Trading Strategies for Bitcoin

Trading Strategies for Bitcoin

Bitcoin is normally described as a cryptocurrency, virtual currency or digital currency. Its ticker symbol is BTC, and its value is currently worth more than $8000 per one BTC token. You can use it to buy products and services. Bitcoin uses a peer-to-peer computer network to operate where transactions are carried out collectively by the network; meaning, there are no central monetary authority or banks. It is because of this blockchain technology that a lot of people believe that Bitcoin will continue being a pacesetter even in the coming years.

You can buy or sell Bitcoin using the cryptocurrency exchange namely Coinbase where you can also open a bitcoin wallet. Bitcoin traders are always looking for the best possible solutions for trading and investing in bitcoin. The method discussed below as a trading strategy for bitcoin is independent of the price of the coin. All in all, demo trade is advised before risking any live money since this is still trading and speculative. Moreover, strategies highlighted can also be used for trading bitcoin cash and other cryptocurrencies.

The only indicator needed for the best bitcoin trading strategy is the On Balance Volume (OBV). It uses a combination of volume and price activity to inform you the total amount of money is going in and out of the market.

Steps to consider when trading Bitcoin (buy trade):

  1. Overlay the Bitcoin chart with Etherum chart and the OBV indicator.

The OBV indicator should be moving in the same direction as the Bitcoin and Etherum price.

 

  1. Look for smart money divergence between Bitcoin and Etherum price.

Smart money divergence takes place when one cryptocurrency fails to confirm the action of the other. This concept works because he cryptocurrency market, in general, should move in the same direction when in a trend.

 

  1. Look for the OBV for a positive response in the trend’s direction.

If Bitcoin is lagging behind Etherum price and while at it, the OBV increased in the direction of the trend, the Bitcoin will later follow Etherum and break above resistance.

 

  1. Place a Buy boundary Order at the resistance mark to catch the possible breakout.

The trade gets triggered, and the Bitcoin price breaks higher just as expected.

 

  1. Place your protective stop loss below the breakout candle and take profit once the OBV reaches 105,000. An OBV reading above 105,000 is the final reading that signals a pause in the trend and thus the need to take

 

The same rules are applied for a sell trade but in reverse.

References:

  1. (Forex Trading, n.d.)
  2. (Medium Corporation, n.d.)
  3. (Trading Strategy Guides, n.d.)
About kota 28 Articles
Master's student in Estonia studying mechanical engineering. Cryptocurrency, Mining, Masternode running, IoT Technology.

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