Top Bitcoin Trading Strategies

• Vikash Kumar Das
• October 03, 2023

Bitcoin trading is becoming more popular every day, and the market is not showing any signs of slowing down. So, if you are considering investing in Bitcoin, now is the time to strike. Find out how to buy Bitcoin and join in on the action.

Although many trading tools will make it easy for you, you still need to understand trading strategies to succeed. Whether you are a newbie or an experienced Bitcoin trader, the following Bitcoin trading strategies will help you succeed.

HODLing

HODLing is perhaps the most popular Bitcoin trading strategy. The term HODLing was first coined in a Bitcoin forum over seven years ago. The author simply misspelled the word ‘HOLD.’ He intended to indicate that he would not be exiting his position. HODLing has since evolved to become a popular Bitcoin trading strategy. HODLing involves holding a long position on Bitcoin and hoping it will increase in price in the long term. It is particularly a great Bitcoin trading strategy for new traders or traders who are unsure about their trading skills.

However, it is worth noting that Bitcoin is extremely volatile, and Bitcoin prices could go down instead of rising. In such a case, the HODLing strategy results in losses. That is why this strategy is not recommended without a risk management plan in place.

Hedging

Ever came across the phrase ‘hedge your bets’? That is exactly what this Bitcoin trading strategy involves. Hedging is the practice of opening trades to eliminate or reduce the risks to existing positions.

Since Bitcoin is notoriously volatile, there is always a possibility of losing money on trades in the short term. Thus, it is necessary to ‘hedge your bets’ by opening a position to mitigate the effects of a decline in the short term.

There are three ways to go about hedging Bitcoin.

Short-sell

Short-selling involves selling your Bitcoin at the prevailing market prices with the hope that the price will decline, and you will be able to buy it back at a lower price. If the price goes down, you buy it back and make a profit from the difference. This profit helps to offset any loss from your existing positions. Short-selling is not without risks, though. You will suffer a loss if the price rises instead of going down.

Hedge with CFDs (Contracts for Difference)

You can use several financial instruments to hedge your Bitcoin exposure, but most traders prefer CFDs. If you have a long position (betting on the price to rise), you can open a CFD that bets on the Bitcoin price declining.

Hedge with Bitcoin futures

Bitcoin futures are contracts between two parties who agree to trade Bitcoin at a specific price on a specified future date. It doesn’t matter how the price moves; the trade must happen.

Trend trading

This strategy depends on the prevailing trends in the market. You can either keep a close eye on what other traders are talking about or use technical analysis to make an educated guess on what will happen next.

Endnote

Bitcoin trading is, without a doubt, one of the most flexible ways of making money online. However, there is a need to consider risks and put strategies in place to manage the risks.