Trading Bitcoin like every other business requires a viable strategy to yield the best results. In this article, we shed light on the best strategy for trading bitcoin that we’ve observed over our vast years of experience trading cryptocurrency.
Long-term traders like to maintain their Bitcoin positions for prolonged periods of time, however, day traders have realized that Bitcoin is profitable for a variety of reasons:
- The volatility of cryptocurrency trading exceeds that of stock trading.
- Bitcoin is traded around the clock, seven days a week.
- Bitcoin enables large deals with little overhead.
- Bitcoin is the most liquid cryptocurrency form.
- Several chances to trade can occur within a 24-hour period.
Our top pick for trading Bitcoin and other cryptocurrency assets is the Bitcoin Circuit site. Since Bitcoin is more volatile than other tradable assets, there will be several profitable trading chances every day. And just as in regular currencies, using technical indicators makes it simpler to predict when price rises are probable. Volume, relative strength, oscillators, and moving averages can all be used when day trading Bitcoin.
The best strategy we have discovered for trading Bitcoin is using the OBV indicator. It is critical to keep an eye on technical indicators and emerging trends. Let’s go on to discuss OBV trading and how to get started buying and selling cryptocurrencies.
Best Strategy for Trading Bitcoin – 5 Simple Steps to Profit
This is a cryptocurrency trading strategy that can be applied to all major cryptocurrencies. This is, in fact, an Ethereum trading strategy as well as a Bitcoin trading approach. The greatest Bitcoin trading method consists 85% of a price action approach and 15%, a cryptocurrency trading strategy that employs an indicator.
Before we proceed, let’s define this enigmatic technical indicator you’ll be working with in this strategy to trading Bitcoin:
The one indicator you’ll be using is the:
On Balance Volume (OBV) Indicator
This is, no doubt, one of the best indicators for trading Bitcoin. It is used to examine the overall amount of money flowing into and out of a financial instrument. The OBV employs a mix of volume and pricing action. This indicates the total amount of money entering and exiting the market.
The OBV indicator is available on most trading platforms, including Tradingview and MT4. It is fairly simple to interpret the information from the OBV indicator. You may discover how to benefit from trading here.
In principle, if Bitcoin is trading higher while the OBV is trading down, this indicates that individuals are selling into this rise. The upward trend would not be sustainable. The same holds true if Bitcoin was trading down while the OBV was trading higher.
What we actually want to see is the OBV moving in tandem with the Bitcoin price. Later on, you’ll learn how to use this knowledge in conjunction with the Bitcoin trading strategy.
There is no technical indication that is 100% successful every time. In this sense, our team at Trading Strategy Guides use the OBV indicator in conjunction with other supporting data to sustain our trades and get more confirmation. We will be using the Ethereum trading strategy to identify Bitcoin trading opportunites in the next stage.
Before proceeding, we usually recommend grabbing a piece of paper and a pen and writing down the principles of the best Bitcoin trading strategy.
The Best Bitcoin Trading Strategy – (Rules for a Buy Trade)
Step 1: Combine the Bitcoin and Ethereum Charts, As well as the OBV Indicator, on a Single Chart
Your chart arrangement should essentially consist of three windows. One for the Bitcoin chart and one for the Ethereum chart. Finally, create a window for the OBV indicator.
Step 2: Search for Smart Money Divergence between the Bitcoin and Ethereum prices
Simply put, we will monitor price difference between Bitcoin and Ethereum. When one cryptocurrency fails to confirm the activity of another cryptocurrency, this is referred to as smart money divergence.
For example, if the price of Ethereum breaks above a key barrier or a swing high but the price of Bitcoin does not, we get smart money divergence. This implies that one of the two cryptocurrencies is “lying.” This is the primary reason we employ this strategy as well as the Ethereum trading strategy to trading Bitcoin.
When we’re in a trend, the Bitcoin market as a whole should move in the same direction, which is why the smart money divergence idea works. For decades, the same concepts have applied to all other major asset groups. This is also true for Bitcoin trading strategies.
We need confirmation from the OBV indication before we buy. This leads us to the next stage in building the best Bitcoin trading strategy.
Step 3: Expect the OBV to Rise in the Direction of the Trend
If Bitcoin is lagging behind the price of Ethereum, it implies that Bitcoin will eventually follow Ethereum and break over the barrier.
How do we know this, though?
Putting it simply, the OBV is an outstanding technical indicator. It can tell us whether real money is purchasing Bitcoin or selling it. When Bitcoin fails to break above a resistance level or a swing high, and Ethereum has already broken, we want to see the OBV grow in the direction of the trend. We also want it to rise above the level at which Bitcoin was previously trading at this barrier level. All that is left for us to do now is place our purchase limit order, which leads us to the next stage in the best strategy for trading Bitcoin.
Step 4: Place a Buy Limit Order Near the Resistance Level to Try to Catch a Possible Breakout
When the OBV indicator becomes green, all we have to do is place a purchase limit order. Place this order at the resistance level as you wait for the possible breakout.
All that remains to be determined for the best Bitcoin trading strategy is where to set our protective stop loss and when to grab gains.
Step 5: Set Your Stop Loss Under the Breakout Candle and Exit When the Obv Reaches 105,000
Trading with a stop loss below the breakthrough candle is a good idea. When it comes to our take profit, an OBV reading above 105,000 is typically considered an extreme reading that indicates at least a halt in the trend. This is where we intend to make money.
**Please keep in mind that the preceding was an example of a purchase trade… For a sell transaction, follow the identical procedures as for a buy deal, but in reverse. An actual SELL trade example utilizing the finest Bitcoin trading technique is shown in the picture below.
Methods to Improve this Bitcoin Day Trading Strategy
While there are certain dangers associated with Bitcoin day trading, these risks may be mitigated in a variety of ways. Here are some of the most effective strategies to improve your Bitcoin trading approach.
- Keep in mind to diversify your trades. Combining Bitcoin, Ripple, Litecoin, Ethereum, and other cryptocurrencies reduces the daily risk associated with a single currency.
- Reduce trading expenses. Opening numerous positions each day has an impact on your daily ROI. Choose a reputable exchange with minimal fees to save trading costs.
- Keep track of trading hours. Schedule trading hours that work with your schedule. Bitcoin is available for purchase and sale 24 hours a day, seven days a week. It’s not like the NYSE, which operates from 9 a.m. to 5 p.m.
- Keep up with Bitcoin News. To remain ahead of the market, pay attention to Bitcoin news headlines. Configure alerts and other sorts of notifications.
- Make use of technical analysis. Use powerful technical indicators such as OBV. This will assist you in justifying each of your deals.
- Use stop-loss orders. Place stop-loss orders on all trades. Begin with a profit-to-loss ratio of 2:1.
Conclusion
Perhaps one day our fiat currency system will fail and be entirely replaced by cryptocurrency. We live in a digitalized society, and the idea of Bitcoin or other big cryptocurrencies replacing the way we pay for products and services is not out of the question.
We hope that this article has thrown some light on how you could use the same technical analysis methods you use to trade the Forex market to trade cryptocurrencies.
Thank you for your time!
If you have any questions or thoughts regarding this Bitcoin trading strategy, please leave a comment below!
