Bitcoin Trading Strategies in 2022 - Ultimate Guide

In 2020 & 2021, the financial world was taken by storm and revolutionized by bitcoin and its dramatic, over tenfold price increase. Many individuals have become attracted to the idea of bitcoin trading and cryptocurrency trading to secure serious gains. 

Modern cryptocurrency exchanges, crypto portfolio management tools, and various financial instruments, which I’ll cover throughout this blog, have made a significant progress in development, thereby, reducing the market entry barriers for newcomers and making operations in the crypto market rather simple and very lucrative. Nonetheless, understanding what impacts the price of bitcoin as well as some of the available trading strategies is paramount for one to analyze the market and be profitable in bitcoin trading. 

So, if that’s your goal, then this is the right read for you! 

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What is Bitcoin trading?

Bitcoin trading is all about buying bitcoin when its price is low and selling it when it is high for a fiat currency such as the dollar. The activity and all effort involved are purely profit-driven with the goal being to accumulate wealth. At its core, this is what is bitcoin trading about. 

The introduction of new financial instruments like futures and margin trading to the crypto market has provided traders with new ways through which exposure to bitcoin can be had and for more diverse trading strategies. Such as shorting bitcoin and making money when its price decreases. Which of course requires you to always be mindful of what is bitcoin trading at right now. 

How to Trade Bitcoin in Simple Steps

So, now you’re probably wondering how do you buy bitcoin and how to trade bitcoin? Your trading journey starts when you register an account on any of the reputable and popular cryptocurrency exchanges like Coinbase, Binance, FTX, or any other. They allow you to buy Bitcoin and various other cryptocurrencies using fiat money. 

Step 1: Understand Bitcoins price volatility: what influences bitcoin’s price?

Before getting acquainted with some trading strategies, it’s important to understand what influences bitcoin's price. But, how volatile is bitcoin really? It’s one of its most notorious characteristics, the bitcoin price has shown it can move several thousands of dollars either up or down in price. But what gives?

We have to keep in mind that bitcoin is a relatively new asset and technology, one that allows for the peer-to-peer transaction of digital currency, it’s borderless, pseudo-anonymous, and has a finite supply (like gold). This has caused a fair bit of regulatory debate in terms of bitcoins classification as an asset, its use in everyday life, taxation, and legality. Regulator changes and macroeconomic events have all shown to have an effect on bitcoin price today and for the foreseeable future. 

Media news concerning bitcoin’s value, uses, security, and adoption can have an impact as well. For instance, bitcoin price volatility was off the charts within just minutes of the news of Tesla filing an acquisition of $1.5 billion worth of bitcoin with the SEC and the company's declaration of intent to start accepting bitcoin as a payment method for their electrical vehicles in February. But! Bitcoin’s price was then dealt a severe blow with news of Tesla ceasing to accept it as a payment method due to environmental concerns regarding bitcoin mining. However, the company just recently announced that they may resume accepting bitcoin as a payment method following some due diligence. The flip-flopping of Tesla has sprinkled the market with increased volatility.

Be it Bitcoin or any other company or cryptocurrency that's traded, its public profile is important. News of bitcoin’s integration with things like legacy payment systems and retailers has a clear and positive impact on bitcoin and cryptocurrency volatility. 

As mentioned previously, bitcoin has a finite supply that is capped at 21 million. This amount is forecasted to be achieved by 2140. Should demand for the innovative and volatile cryptocurrency continue to increase, then the price should rise. It’s impossible to say how much is bitcoin going to be by then. But, almost 100 years is surely enough time to become profitable using any of the training strategies covered below. 

Step 2: Choose a bitcoin trading strategy

Now, it’s time to go over the best trading strategies and pick one that's right for you. There are really only four bitcoin trading strategies that are commonly used. Let’s get into them then, shall we?

HODL:

Although more of an investment strategy rather than a bitcoin trading strategy, our list wouldn’t be complete without this one. Taking its name from an accidental misspelling of the word “hold” on one of the most popular crypto forums, the term represents ‘hold on for dear life’. This is one of the most popular bitcoin investment strategies used by those who’d prefer to simply buy and store their bitcoin away for the long haul. Taking profits when it makes sense and feels right. HODLers aren’t bothered by short-term bitcoin volatility. For instance, HODLers that managed to buy bitcoin at any time during 2017 when it was at or below $20,000 are up at least 62% on their bitcoin investment. 

Day trading bitcoin:

This bitcoin trading strategy involves you opening and closing a, or several positions within the same day. This style is most suitable for short-term traders that would like to capitalize on the short-term price volatility of bitcoin, which is quite high compared to any other asset from traditional financial markets. The task for them is to buy low and sell high while mitigating risk, I’ll go over risk a bit more. 

Trend line trading bitcoin:

Involves aligning all of your trading activity with the trend of the market, which can either be bullish (prices are going up) or bearish (down). For example, your bitcoin strategy would be to go long if the market trend was bullish and adjust your position if things start to reverse. Here’s a very useful and in-depth guide on trading bitcoin with trend lines. 

Hedging with bitcoin:

A bitcoin trading strategy that involves you taking an opposing position to one that you are already in as a way to mitigate some risk because you’re afraid that the market might move against you. For example, if you're a HODLer, and you feel like there might be an impending short-term drop in value, you could open a short position on Bitcoin using leverage to trade with a smaller deposit compared to your initial position and make some extra gain. How is it possible? Most leading cryptocurrency exchanges allow their users to use up to 100x leverage, some exchanges like Binance allow for 125x. Basically, this means that you can borrow up to 125x the amount of your trading stack to make a trade. But doing so is very risky because heightened periods of volatility can liquidate you if you’re longing or shorting on high leverage. Be reasonable! 

When it comes to choosing from bitcoin investment strategies, things really boil down to personal preference and how much time you can allocate to bitcoin. 

Step 3: Choose how you want to get exposure to bitcoin

There are several different ways of how to get bitcoins. The standard way is by buying bitcoins using cryptocurrency exchanges, like the ones I previously mentioned. They’re all quite easy to use and offer a variety of different order types to take advantage of. If you need help with how to buy and sell bitcoin, the exchanges all offer user guides. 

If you were a HODLer you could store your bitcoins on an exchange of preference or withdraw them to your own personal wallet. Another way is by using derivative products like Bitcoin Futures, where you don’t actually own bitcoin, but rather speculate on its future value. These are two of the most used methods for how to invest in bitcoin and make money. 

Now you should feel pretty confident and know how to get 1 bitcoin to start trading with or HODL. 

Step 4: Be serious with Risk management in bitcoin trading

Having an understanding of trading risk management is critical for preserving capital and bitcoin trading. One of the most basic risk management techniques is utilizing stop-loss orders. These orders will close your position at a specific price level, they are used to prevent you from accruing more losses while being in an unprofitable deal in case the market were to go in an unfavorable direction. 

You can also set take-profit orders on most cryptocurrency exchanges to close out profitable deals before the market turns. Making appropriate use of such orders is at the core of all risk management strategies.

There’s a rule of thumb in bitcoin trading, and that is “Do not risk more than you can afford to lose”. What this means is that it is unwise to wager too much of your bankroll on a trade. This is something that’s quite tempting for people to do in crypto considering the market’s great volatility. It’s unwise in terms of trading risk to allocate more than 10% of your entire trading capital for one trade. 

If you’re in bitcoin for the long term, have a plan in mind for when you will feel comfortable selling your bitcoin for profit. And if you’re day or trend trading bitcoin, please do use stop orders. However, just because you can set stop orders and walk away, doesn’t mean that you shouldn’t keep an eye on your trade. 

Step 5: Monitor your trade: how to make money with bitcoin?

A large portion of success and how to make money with bitcoin pertains to monitoring it and your trade. This is even more so relevant for bitcoin day trading. You’ll need to always be mindful of its price and fundamental factors like regulations, news, and adoption to be sure that your trade is positioned in the way that you initially anticipated. Having a keen understanding of technical and fundamental factors and always being on top of your trade is really how to day trade bitcoin properly. 

The easiest way to keep an eye on your trade and manage risk is by using one of the sweet bitcoin trading apps that I’ll cover further below and that will really make your life easier. 

When Is The Right Time to Buy & Sell Bitcoin?

The cryptocurrency market operates 24/7 and year-round. There are certain periods throughout the day when there may be heightened volatility, usually during morning hours which coincide with the start of trading on major stock markets and financial centers like New York, Hong Kong, London waking up and start buying and selling bitcoin. 

When it comes down to when to buy bitcoin and sell bitcoin, ideally you’d want to get it for as low of a price as you can and sell it for higher. Of course, derivatives allow you to diversify your trading strategy by placing bets on both moves up and down in bitcoin’s price. 

Predicting the very best possible time of when to buy bitcoin and when to sell bitcoin comes down largely to market cycles and the depth of your own analysis and application of various bitcoin trading strategies outlined here. If you’re a day trader, you wouldn’t hold a position overnight. If you’re trading with trend lines, then you’re trying to ride the trend as best as you can. HODLers might want to consider selling some BTC for cash when the market is feeling overheated and as if the price will go up forever. Euphoria is usually not the best time for investing in bitcoin.

Best Bitcoin Trading Apps

There are a few notable cryptocurrency portfolio trackers, management apps, and bitcoin trading platforms that you can use to strengthen your strategies and get the most out of your trading. For example, Blockfolio is a pretty standard yet popular app that lets you track portfolios across a lot of cryptocurrency exchanges, set price alerts, and look at price charts. A common alternative to it is Delta. 

Another alternative definitely worth mentioning is the Good Crypto advanced crypto-portfolio tracker & management app. It lets you manage all of your exchange accounts and set advanced order types to maximize your profit and minimize your risk and set advanced order types to maximize your profit and minimize your risk by such tools as trailing stop order as well as receive notifications and updates on bitcoin and thousands of other cryptocurrencies. It may very well be the best crypto trading app.

Summing Up

I hope this piece helped shed some light on viable bitcoin trading strategies that you can utilize to accumulate some wealth. Keep in mind that becoming better as a trader is a continuous process that requires a lot of effort and constant development of skills like technical analysis, understanding market psychology, and how markets behave. Unless of course, you’re a HODLer, but even then you still need to have a plan and be mindful. 

Don’t go all-in on one trade, manage your risks, and use one of the awesome apps mentioned here to monitor and manage your trade.

Author bio:
Gleb Myrko. Crypto Marketer & CEO Rgray.io (Twitter, Facebook)