Bitcoin trading allows you to speculate on price movements in the cryptocurrency. While buying bitcoin through an exchange in the hope that its price will rise over time has traditionally been the case, cryptocurrency traders are increasingly using derivatives to speculate on both rising and falling prices – to capitalize on bitcoin’s volatility.
Discover What Influences The Price Of Bitcoin
To capitalize on a rising opportunity or short the latest bubble, you must first understand the factors that influence bitcoin’s price:
- Bitcoin availability. The current bitcoin supply is limited to 21 million units, which will be depleted by 2140. Because of the limited supply, the price of bitcoin may rise if demand rises in the coming years.
- Negative publicity. Any new information about bitcoin’s security, value, or longevity will hurt the coin’s overall market price.
- Integration. The public perception of Bitcoin depends on its incorporation into new payment systems and banking frameworks. Demand may increase if this is successful, benefiting bitcoin’s price.
- Important occurrences. Changes in regulations, security breaches, and macroeconomic bitcoin announcements can all impact prices. Any agreement between users to speed up the network could boost confidence in bitcoin, causing the price to rise.
Choose a Bitcoin Trading Strategy and Style
You can choose from the following trading styles and strategies:
- Day trading
- Trading trends
- Hedging with Bitcoin
- HODL (or buy and hold)
How to Trade Bitcoin During the Day
Day trading bitcoin involves opening and closing a trade position within a single trading day, which means you won’t have any bitcoin market exposure overnight. You won’t have to pay overnight funding fees for your position. And this strategy is ideal for anyone that wants to profit from bitcoin’s short-term price movements. It can help you take advantage of daily volatility in bitcoin’s price. You can day trade Bitcoin now with automated programs that help observe daily trends.
How to Trade Bitcoin Trends
Trend trading entails taking a position that corresponds to the current trend. For instance, if the market is in a bullish trend, you will go long; if the market is in a bearish trend, you will go short. If this trend began to slow or reverse, you would consider closing your position and opening a new one to match the new direction.
Hedging Strategy for Bitcoin
Hedging bitcoin means reducing your risk exposure by taking an opposing position to the one you already have open. You would do this if you were worried about the market moving against you. For example, if you owned bitcoins but were concerned about a short-term drop in value, you could use CFDs to open a short position on bitcoin. If bitcoin’s value drops, the profits from your temporary position will cover some or all of your losses on the coins you own.
Bitcoin HODL Strategy
The ‘HODL’ bitcoin strategy entails purchasing and storing bitcoin. The word originates from a misspelling of the word “hold” on a popular cryptocurrency forum, and it is now commonly said to stand for “hold on for dear life.” This phrase, however, should not be taken too seriously; you should only buy and hold bitcoin if you believe its long-term price will rise. If your research and trading plan shows that you should sell your positions to take profit or limit loss, you should do so – or you could set stop losses to close your trade positions automatically.
Decide If You Want To Go Long-Term Or Short-Term
Trading financial derivatives allow you to go long or short, depending on current market sentiment. Going long means you expect the price of bitcoin to rise while going short on trade means you expect the price to fall.