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An Introduction to Bitcoin Trading and Technical Charts



Bitcoin trading is a popular market that has been growing in recent years. There are many who obtain bitcoin to hold for long periods of time. However many people trade their bitcoin regularly with intra-range strategies, day trading, leverage trading and more. Often times trading can sometimes be confusing, and there are many things to consider when participating within the exchange environment.

Also read: The Bitpay Visa: a Bitcoin-Debit Card Review


The World of Bitcoin Trading

The price of bitcoin changes often and some would consider the digital asset to be volatile. The fact is, though, that most currencies worldwide change in value quite a bit as well. And people make money trading fiat currencies, and commodities, based on these ups and downs in price. Bitcoin trading and cryptocurrency exchanges have matured quite a bit since the early days. There are multiple trading techniques and a vast array of exchanges that offer different trading services. Today, we will discuss the various surroundings of the bitcoin trading ecosystem and what to expect from these exchange markets.

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BTC/USD candlestick chart, Poloniex on 1/5/17

Candlestick Chart

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The candlestick chart scheme

The candlestick chart is the most common chart used to technically analyze and predict Bitcoin’s price movements. The chart is used in many other markets like forex trading and national fiat currencies. This style of charting is very popular but can often be confusing to understand. Unlike bar charts there are different aspects that look at the short and long-term outlooks differently. Candlesticks reference the price of each trading session’s open, high, low, and closing positions. As the chart progresses analysts can apply different trend lines and technical indicators to try and predict price movement but in the trading world nothing is for certain.

Day Trading and Intra-range Strategy

One style of bitcoin trading that’s quite popular worldwide is day trading; that is, trades speculated within the same day. This means a trader closes their position by the end of the day or within a specific time frame. Intra-range trading (intraday) is relatively the same and traders use shorter periods of time to profit off scalps and sudden fluctuations in bitcoin’s price value. Day trading strategies are driven by profit, and can lead to a lucrative occupation or the significant loss of wealth. Trading this way takes research and practice to perfect the skills good enough to profit daily.

Shorting, Long Bets, Options, and Futures Trading

predicting-the-future-1This type of trading involves a trader placing a wager that the price of bitcoin will be lower or higher within an arranged period of time. Just recently a trader got some attention for betting on a $10 million bitcoin short position and got liquidated because the price rose significantly. This means the trader placed a bet that the price would drop, but lost, leaving the trader to buy back the bitcoin at market rate. Long positions are basically the opposite and the trader wagers that the price will be higher over time. In essence, this type of trading is like buying a good and hoping the good’s price will drop or rise with the trader profiting from the difference.

There are various methods of trading bitcoin options, futures, and speculative bets. Quite a few exchanges offer these types of trades but all of them require collateral just in case the customer loses. Furthermore, bitcoin futures trading can be risky and traders should hone their skills when entering into these types of bets.

Bear and Bull Markets

uep4bdacTraders often refer to market conditions as “bear” or “bull” markets and sometimes use the phrases “bearish” or “bullish.” A bear market is when bitcoin’s price value drops into a downward trend with increased selling and short positions. A bull market condition references increased buying, a price rise, and traders placing long bets.

During a bullish market trend, the price rises steadily and entry points often decrease. Alongside this, during a bearish market trend, investors wait for extended panic selling and entry points. Bear and bull markets often give a brief description of bitcoin’s price value and whether the price trend is up or down.

Some Technical Terms  

  • Simple Moving Average (SMA): The simple moving average is a calculation of the sum of the closing price divided by the total of time-frames.
  • Fibonacci Retracement: The technical analysis of Fibonacci retracement traces the price stops of bitcoin using horizontal lines to track both support and market resistance. Trend lines are created between ups and downs and then divided by Fibonacci ratios.   
  • Stochastic Oscillator: The technical indicator known as the stochastic oscillator measures the closing prices within the prices trending direction over a period of time. Furthermore, it can be used with the SMA to refine insight on market movements.
  • Overbought: Often times people refer to bitcoin’s price as being overbought, which means demand or price rises are not justifiable by technical indicators and market fundamentals.

Trading Is Not Easy

A lot of people assume that trading is easy money but there are significant risks associated with this type of exchange. First and foremost, many traders leave their bitcoins on exchanges. This means they are leaving their funds in the hands of an exchange with expectations the business is responsible and secure. However traders have often learned the hard way, like in the recent Bitfinex hack and the infamous Mt. Gox disaster. Remember – if you don’t possess your private keys you really don’t own the bitcoin.

On the flipside, trading can be lucrative with a lot of practice, and it’s a popular environment in the bitcoin space. Additionally, lots of people trade altcoins in order to gain more bitcoin with their profits.

Always remember that trading can be risky and requires much practice and even plotted charts, technical indicators, and predictions can often be wrong.

Disclaimer: Bitcoin.com trading articles are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the money.

Do you trade bitcoin? What types of techniques do you use trading cryptocurrency? Let us know your experiences in the comments below.


Images courtesy of Shutterstock, Poloniex, and Pixabay.


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