There are many ways that people invest in and trade Bitcoin. One of the most fast-paced and volatile ways is through day trading. Day Trading, also called an entry strategy, is where you make several trades in a single day across a market. You need to react to price movements to make small profits across the different margins, which add up at the end of the day if you get it right.
Trade Your Own Setups
Many exchanges offer preset trading strategies. While these may work for some, we recommend trading your own setups according to your specific needs. Trading setups are straight forward. You need to recognise patterns in the markets and use previous market information to plan your Bitcoin trading strategy.
Here are some of the most popular tips for day trading.
Breakouts happen when a market first opens and increases or decreases by a high volume. These are generally linked to news events. You buy when the market value is low and sell quickly before the market hits its resistance level. Don’t get stuck trying to profit from every breakout; some are false, which we’ll discuss below in this article.
The goal in range trading with Bitcoin is when you follow a price that swings between two sets. You need to confirm the bottom and top prices in your chosen range. Make sure there are at least two similar highs and lows that have previously occurred to ensure it is a viable range to use. You then buy Bitcoin at the lower range and sell it once it reaches the higher range.
A flag is when the price has a steep drop or rise in price over a short time and then stabilises. You need to identify what the familiar flags are in Bitcoin charts. You buy before the low price steeps up and sell before the price range destabilises and drops. Trading flags usually pose fewer risks than other day trading setups.
Don’t Read the News
Another mistake traders make in Bitcoin trading is trusting the news. Most of the news reports published get promoted by a group or company and are biased. The only way to trade successfully is by reading financial pieces and learning the long-term Bitcoin trends.
Cut Your Losses
The biggest mistake traders make is holding onto a Bitcoin market when they should have cut their losses and moved on. Only enter a trading market when you have a solid entry and exit strategy and stick to it. Sometimes it’s better to skip trading for a day. By following the trends you will notice that Bitcoin or any cryptocurrency has days where profits are not attainable.
Set an amount that you can afford or are willing to lose and pull your funds out when that target is reached. Without loss limits, you are essentially just gambling on an exchange and not using it as a profit-making tool through tried and tested trends. Remember that unlike stock markets where the margins move roughly 2-3%, cryptocurrency markets can drop by as much as 80% in a matter of hours.
Visit Tradingbrowser to learn more about bitcoin trading.