Today, the cryptocurrency market cannot yet be considered fully mature, despite its significant influence on other financial assets.
- Regulatory frameworks from authorities worldwide are still under development;
- many still express doubts about the applicability of Blockchain technology in its current form as a tool for large-scale business;
- there are frequent releases of questionable information that cause excessive volatility;
- periodic bankruptcies and hacker attacks on crypto exchanges do not go unnoticed.
All these factors indicate a heightened risk in this market.
Contents
- Major Cryptocurrencies for Investing and Trading
- Trading Bitcoin Through a Broker
- Bitcoin Trading Strategy
- 3 Technical Strategies for BTC That Work
- Short-Term Bitcoin Strategies Gain New Life
- Conclusion
Major Cryptocurrencies for Investing and Trading
Bitcoin (BTC) is the driving force of the cryptocurrency market. The first exchange of Bitcoin for national currency took place in September 2009, when 5050 bitcoins were exchanged for 5.02 US dollars. Today, BTC/USD is the most valuable asset in the crypto market. Its high volatility, which can be nerve-wracking for investors, allows speculators to profit from short-term price movements.
Ethereum (ETH) is the second most popular and capitalized cryptocurrency. Currently, most market participants view it more as an investment asset rather than a speculative one.
Besides these two main cryptocurrencies, popular options among investors and traders include Bitcoin Cash, Ripple, Bitcoin Gold, Litecoin, Dash, NEO, Monero, IOTA, and others.
Major exchanges offer trading pairs for digital currencies, with the most popular being BTC/ETH, DSH/BTC, and LTC/BTC. Trading these pairs requires thorough analysis of news and awareness of key events affecting the crypto market.
Interest in the cryptocurrency market is growing not only among professional investors but also among the general public.
Trading Bitcoin Through a Broker
One of the simplest ways to start with cryptocurrencies is by opening a trading account with a major forex broker. Due to the rising popularity of crypto assets, more companies now offer digital currency trading to their clients. The conditions among brokers are generally similar.
They usually provide access to crypto trading via MT4 and MT5 platforms. For example, with BTC/USD:
- The minimum lot size is typically 0.1 bitcoin,
- the spread is around 0.3-0.4%, making trading on higher timeframes (H1 and above) more logical,
- leverage ranges from 1:1 to 1:5, so a deposit between 200 and 1,000 USD is needed to start trading,
- broker commissions usually range from 0.2% to 0.3% of the trade amount.
It is important to note that trading bitcoin with a forex broker is done through CFDs (Contracts for Difference), which allow earning from both rising and falling prices without owning the actual asset. For maximum security, it is recommended to open accounts with regulated brokers licensed by reputable financial authorities such as ASIC, CySEC, FCA, and others.
Bitcoin Trading Strategy
When discussing bitcoin trading strategies, it is essential to remember that bitcoin is a market commodity like any other. Therefore, it is subject to the same psychological and fundamental influences as other trading instruments.
There is a common opinion that there is too little historical trading data for bitcoin to rely heavily on technical analysis, and that more time should be spent studying the news background and market crowd reactions. This view is understandable since the market is influenced by various data releases and events related to global cryptocurrency circulation.
3 Technical Strategies for BTC That Work
The chart shows BTCUSD price moving within a well-defined price channel, then shifting to an upper projection channel after a strengthening upward move, demonstrating one of the typical patterns of trend development.
The next chart illustrates the formation of divergence between price highs and corresponding oscillator highs. This signal is a strong indicator of a potential reversal and a good entry point for short positions on bitcoin.
Another confirmation of technical analysis effectiveness is shown in the following example. During a dominant uptrend, after pullbacks, fractal boundaries of local resistance can be identified (e.g., using the Parabolic SAR indicator). Trading breakouts with such indicators can be very successful.
Short-Term Bitcoin Strategies Gain New Life
Since the cryptocurrency market is still developing, many short-term strategies that have become less relevant in traditional markets due to widespread use of high-frequency trading (HFT) algorithms are experiencing renewed effectiveness here.
Due to the nature of price movements, breakout strategies for key price levels work for BTC/USD almost textbook-perfect. These patterns may lose clarity as new market participants arrive, but for now, many classic models perform well in the crypto market.
Another option is automated trading strategies such as BTCUSD on the daily chart using the Buy Strat with Parabolic SAR (0.02; 0.1) indicator.
The events of autumn 2017 were milestones in bitcoin’s history, comparable to reaching $100 or when 1 BTC became more valuable than an ounce of gold. On September 1, bitcoin hit $5,000, and by late November 29, it was nearly $11,500, with a brief dip below $3,000 in between. Below is a simple way to profit from such movements.
As shown, on September 19, when the price crossed the indicator from below, the first buy was made near $4,000. This trade closed when the price crossed the indicator from above near $5,590. The next trade followed the same pattern: Buy at $6,199, Close at $6,547, and so on.
Conclusion
The strategies described above serve as examples demonstrating the potential of automated trading approaches for cryptocurrencies. Traders can easily create their own algorithms, backtest them on demo accounts, and then, if successful, deploy their bots on live accounts.
Cryptocurrencies today are a global phenomenon that has shaken the entire financial community. This is undoubtedly one of the fastest-growing segments in global financial markets. Bitcoin is a promising tool for both investing and trading; the key is to properly evaluate the asset and choose the right trading strategy. Which one to choose is up to you.
