Cryptocurrency has come a long way since Satoshi Nakamoto created Bitcoin, today’s leading digital coin, in 2009. As of September this year, Bitcoin’s price jumped to more than 25 thousand USD (2 million INR), leading a cryptocurrency market with a volume of over 16 billion USD (1.3 trillion INR). With the Reserve Bank of India now more welcoming of Bitcoin and cryptocurrency in general, the doors are open wide for India’s traders to leverage this profitable opportunity.
Lucrative as it is, however, experienced traders know that trading with Bitcoin isn’t a guarantee for success. Crypto traders must consider their strategy carefully to maximize their returns. Here are five you can opt for.
High-frequency trading
With this strategy, you can go beyond human capabilities and use automation to accurately execute a large number of orders in a short period. Doing so will involve using a program to analyze cryptocurrencies across various exchanges, detect triggers and trends, and transact swiftly. All you need is a good trading plan—for example, trading in the opposite direction from a prominent investor to exploit price movements—and a stellar trading platform that offers effective automated software. For this, you’ll want to use a platform that offers MetaTrader 5, which has a wealth of Expert Advisors that can analyze quotes and perform operations in the crypto market. You can even customize one per your own indicators via the programming language MetaQuotes Language 5. With an excellent high-frequency trading plan and superior software, you can better position yourself to profit from Bitcoin.
Arbitrage trading
Bitcoin’s prices can deviate significantly over a particular period—and because of the speed at which this happens and the fact that Bitcoin is traded across numerous exchanges, there are opportunities for price discrepancies. Utilizing that information is called arbitrage trading. You essentially purchase Bitcoin at one exchange and sell it where the price is higher. You then profit off of the price difference—and after you’ve done that, you can say you’ve successfully pulled off a crypto arbitrage trade.
Trend trading
One way you can effectively trade in Bitcoin is to predict how its price trend will move and follow it. If Bitcoin’s prices are trending upward, take a long position. If Bitcoin’s prices are consistently trending low, take a short position. Exit your position when you predict that Bitcoin’s trajectory is about to shift. This strategy can be risky, as you must maintain your position despite fluctuations. Because of this, trend traders utilize technical tools like the Stochastic Oscillator, which evaluates the current price of an asset relative to its price range across several periods to tell you its trend strength. So, if you calculate that Bitcoin’s Stochastic is above 80, you can have relative assurance that its current trend is strong and unlikely to reverse. From here, you can maintain a long position and reap the benefits of successfully predicting this trend direction.
Crypto futures trading
Use this method to trade Bitcoin if you’re confident about where its value is headed. In this case, you’ll want to take out a future contract and agree to purchase Bitcoin at a predetermined future price and date—for example, to buy five Bitcoin tokens at this year’s price and complete the transaction within two years. If Bitcoin’s price increases, you’ll have made a profit and maximized your returns.
Swing trading
With all the volatility in the cryptocurrency market, you might find swing trading to be especially beneficial when trading Bitcoin. For this, you’ll want to capitalize on Bitcoin’s sudden price movements rather than its overarching trends, like you would with trend trading. For example, if you predict that Bitcoin’s price will drop—because of the pullback of an initial price surge, for example—you have the opportunity to hold a short position. As this Microsoft Start article states, you are not obligated to exit your position within one trading session. Instead, you do so when you believe Bitcoin’s price will start rising again. You may want to use a technical tool like the Relative Strength Index, which can determine the relationship between Bitcoin’s price and demand and tell you when the cryptocurrency’s price will likely change. You can then use the identified short-term shifts to trade and profit from Bitcoin.
Bitcoin is a lucrative asset to trade. Consider the five strategies above to make the most of it.
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