The present article is about trading strategies investors should adopt in 2023 to trade Bitcoin successfully. If you’re reading it, you most likely have heard plenty about how Bitcoin is a smart investment now that the market is in the bear phase and the cryptocurrencies are listed at lower prices. There are tons of investment strategies that could enable you to take advantage of the current Bitcoin price, but how can you find the one that fits your trading style?
Even if its value dropped from its highest point, Bitcoin remains the hottest digital currency in the market. Bitcoin trading is hotter than gold, stock, or oil trading because it enables investors to make greater revenues. Bitcoin enthusiasts believe the market will grow once it exists in the bear phase because it’s based on blockchain technology. Blockchain technology enables people to complete transactions without the involvement of a central exchange.
Investing in Bitcoin to make a profit is a well-known trading strategy.
Decide if you want to invest in Bitcoin short-term or long-term
Bitcoin is one of the most volatile assets on the market and can result in substantial gains or losses. Before adding it to your portfolio, you need to understand how it works and how it’s connected to other digital currencies. Exploring blockchain, reading guides, and keeping an eye on the market moves are some ways to determine if Bitcoin trading meets your investment goals.
Before engaging with the market in any way, remember to invest only what you afford to lose, and consider discussing with an experienced trader before you get started.
Once you gain knowledge about the market, it’s time to decide which approach suits you better because you can engage in short- or long-term trading.
As a short-term trader, you need to identify the opportunities that allow you to take advantage of Bitcoin’s price swings and create and execute trades according to them. This trading style is risky, stressful, and more active, so you must decide if it fits your personality. It’s worth saying that it offers faster and larger returns if you learn to do it right. Short-term trading is ideal if you want to make a profit from Bitcoin prices dropping and rising.
As a long-term trader, you must buy Bitcoin tokens and hold them for weeks, months, or even years, with the intention of selling them later for a profit. According to most crypto experts, Bitcoin’s value will grow in the long run, so you don’t have to stress about trading actively. Suppose you want to add an asset to your investment portfolio and wait for it to make you a profit; this is the perfect strategy for you.
Learn to read charts and place trades
Before buying Bitcoin, ensure that crypto trading is right for your investing strategy and you understand the risks associated with working with an asset as volatile as Bitcoin. Learning how to read graphs and understand how various order types work is also crucial. For example, Binance offers 3 basic order types OCO, stop-limit, and market.
OCO or One Cancels The Other is an order type where 2 stop-limit orders combine, and they cancel each other mutually if particular conditions are met. It would help if you established an active duration for each stop-limit and OCO order.
Stop-limit is an order type that requires you to pick a stop price and limit price. When Bitcoin reaches the stop price, you sell for at least the limit price you chose.
Market order types imply buying or selling at the present market price and completing your trade immediately.
Make a Bitcoin trading plan
If you just entered the crypto market, you might wonder what the difference is between trading and gambling. The main difference is that you need a plan when you trade assets like Bitcoin. The essential step in creating a plan is to ensure the strategies you choose to match your investing goals.
A successful trading plan includes three steps:
– Look for patterns. Learning to read charts and create a Bitcoin trade plan is crucial because you need to identify patterns in previous market movements and use the information to predict future swings. Some patterns frequently emerge across the crypto market that experts gave names (support, resistance). However, others are more obscure and require in-depth attention. For example, you might find out that Bitcoin goes up when Ethereum registers value drops, and you could use the pattern to trade.
– Craft a plan and stick to it. The average crypto trading plan should include two components: where you take profits and where you cut losses. For example, you might decide that you want to sell 20% of your Bitcoin when the cryptocurrency’s value increases to $1000 (the point where you take profits) and sell all your coins if the price drops below a set value (the point where you cut losses). To employ this step, you need to set some stop-limit order. It might not be the most effective trading plan, but it enables you to set some boundaries.
– Experiment. It’s advisable to test several Bitcoin trading theories before investing a large sum. Backtesting and paper trading are effective strategies, and several trading platforms allow you to use them. Paper trading, for example, is a strategy that allows you to use fake funds on the crypto market, to test your Bitcoin trading strategies in the present conditions.
Bitcoin trading is associated with several risks, similar to trading any other asset.
– Bitcoin is volatile, making it more attractive to investors.
– Bitcoin functions on unregulated, manipulated markets.
– Inaccurate patterns. Sometimes it’s impossible to identify a pattern according to which Bitcoin’s value evolves.
– You’re over-exposed, so it’s best to not invest more than you afford to lose.
– You can use excessive leverage because several exchanges offer high leverage to enable you to magnify the potential risks.
Trading Bitcoin is excellent to make a profit if you’re a seasoned investor. You can pick the trading style that best suits you and create strategies that allow you to reach your goals.