If there’s one thing consistent about Bitcoin, it’s that it’s always inconsistent. Just when everyone agrees that the bears are taking control, BTC sees its highest intraday gain since 2011. Most of us looked on with a mix of incredulity and irritation. After all, Bitcoin may have been making huge gains, but not many people placed their bets the right way.
If you’re interested in exploring your trading options, rather than just sitting on the sidelines, here are a few ways you can trade.
Buy and Hold
Of all the Bitcoin trading strategies out there, buying and holding is certainly the simplest. That doesn’t necessarily mean that it’s the most profitable, however. HODLing is a long game. Most traders who buy and hold wouldn’t even consider selling their BTC based on last Friday’s record rally.
HODLers must be patient. They need to be able to absorb the breakouts and the downturns and understand that their belief is that the asset will appreciate in value over time. Not only should HODLers not worry about market slumps, but they should be ready to ‘buy the dip’ (purchase more BTC when it’s at a lower price).
Scalping is a very labor-intensive style of trading that requires discipline, study, and zero emotional attachment to the underlying asset. Digitex Futures CEO Adam Todd made a living as a scalp trader in the open outcry pits of London back in the 90s. He says that scalpers make money based on the short-term and on the smallest fluctuations in price.
Many scalpers will open multiple positions in one day and enter and exit a trade within seconds. “Scalping requires constant attention to the screens and price movements,” he says, “you can’t be checking your Facebook or reading emails if you want to be successful at scalping.”
Mr. Todd is preparing to launch the first commission-free Bitcoin futures exchange with a testnet date slated for next month. He says that part of his motivation is that scalping on fee-charging exchanges is “pretty much impossible right now” and that scalp traders often lose their small gains to commission fees.
You shouldn’t penalize your most active traders lending you all the liquidity by crippling them with commission fees. Digitex will charge no commissions on any transaction.
This will make this style of trading much more attractive in the cryptocurrency markets.
Trend trading Bitcoin as the name suggests requires identifying a market trend and correctly placing your call, whether long or short. This involves much technical analysis and trend traders will probably spend a lot of time analyzing charts. Ideally, they should know quite a lot about the underlying asset (BTC in this case) and spot a trend before the rest of the market in order to make a profit.
You need a fair bit of experience to trend trade, or at least have enough money to lose. The main takeaways from trend trading are that you need to get in fast, make a profit, and exit your position before the trend corrects.
If you aren’t willing (or able) to dedicate a whole day to Bitcoin trading, another way to trade is swing trading. As the name suggests, swing traders accumulate on a downward swing and sell when the price is high. It’s particularly suitable for cryptocurrency markets since there is such high volatility and chances to make a lot of money if they make the right calls.
When deciding on a Bitcoin trading strategy, ask yourself how much time and money you want to commit. Remember the Digitex Futures CEO spoke about scalp trading requiring all of your focus. That may be true, but it can also be less risky than holding a long (wrong) position. As with anything Bitcoin, DYOR and never trade more than you’re able to lose.