Creating Bitcoin Trading Strategies: Everything to Know for Beginners

by whatsmind

Bitcoin trading is a fascinating subject. The cryptocurrency has been capturing the public’s attention for some time now, and it only seems to be rising in popularity.

With this new interest comes a lot of questions about how people should trade Bitcoin and other cryptocurrencies.

In this article, we’ll answer all your questions on creating Bitcoin trading strategies from scratch or creating your own trading plan that suits you best.

Start Off Small

Trading Bitcoin is not like trading other assets. With stocks, you can create a plan that works for your personality and risk tolerance.

But with the volatility of cryptocurrencies, creating a strategy takes some time to master before you can execute it on exchanges. Our advice would be to start small by creating a trading system that fits into your daily life first.

Sticking to what we know best will help us learn faster while sticking within our comfort zone at the same time.

As you begin creating your strategy, think about how much time you can put into trading each day.

Keep in mind that cryptocurrency markets are open 24/7 (except for the occasional maintenance) so any plan must include making trades throughout this timeframe as well.

Creating a Bitcoin Trading Strategy with Technical Analysis

Technical analysis is one of the most common ways to create trading strategies. If you’re not familiar with this method, it involves using charts and market indicators like RSI or Stochastic Oscillators to predict price movements.

Here’s an example: let’s say we want to know if there will be upward movement on the BTC/USD chart over the next few days based on its 100-day moving average indicator.

It is currently at $6300 but is trending lower, which means bearish conditions.

The 100-day moving average line is creating a “lower low” (bearish) and the 20-day exponential moving average (20 EMA) has crossed below the 50 EMA creating an even more bearish condition.

However, if we look at all three lines together they are creating bullish confirmation on each other with what’s called convergence. This indicates that there will be some upward movement in price over the next few days because of this indication alone.

Select a Secure Wallet

Once you’ve mastered creating a trading strategy using technical analysis, it’s time to look into how safely store your Bitcoin.

There are numerous types of wallets available for all users and we would recommend creating an account with Coinbase so that you can quickly transfer funds whenever needed.

Remember, be responsible when creating your wallet because if someone else gets access they will have the ability to move any cryptocurrencies out in seconds.

Our advice is always to create back-ups just in case something goes wrong or take advantage of two-factor authentication as well.

Research the Crypto Market

To create a Bitcoin trading strategy, you need to know what’s going on in the market and how it will affect your position, according to Byte Federal

For instance, if we look at the BTC/USD chart again we can see that there was an upward movement creating bullish conditions, and then immediately after this occurred bearish conditions set in creating lower lows over time.

Understanding how different events like “hard forks” or news reports may influence prices is important when creating a Bitcoin trading strategy because these changes directly impact which direction the price moves next.

Therefore, staying up-to-date with current events related to cryptocurrencies is one of our top pieces of advice for creating Bitcoins strategies from scratch.

Choose the Trading Strategy That’s Best for You

After creating a trading strategy and selecting a wallet you can begin creating your Bitcoin strategies.

As we’ve said before, there are many different ways to do this using technical analysis; the most popular of which is called “scalping”.

This method involves creating quick trades that take advantage of short-term movements in price like what was seen on our BTC/USD chart above where it goes up and down erratically throughout the day.

It’s important to note here that scalping requires you to use stop losses at all times so make sure you create backups for your account or escape out if something goes wrong.

Keep Your Eye on Stop-Loss Orders and Profit Targets

When creating a Bitcoin trading strategy, it’s important to remember two things: stop-loss orders and profit targets.

A stop-loss order helps create the risk management element of your trading plan by selling an asset if the price goes against you during a trade.

On the other hand, creating profit targets is used to define how much money you want to make before closing out your position with no more room for movement in either direction.

It is vital that these are pre-determined figures because they will be based on market movements rather than emotions or feelings alone because this could lead traders into making bad decisions over time.

Take Extreme Caution When Using Leverage

Leverage is when you increase your trading level by creating a loan so that you can buy or sell Bitcoins at bigger volumes.

To create the best Bitcoin strategies, it’s important to take extreme caution when creating leverage because there are two sides to this story – both negative and positive.

The upside is that if the market goes in the direction that you want then leveraging allows for more trades creating higher returns on investments (ROI).  

However, just like any other financial loan, it will need to be paid back with interest which means using too much of it could lead to debt down the road.

Diversify Your Portfolio with Different Cryptocurrencies

Creating a solid Bitcoin trading strategy requires that you diversify your portfolio with different cryptocurrencies.

This will allow for maximum growth over time because the market is unpredictable at times and one currency could see price spikes while others are being undercut by competitors across exchanges.

For example, let’s say someone creates an Ethereum trading strategy based on what they know about Bitcoins but doesn’t take into consideration how Litecoin or Ripple may be affected.

This would create problems down the road if something goes wrong after creating it.

Creating back-ups of everything related to creating strategies makes sure all angles are covered when dealing with volatile markets where nothing can ever go 100% right in some cases.

Buy and Hold on to Your Bitcoin Because the Market is Volatile

Although creating Bitcoin trading strategies may sound like a great idea, it’s important to remember that this market can fluctuate drastically over short periods of time.

For example, look at how much BTC/USD dropped in just one day during mid-December 2017 when everyone was celebrating the holiday season.

This volatility makes creating any type of strategy risky because you don’t know what will happen next or where prices could go from here up or down even further.   

With all these changes happening so fast and frequently, creating a long-term buy-and-hold plan for your Bitcoins might be the better choice until things settle back down again.   

Never Buy Based on Emotions

The worst mistake any trader can make is creating a Bitcoin trading strategy based on emotions and feelings over technical analysis.

If you want to create the best possible plan, it’s important to follow some basic steps outlined by crypto-trading experts as well as those learned from personal experience trading cryptocurrencies for years now.   

As mentioned earlier in this article creating buy or sell orders with strict stop losses will help keep your risk management process going through thick and thin no matter how much things change overnight.

Avoid Scammers and Pump & Dump Groups

Creating Bitcoin trading strategies can be risky if you don’t know what to look out for because scammers are everywhere.

For example, creating buy orders over Twitter is never a good idea no matter how great it sounds or who suggests it because this could lead to pump and dump groups that will only eat away at your funds without providing any ROI in return.   

Instead of taking the risk on stupid decisions like this, creating solid trading plans based around technical analysis with stop losses should keep everything under control even when things go wrong.

Minimize Trading Costs and Overhead

For anyone creating Bitcoin trading strategies, minimizing overhead and transaction costs is crucial to growing your investments over time.  

Although fees will always be a part of the process in some way or another, there are ways to reduce them as much as possible without creating any significant changes that could affect ROI in negative ways.

Using well-known exchanges like Coinbase can help cut down on how much you pay when purchasing Bitcoins while transferring funds from one wallet to another also helps keep things affordable for everyone involved.   

Creating low-cost purchases and transfers allows for more money saved up which means more investment into trades creating higher returns on investments (ROI).  

Follow Bitcoin News Sites

Keeping up with the latest news stories related to creating Bitcoin trading strategies is important because you never know when something could suddenly change overnight.   

For example, if a new exchange comes online that offers lower fees than any other site around right now it would make sense to use them instead of creating another costly transfer between wallets and exchanges which can eat away at potential profits over time.

Start Creating Bitcoin Trading Strategies for You

If you’re ready to begin creating Bitcoin trading strategies, there’s no time like the present. To learn more about this subject, continue reading this blog for more helpful articles.

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