Bitcoin trading is hard. While Bitcoin is the previous decade’s best-performing asset, it’s also incredibly volatile, and it moves by its own logic. Crypto, in general, is a difficult market to trade, but there are a few things you can do right now to improve your strategy and earn profits. 

Buy the Dip 

One of the most common Bitcoin strategies is to buy the dip. This dead-simple trading strategy advocates loading up on Bitcoin during each 15% to 25% pullback and then selling on the rebound. While this strategy can prove to be effective, there is one crucial detail that doesn’t get enough attention: it only works in a bull market.

The only way to make a profit buying the dip is to wait for the increase in price. The problem is, there is no guarantee that it will happen. For example, traders are expecting the rise in BTC’s price after the bitcoin halving, but no one is certain that things will go by this scenario.

After the bull market of 2017 people continued to buy, thinking that they had the right strategy. Unfortunately, prices just kept dropping throughout 2018, leaving traders with holdings that quickly ended up underwater. 

Use the Right Indicators 

There are many fancy trading indicators today that it can be tempting to try and use them all. This is almost certainly a recipe for disaster. To be profitable, you should find just a handful of indicators that work best for you and stick with those. For example, some very successful traders only use the most basic indicators, like volume and moving averages. 

Also, it’s important to point out that finding useful data is crucial. Although CoinMarketCap is often quoted in news articles, their volume profiles can be exaggerated by exchanges engaged in wash trading. Here’s an example, as of publication where CMC reports 24 hour BTC volume at $35 billion while reputable reporting websites list the 24-hour volume at only $1 billion! For accurate volume profiles, please check and 

Set a Stop Loss and Stick to it

One of the biggest mistakes that inexperienced traders make is either:

  1. Not setting a stop loss. 
  2. Disregarding the stop loss.

Both can lead to massive losses. In trading, there is no certainty, only probability. Even the best traders may only be right 60% of the time. However, that’s still enough for them to be quite profitable. They can be profitable because they use a stop loss to limit the downside. It can be very tempting to disregard a stop loss, but this is a bad idea. Before you execute the trade, you should know precisely when you’ll get out and then stick to it. 

Letting a trade run past a stop-loss most often leads to closing out the position later on for en even lower price. Even in the rare case where the trade does turn around, and you make a profit, it’s seldom enough to make up for all of the other unprofitable trades.  

Master One Timeframe  

With trading, you can work on any timeframe you want. For instance, you can specialize in long term trades that border on being investments. Or you can take positions for just a few hours, and everything in between. Regardless of what suits you best, it’s most profitable to focus on one timeline and gain mastery in that area. 

If you don’t, you may lose profits. For example, imagine a trade that you want to hold for 48 hours. At the end of two days, you notice that the market isn’t acting as you expected. However, you decide that it will change its behaviour soon, so you keep holding. Ten days later you’re still in this trade which is diverting your time and capital and is likely to prove unprofitable. This example is given to make clear how important it is to stick to the planned timeframe.

Follow the Right People 

With Bitcoin trading, you can never know it all; there’s always something else to learn. YouTube is fantastic because it allows traders to access a vast treasure chest of knowledge. However, whatever your means of social media access, it’s crucial to follow the right people. Think carefully about what they’re saying, what their track record is and whether they mean what they say. 

For example, some traders will claim that they wholeheartedly believe in a project like Bitcoin and that they’re so committed that they will buy it no matter what the price is. But then Bitcoin draws down 30% in two days, and that person becomes too afraid to buy. So they’re saying one thing to all of their followers, but when it comes down to it, they’re not even acting by their own words. 

While we can make a handful of recommendations like Bob Loukas and The Crypto Sniper, you must do your research and think for yourself when determining who to follow. Making a profit in Bitcoin trading isn’t easy, but if you follow the wrong people, it can be nearly impossible. 

Getting it Right 

One final thought: momentum trading. While crypto often proves so volatile that no single trading strategy remains profitable forever, momentum trading does seem to offer at least some promise of a good return. There are some beneficial momentum trading strategies out there that can be applied to Bitcoin.  

Being profitable in Bitcoin trading means being flexible. Market conditions are continually changing, and Bitcoin’s volatility is the stuff of legends. To be successful requires a lot of thinking and constant tweaks to your trading strategy. However, if you can pull it off Bitcoin trading can be very profitable, especially as the asset class grows and global awareness of Bitcoin skyrockets. 

Mary Callahan
Author: Mary Callahan