Everyone now wants a share of the Bitcoin pie and knowing which trade strategy to trust can be a challenge. You will find many trading strategies for Bitcoin trading, each promising to bring you good returns. Bitcoin trading is currently more popular than gold, stock, or oil trading and the biggest reason for its popularity seems to be the groundbreaking blockchain technology upon which it is founded. Here are some easy steps to profit when you are looking for the best Bitcoin strategy:
- You need to compare the Bitcoin and Ethereum charts and OBV indicator to get a clear idea. The OBV or On Balance Volume indicator is perhaps the best technical indicator for Bitcoin day trading; it evaluates total funds going in or out of an asset. It uses a combination of price activity and volume. When the Bitcoin is trading upward while the OBV is not it indicates that are people are engaged in selling. The same happens when Bitcoin is trading down and OBV is trading up.
- You must identify smart money difference between Bitcoin and Ethereum prices. Smart money divergence occurs when any one crypto cannot confirm actions of another crypto. For instance, if the price of Ethereum swings high or breaks above a resistance but Bitcoin does not, it indicates smart money divergence. In short, it indicates that either of these two cryptos is “lying”. This concept works because the crypto market should ideally follow the same direction if it is in a trend.
- Your next task is to see if the OBV increases in the trend’s direction. In case the Bitcoin has been lagging behind Ethereum, it indicates that it should soon follow in Ethereum’s footsteps and break the resistance. The OBV is very useful as an indicator because it should ideally increase in the trend’s direction when the Ethereum has already broken the resistance but the Bitcoin has not.
- You must now place a “buy” order to catch the breakout at the resistance level. When you get a go-ahead from the OBV indicator, you can put buy limit orders. Here, you place the order at a resistance level anticipating a possible breakout. Following this, you simply have to place your stop loss and take profit orders.
- Finally, you must place the stop loss order below the breakout candle. This is a smart trading methodology. Where take profits is concerned, OBV reading of above 105,000 is typically an extreme reading which indicates a pause in trend, and it is here you must take profits.
Bitcoin traders are always looking for the best possible trading and investing solutions. No matter which strategy you adopt, the truth is your money is always at risk because the crypto market is notoriously volatile. So, it is always advisable to engage in demo trading before you risk real money. Even though you may be trading digital currencies that are not physically available, they are still money and without a proper trading plan in place you can end up losing more than you ever imagined.