divergence concept works is because the cryptocurrency market as a whole should move in the same direction when we’re in a trend. The same principles have been true for all the other major asset classes for decades. It’s true for the cryptocurrency trading strategy as well.
Before buying, we need confirmation from the OBV indicator. This brings us to the next step of the best Bitcoin trading strategy.
Step #3: Look for the OVB to increase in the direction of the trend.
If Bitcoin is lagging behind the Ethereum price it means that sooner or later Bitcoin should follow Ethereum and break above the resistance.
But, how do we know that?
Simply put, the OBV is a remarkable technical indicator. It can show us if the real money is really buying Bitcoin or if they are selling. What we want to see when Bitcoin is failing to break above a resistance level or a swing high, and the Ethereum already broke, is for the OBV to increase in the direction of the trend. We also want it to move beyond the level it was when Bitcoin was trading previously at this resistance level (see figure below). Here is how to identify the right swing to boost your profit.
Now, all it remains for us to do is to place our buy limit order, which brings us to the next step of the best Bitcoin trading strategy.
Step #4: Place A Buy Limit Order at the resistance level in an attempt to catch the possible breakout.
Once the OBV indicator gives us the green signal, all we have to do is to place a buy limit order. Place the order at the resistance level in anticipation of the possible breakout.
It’s no surprise to see this trade getting triggered and for the Bitcoin price to break higher than expected. After all, we told you the OBV is an amazing indicator.
Now, all we need to establish is where to place our protective stop loss and when to take profits for the best Bitcoin trading strategy.
Step #5: Place your SL below the breakout candle and take profit once the OBV reaches 105,000.
Placing the stop loss below the breakout candle is a smart way to trade. We’ve written more about the reasons for hiding your SL above/below the breakout candle in our most recent article here: Breakout Trading Strategy Used by Professional Traders.
When it comes to our take profit, usually an OBV reading above 105,000 is an extreme reading that signals at least a pause in the trend. This is where we want to take profits.
Note** The above was an example of a buy trade… Use the same rules – but in reverse – for a sell trade. In the figure below, you can see an actual SELL trade example, using the best Bitcoin trading strategy.
Ways to Enhance This Bitcoin Day Trading Strategy
While bitcoin day trading does have some risks, there are many ways these risks can be reduced. Here are some of the top ways to enhance your Bitcoin trading strategy.
- Diversify your trades. Combining Bitcoin, Ripple, Litecoin, Ethereum, and other cryptocurrencies will help reduce the daily risk associated with a specific coin.
- Minimize trading costs. Opening multiple positions every day affects your daily ROI. To minimize the cost of trading, choose a trustworthy exchange that has low fees.
- Watch Trading times. Plan out trading times that are compatible with your schedule. Bitcoin trades 24 hours a day. It's different from the 9-5 NYSE.
- Follow Bitcoin News. Pay attention to cryptocurrency news stories to stay ahead of the market. Set up alerts and other types of notifications.
- Use technical analysis. Use strong technical indicators like OBV. This will help you justify each of your trades.
- Use stop losses. Set stop-loss orders on every trade. Start with a profit loss ratio of 2:1.
Maybe one day our fiat money system will go under and be completely replaced by cryptocurrencies. We’re living in a digitalized world and the possibility of Bitcoin or any other major cryptocurrencies to replace the way we pay for the goods and services is not beyond the realms of possibility.
However, as long as there are still profits to be made from Forex currency trading we encourage you to read our receipt for Forex trading success: How to Make Money Trading – 2 Keys to Success.
We hope that The Best Bitcoin Trading Strategy – has shed some light on how you can use the same technical analysis tools that you use for trading the Forex currency market to now trade the cryptocurrencies.
Ready to get started? Learn about other top investments in our Best Cryptocurrencies to Invest in 2020 Guide.
Thank you for reading!
Please leave a comment below if you have any questions about this best bitcoin trading strategy!
Also, please give this strategy a 5 star if you enjoyed it!
Please Share this Trading Strategy Below and keep it for your own personal use! Thanks, Traders!