Cryptocurrencies are gaining popularity like never before. What was once an obscure concept has now become a mainstream asset class, attracting large institutional interest and the attention of retail traders from all walks of life? Unlike stocks or other traditional financial instruments, trading Cryptocurrencies is not for everyone. However, it does have its benefits, which can be leveraged by savvy traders to make gains.
Cryptocurrencies are inherently volatile assets, so it’s important to understand how volatility works in the market and how to use that volatility to your advantage. This guide will introduce you to everything you need to know about using your crypto brokers to gain from market volatility.
Buying the Dip
One of the best ways to make money trading Cryptocurrencies is by taking advantage of price fluctuations. Some traders are willing to risk large amounts of money to earn small gains in the market. At the height of the crypto bull run in December 2017, Bitcoin reached an all-time high of $20,000. It had been in decline since June, but suddenly, people were rushing to buy the cryptocurrency.
Naturally, it was a supply shortage, which meant Bitcoin’s price was driven up by increased demand. Naturally, the price fell sharply once the supply came back online. It went from $20,000 to as low as $6,000 before recovering to $8,000. The key here is to buy Bitcoin using the News Spy trading account when its price is low and hold it until it has recovered. The best time to do this is just before the end of the year when people rush to buy the cryptocurrency with their tax-free savings.
Short Selling
A short sale is the sale of a stock that you own but plan to sell to someone else. You borrow the stock and sell it to make money when the price falls. Like a regular stock shorting Bitcoin is not an ideal strategy. Bitcoins are extremely volatile assets, which makes shorting them a risky business. There are, however, some cases where shorting Bitcoin is a viable investment strategy. Typically, there is a huge spike in the price of a cryptocurrency during a speculative bubble.
The frenzy surrounding Bitcoin in late 2017 is a good example. Some investors may see such price surges as a once-in-a-lifetime opportunity to make a huge profit. It doesn’t make much sense, but some people may consider it an investment opportunity. If you are one of those investors, shorting Bitcoin at the height of the Bull Run would have been a bad idea.
Trading Strategies
The best way to use your crypto brokers to gain from volatility is to develop a trading strategy that incorporates specific market indicators and factors. When it comes to trading Cryptocurrencies, there are a lot of factors that can affect the price of a particular asset. Some of these factors include supply and demand, volume, news events, trading fees, and many others. A good strategy should identify the most critical factors and market indicators a trader can use to make money in the market. One popular trading strategy uses technical analysis to identify trading opportunities.
Technical analysis is the study of patterns in the market using indicators such as moving averages, Bollinger bands, support and resistance levels, Fibonacci retracements, and more. A successful strategy will allow traders to take advantage of patterns in the market, identify price movements, and profit from market volatility. A trading strategy is useless if it doesn’t work. The best way to improve your strategy is to test different variables.
Additionally, How Are Cryptocurrencies Taxed?
Final Thoughts
The volatility of Cryptocurrencies makes them ideal for short-term trading. Although short-term trading may seem appealing, it can be dangerous and can result in heavy losses. It is essential to develop a trading strategy and use the right investment tools to help you succeed in the volatile market of Cryptocurrencies. It may take some time and patience, but with a little effort, you can reap big profits from the volatility of the cryptocurrency market. As Cryptocurrencies continue to gain popularity and become more mainstream, volatility is likely to increase even further. It’s important to remember that volatility is something you can use to your advantage when trading cryptocurrency.
