Bitcoin Forex Trading Strategies

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An Introduction to Bitcoin Forex Trading Charts, Technicalities and Strategies

Bitcoin trading and forex trading have a lot more common than you think but there are differences as well. While bitcoin is a new phenomenon, forex trading has existed for almost a century and the price of shares are known to get far from their realistic value. Bitcoin and even other altcoins are also said to inflated beyond reasonable price range but they eventually stabilize and correct themselves faster than the stock exchanges. With shares, almost everyone is out to buy shares for a small amount of time maximum a day or two so that they can try and profit from its sale and get out before the prices decline. The same is quite prevalent in the bitcoin and other crypto currencies but there is still a sizable number of people who buy bitcoins with a longer holding period in mind. So if you have a good knowledge of stock exchange doesn’t mean you will have it good with bitcoins too and it can get really confusing with several coins being traded against each other and bitcoins. Here is a rundown of how things are done in the bitcoin world.

The first thing you will notice after reading the charts of bitcoin futures is the volatility. The volatility is there and many people hope to benefit from it. Just like people making money from commodities trading and general flat currencies trading, the cryptocurrencies traders are also looking for a quick fix strategy. Only big investors and funds devise complex strategies. If you are new to all this, here are a few strategies with the help of graphs you can try out in the beginning.

Day Trading and Intra Range Strategy

Day trading translates into trades predicted within a day. Intra range strategy is also a regularly used short term approach in which traders make small increments by using sudden fluctuations. Trading this way takes a lot of practice and know-how of the market. You can’t just do it on impulse. This is also used in the forex trading and other markets.

Shorting, Long Bets, Options, and Futures Trading

Long bets or trading is like buying a good and hoping the price will increase in the coming days or weeks. Basically we wait out till the price is right and then you cash out. You can cash out before that for liquidity purposes as well. There are other methods by which you can trade in the crypto market. But, in my opinion, betting on bitcoin futures is not something to be encouraged a lot. The market is too volatile!
Profiting in the Bearish or the Bullish Market

You must have heard these numbers while watching the news. A bullish market is the one in which share prices or in this case the whole coin market are generally increasing. When the price is increasing, many traders like to buy coins which further escalates the price and then they hope to sell it before it nosedives for the upteenth time. A bearish market on the other hand is the one in which the coin prices are overall falling. Now traders who have bought the shares at lower prices want to get out and make a profit before they lose. So, they start selling and it triggers a significant decline in the market. Some smart investors buy shares at lower prices in a bullish market because they believe the right price is much higher. So, either bullish or bearish, traders are always interested and follow its future.

Bitcoin Trading Strategies

We will discuss some of the more complex strategies involving charts and graphs. Many people make the mistake by saying bitcoin market is so volatile, data and charts don’t matter. While it is true that the market is so volatile that nothing is concrete, but in the end the traders who determine the price are human and the conditions around us are mostly man-made. Human mind subconsciously works very systematically and behaviours are well-recorded. So these charts and graphs are really useful and if you want your bitcoin fluke to become a consistent source of income with this trading, you need to understand how to use the charts to your advantage.

Here are a few strategies using charts and data that you can try:

The Candlestick Chart

This technique is also used by other markets like the commodities exchange and stock exchange. It is a good technique especially for an intermediate level trader who is trying to stick to a proven strategy instead of guessing and predicting all the time. Unlike regular charts, the candlestick charts can give different aspects to the same price data. As the trader gather enough data, he can try and predict the future trend of the coin. While there is nothing for sure in the crypto market, it is a proven strategy that you should always consider.

Altcoin Flipping Techniques

Just like stock exchange you can use robust flipping techniques with bitcoins to make money. According to one approach you divide the bitcoins you hold into five equal trading packs. Suppose you have one bitcoin and you divide it into 5 packs of .20 bitcoin.

You can use:

0.2 Bitcoin for buying ETH
0.2 Bitcoin for buying Litecoin
0.2 Bitcoin for buying Ripple XPR
0.2 Bitcoin for buying gamecredits Game

0.2 Bitcoin for any short term investment you would like to make in any coin where you think it is the right time to swoop in.

Now you need to pick the right currencies to trade depending on chart data and prices. No matter how small your capital is, even if around $100, you can find currencies to trade in the crypto world. But, don’t go for the cheapest if you have enough money. Blue Chip altcoins are much more likely to be profitable in the short term than newer coins.

You can use the last unallocated short term investment in many different ways. A risker approach is that you use it to speculate the futures of the bitcoins, ETH and other altcoins. You don’t do it reactively and instinctively at all. You look for coins whose trading volume is increasing or is predicted to increase. The coins with higher trading volume represent good short-term profit-making opportunities.

Technical Analysis Approach for Bitcoin Trading

After speculative and basic techniques are tried, bitcoin traders are advised to get into the tried-and-tested approach of technical analysis. Using this technical approach, traders can make sense of all the data and identify key trends that will result in them making better predictions.

A basic understanding of the Dow theory is essential to understanding it.

Here are a few key points of the theory:

● The current price and trend reflects the coin’s entire journey up till this point.
● Price movements even if they appear entirely random are quite likely to follow trends
● What’s happening is more important than Why its happening. Its a market and you don’t need to rationalize its behavior and you have to catch up
● Historical price drops and surges have a way of repeating themselves

So, armed with this knowledge and approach, we now move to the most difficult part.

Trend Identification

You can see that the market is volatile and it all seems to be really random but experienced technical analysts can always identify one or more trends that the market is following. So, ignoring the short term trends, we can help identify an uptrend in the making and then make profit from it. Similarly downtrends and sidetrends can also be identified and used for strategic advantage.

Moving Averages

Moving averages is a way to smooth out price fluctuations in a graph to have a better sense of where the price is going. You can use a very simple, basic method of doing it called simple moving average. While it is not that reliable, you can still use it to observe the trend of any particular coin or the market as a whole. You must calculate the average price of a coin over a 20-day period.

A more useful approach is called exponential moving average. This approach is much more dynamic and provides insight into the more recent pricing of the particular coin.

By using these moving averages techniques, we can see where the market is going as a whole. If the 20-day market average is lower than the 5-day average then it points to a bearish market turning into a bullish market.

This chart shows the five day average SMA 5 surpassing a 20-day average.

Bitcoin Trading Strategies

Support and Resistance

This one is an extremely crucial tool for analyzing the market before making strategic purchases or sales. The support and resistance levels give a good measure of demand and supply of any major altcoin in the market.

The support level is defined as the price at which an overwhelming number of traders are ready to buy a coin. The actual rate of the coin hovers above the support level and as it approaches the support level, traders and investors are ready to invest in it. This creates a “floor” just like in stock exchange.

For example, if the BItcoin price has stabilized above $2000 for some time and it then retreates below $2000, many investors will be tempted to buy it since they believe it is the support level.

 

Bitcoin Trading Strategy

This chart shows the support level shown by a constant green line.

You can see as soon as it drops below the support level, it rises again. The support level is different according to different investors but many subconsciously are predicted to agree on its range.

Now the resistance is the countering factor of support. It is the price above the current price where investors are likely to sell it because it has become overpriced and inflated. When it touches that level, traders are expected to sell it.

Bitcoin Strategy

Now the green line is represented by the resistance level. You can see that once it is breached, the currency is likely to go back under due to selling trends.

Now support and resistance depend on many factors. They are also very dynamic. Different chart situations mean different ranges of support and resistance in the minds of investors, especially short term ones. I hope this chart will make things a lot clear:

Bitcoin Support and Resistance

You can see here that the chart here represents the support and resistance level shown by two lines of the same color. The price range in between these two levels is called the range.

You can see that range can move up and down the graph, get squeezed and expanded at all times as the overall price of currency takes a hit or surges. It is a fascinating statistic to study, no?

Volume

Volume is also really important to consider before evaluating the current market and making predictions. High volume means surging price trends and strong figures while lower volume means lower figures.

For example, if bitcoin has a field day and enjoys a long upward trend and then immediately drops shorply, you need to check out the volume of the traded coins. You are most likely to see that the volume has also dropped along with the price.

Here volume is shown by green arrows.

Bitcoin Volume Trading

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