Bitcoin is a decentralized peer-to-peer payment system, a cryptocurrency that can be transferred across borders without any middleman like a bank or government financial institution. Unlike regular fiat currencies, Bitcoins are neither issued nor controlled by governments or banks. To trade the Bitcoin you need to adopt a trading strategy and stick to it.
5 steps to profit from Bitcoin trading strategy:
- OBV: This technical indicator is required for Bitcoin day trading. This analyzes the total capital flowing in and out of any asset. So, the OVB will consider both prices and volume of trade. You will find the OVB indicator on majority of trading platforms. Theoretically speaking, when the Bitcoin is trading upwards and the OVB is trading downwards it indicates that traders are selling in. It is important to identify the time when both the Bitcoin price and OVB will be moving in one direction. Since no technical indicator can be 100% effective every time, it is advisable to use other parameters when making trades.
- You need to keep the Bitcoin chart side by side with the OVB indicator and Ethereum chart. Your job now is to identify money divergence between Ethereum and Bitcoin prices. Smart money divergence is when one crypto cannot confirm actions of the other crypto. For example, if the price of Ethereum swings high but Bitcoin does not, there is divergence. This indicates that any one of the two cryptos is “lying”. When Ethereum’s price breaks the resistance but Bitcoin’s price does not it is a sign that there will be a trade. Smart money divergence will work because the entire market should ideally move in one direction if there is a trend.
- You must then look for the OVB indicator to go up in the trend’s direction. For instance, if the Bitcoin was lagging behind while the Ethereum was going up it indicates that soon the Bitcoin would break the resistance. The OBV informs whether real money is buying Bitcoin or if it is selling Bitcoin. You have to wait for the OVB indicator to go up in the trend direction.
- The next step in your Bitcoin trading strategy is to place your buy limit order. This must be placed at resistance level to take advantage of the possible breakout. When you notice that the OVB indicator is giving you a green signal, you can go ahead and place this buy limit order. The trade gets activated and the Bitcoin prices are then expected to break higher. You must then determine your stop-loss amount and decide where to take profits from this trading strategy.
- You should place the stop-loss beneath the breakout candle to trade smartly. As far as profits are concerned, when the OVB reading crosses 105,000 it indicates a pause in this trend; this is when you should take profits.
These are some easy steps to profit in Bitcoin trading by using some of the trading tools. You must however remember to diversify your trades and place stop-loss orders. Using strong technical indicators like the OVB can help you justify your trades.