Trading Strategy: Basics Of Trading

There is a trading strategy for any market condition. Even when prices hit the bottom, there are a lot of opportunities to make a profit of the situation.

Today I’d like to describe the most popular trading strategies and explain the basic concepts of trading. I will also give you advices on bear market trading, as this trend is still around.

Bear market vs Bull market

Let us start with definition what is bear market and what is bull market for traditional markets. When prices do not go up or down and stay in a straight line, the market almost stops its work. That’s why some corrections are necessary. The accepted norm of fall for traditional markets is said to be 10%.

And when price changes on a different percentage, it automatically becomes a change in trend. It also gains special names and behavior lines.

• Bull phase: a fall of more than 10%
• Bear phase: the fall extends to 20%

Experts say, the bear market usually lasts for 15 months and shows decline about 32–40% for traditional markets.

Of course, for cryptocurrency markets it’s a bit different.

Having a look at the chart, we can say that BTC price climbs up by ‘stairs’ and then slides down using an ‘elevator’.

However, you have to remember that any correction is a buying opportunity.

Trading Strategy For A Bear Market: Find Reliable Cryptocurrency

In a bear market, all cryptos tend to go down. No matter how famous and widespread they are. However, the ‘good’ digital currencies manage to recover, while the rest — do not.

Having this in mind, spend a little more time browsing the charts of coins you would like to buy.

Let’s take BTC as an example. It is one of the most stable currencies which will definitely survive through any crisis. So it is better to buy more Bitcoins and consider this situation as cryptocurrency sale.

Here’s the chart from HitBTC exchange, where we can see both buying and selling orders.

As we can see on the picture, at that moment the BTC/USDT price index was 6174,82.

What Is Day Trading

This traditional trading strategy means that a person closes all his positions every evening and then starts from the very beginning the next day. During the daytime, you buy and sell until finally close the trading process without leaving it overnight. It allows to have the situation under control and count all the income or loss.

Traditionally, day trading is performed by professional traders. The reason is simple: it could be very difficult to spend all day long in front of the computer browsing the statistics and changes and to make quick decisions.

However, electronic trading has opened up this practice to non-professional traders too. By the way, day trading is also the most well-known active trading style.

What Is Position Trading

Position trading is another trading strategy. As it’s made clear from the title, a position trader is the one who holds a position. Position traders do not trade actively unless they see a good potential behind the cryptocurrency they are trading.

If you want to try this trading scheme:

• You will have to combine longer-term charts with other methods to define the trend of the current market direction;
• Be ready to spend from a few days to several weeks, or sometimes even more;
• Be smart enough to determine the trend of a security. You need to see profitable higher highs or lower highs to do this.
• You need not try to forecast the price levels;
• And finally, exit the position when the trend breaks.

And now let’s have a look at the modulated example chart. After the BTC/USDT pair breaks a bearish trend, a double bottom occurs and very soon confirms as the price starts to grow again. This situation creates a quite long opportunity for trading.

Sometimes position trading could be called a buy-and-hold strategy but actually, it is not. A trader just spends his time watching the market.

What Is Scalping

This trading strategy aims at achieving as many profits as possible on minor price changes. It is another quickest strategy implemented by traders. By the way, traders who implement this strategy are known as scalpers.

This type of traders usually makes the spread or buy at the bid price and then sell at the ask price to receive the difference as profit. If implement a strict exit strategy, they will be able to prevent large losses and win a number of small profits. What is important to know, scalpers hold their positions for a short period to decrease the risk.

Small price movements frequently appear on chart and make smaller volumes more often. And if the profits per trade are too small, scalpers search for more liquid markets to increase the frequency of their trades.

Trading robots are mostly used for scalping these days.

What Is Swing Trading

When a trend ends and the new one has not established yet, swing traders appear. They buy or sell while the price keeps trying to set in. Usually swing trades perform their actions for more than a day but less than the particular trend ends.

On the chart we can see how price index goes up and down, making many changes throughout a week or so.

A set of ‘trading rules’ for this category is based on a technical or fundamental analysis. To make it clear, these algorithms are designed to identify when to buy or sell their tokens.

However, the key part of a swing trading strategy is the way it minimizes losses during the market corrections.

And of course they do need a moving market which changes its direction one way or another.

More Features Order Types

To simplify the trading process, you can just place market or limit orders. It will work out in case traders are not sure whether they would be by the computers on time when a good chance appears.

• A market order [marked green] means that trader wants to accept any price market would like to give him to get the order filled. It is not a very profitable tactic as prices might change too often.
• A limit order [marked red] means that a trader sets the price himself. So it depends on the most he would pay or the least he would take. Could be extremely useful in taking down the transaction costs.

Watch Your Time

When you place a limit order, you have to place it on the particular period of time. The need for this is the unpredictable price changes. If they move up, the trader is supposed to gets the gain. And if the market goes down, he would have no downside.

So why give away options when you can get paid for them?

Now let’s have a closer look at some possible time limits which cryptocurrency exchanges provide.

For example, HitBTC exchange suggests 5 types of time limits.

• Good-Till-Cancelled: lasts until the order is completed or canceled;
• Immediate-Or-Cancel: must be executed immediately. Any portion of an IOC order that cannot be filled immediately will be canceled;
• Fill-Or-Kill: must be executed immediately in its entirety. Otherwise, the entire order will be canceled;
• Day: automatically expires if not executed on the day the order was placed. A day ends at 00:00 UTC time;
• Good-Till-Date/Time: automatically expires at the specified date and time.

And it’s up to you to decide which one to use. But first of all, I would recommend trying every option to see what is the best for your trading strategy.

Market Depth Indicator

This chart also can be very useful while trading. Combining the abilities of large market orders, it shows the overview of possible open orders. Depth charts are the easiest way to know about demand [green] and supply [red] of cryptocurrency at different prices.

A depth chart has two lines:

• BIDs or BUY orders.
• ASKs or SELL orders.

Most live charts have Green lines for BIDs and Red lines for ASKs. Each line is made of little dots connected with one another. Each dot shows how much can be a BTC/USDT pair traded at that point. The HitBTC exchange’s chart also shows us the trading volume of both currencies.

Market depth works in real time so the changes happen constantly throughout the trading session. This allows skilled traders to gain profit from short-term price changeability.

Be Patient

Patience is one of the most important characteristics for a trader. If you are not sure what to do, keep monitoring the currency for its vital statistics. Just keep in mind that profitable cryptos come safe out of any bear markets and they are immediately ready for the upcoming changes.

And my last advice would be as follows: don’t be afraid of selling. It is a well-known fact that if you lose 50% during a bear period, you would be able to gain 100% in the next bull.

Originally published at hitbtc-review.net on July 5, 2018.