Here Are Some Most Common Bitcoin Trading Strategies To Know

Charlotte Miller

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No matter if you are a beginner or a pro in bitcoin trading; there is no way of making profits if you don’t apply effective strategies. A trading strategy is a methodology that defines how traders or investors handle their share positions, price movements, and other related important factors. 

In the case of bitcoin trading, there are three major trading techniques and strategies that you need to be aware of. Each of these trading styles will have different pros and cons. To help you have a better understanding, we have discussed these effective trading strategies in detail and explained the pros and cons as well. Read on to know further.

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Day trading 

So, what is day trading? Such type of trading refers to a strategy where you open a position and close it within a single day without holding it for long. This way, the open position of your purchase won’t be affected due to overnight market fluctuations. Hence, you can easily make profits by opening a short position and closing it once the price falls below the set limit. To become a pro trader in the day trading method, you need to implement a few plans like scalping, news-based trading, HFT or high-frequency trading, and range trading. 

Pros of Day trading 

  • You won’t have to deal with overnight transactions or funding fees. 
  • It is suitable for traders who want to stick to short open positions rather than long-term investments.
  • It has fewer risks since you can monitor the market movement easily during the entire day. 
  • The profit percentage of day trading is maximum as compared to others. 
  • You can implement any one of the above-mentioned day trading styles to meet you8r expectations and requirements. 
  •       Pros of Day trading
  • With day trading, you won’t make any long-term investment in the bitcoin trading market.  Since the position will be closed before the day’s end, you won’t be able to enjoy any overnight price movement in your favour.

Bitcoin hedging 

Bitcoin hedging is applicable only for traders having an already existing open position in the crypto market. Here, suppose your position is on the verge of suffering a huge blow. In that case, you can reduce the risks or mitigate the losses by opening a reverse trade position. Usually, a short-term position is opened for hedging or reducing the transaction risks. Once the price moves in your favour, you can close the hedged position and continue with the original one. 

Pros of The Bitcoin Hedging 

  • · Suppose the price is decreasing fast and your current position is at risk. In that case, the hedge position will offset the challenge by increasing in value. 
  • · With this, the chances of suffering losses can also be greatly increased. Therefore, you won’t have to get disappointed by your decision to invest in BTC. 
  • · Bitcoin hedging is easier and usually works for both long-term and short-term trade positions. 
  • · Also, with the help of hedging, you will maintain your asset holdings with ease. 
  •       Cons of Bitcoin Hedging

 Hedging may be advantageous, but it involves several risks. If the price gets fixed, your hedge position may suffer losses.

  • Bitcoin hedging needs to be done appropriately, which is why a single mistake in your strategy and the entire plan will fail. 

HODL strategy 

In the HOLD strategy, you need to open a long position and get some assets. Once you have the currencies, you have to store and hold them for a long-time approach. It should be done only when the price movement forecast is positive and in your favor. If you open a position based on HOLD strategy when the market is highly unstable, you may end up losing more than you had earned through trading. 

Pros of TheHODL strategy 

  • The profit percentage of the HOLD strategy is the most. Therefore, with proper strategy, you can easily gain more profits. 
  • It is perfect for every investor who wishes to open a long-term position in the bitcoin trading market. 
  • If the price movement graph is moving towards a positive direction, the HIDL style is suitable. 

Cons of The HOLD strategy 

  • Due to a lack of short positions, you may suffer losses if the strategy is not implemented correctly. 
  • Another minus point is the risks associated with the HODL plan. These challenges are expected and without any workaround, evading the losses is not possible. 

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Final thoughts 

All these above-discussed strategies work well with multiple exchanges like the , so you won’t have any problem adopting any one of these. However, do not ignore the market volatility, the rapid changes in price movements, and other risks because if the plans are not implemented correctly, you will have to suffer the consequences.