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How to improve your trading strategy related to bitcoin

With bitcoin ranging between $30.000 and $40.000 over the past few weeks, investors find the market more boring than they’re used to. Of course, the current condition of the space is similar to the previous two bull markets, as we experienced some volatility towards the downside.

That said, most market participants are now either choosing to buy bitcoin for the long term or learn how to trade in order to increase their portfolio holdings.

But trading is as much a skill as it is an art. And knowing how to juggle between emotions, market outlook and candle charts can be quite a challenge. For that reason, we delve into five areas you can focus on to improve your trading decisions and increase your profit. Let’s delve in.

Control your emotions

Or better yet, control the actions that derive from your emotions. New traders face this challenge quite often, especially in volatile markets like those of crypto. The bitcoin price fluctuates a lot, and usually, the catalyst for this is the overall market “feeling”, as a response to news and rumors.

The most successful traders are able to detach their emotional reactions from their money and do so by investing money they can afford to lose and remaining objective at all times. As soon as you allow marketing gimmicks, FUD, and third parties to tell you how to trade, the game is pretty much against you. So make sure you remain in control at all times, even if the volatility seems more than you can handle.

Learn technical analysis

Technical analysis is the research method and theory that enables traders to make decisions based on historic price performance. In other words, you track the value of cryptocurrencies to determine where the price is going in the short term.

Technical analysis and day trading is more profitable during bear markets, but can also help you further control your emotions when “unexpected” price crashes occur. The best example for this is to review the recent market dump that took Bitcoin from $64.000 all the way down to $30.000. By overlaying the chart with the price action of 2013, we can see that the exact same thing happened in a previous bull market.

Learn sentiment analysis

Sentiment analysis refers to the “feeling” of the market as we mentioned above. It deals with investor psychology as a response to new information. In other words, how positive or negative the outlook of investors is towards a cryptocurrency.

There are many tools to track market sentiment, like the Fear & Greed Index, Social Media analysis tools, and event calendars. However, the best thing you can do to understand the market sentiment and how to best trade it is to remain involved in the market. Start by creating an account on Twitter and follow influential crypto personalities. Visit and read through forums. See what the market thinks about recent or upcoming events and weigh it against your fundamental knowledge of the cryptocurrency you are trading. Is it justified or does it present a great trading opportunity?

Understand the fundamentals

Speaking of fundamentals, Bitcoin is a tough cookie to crack for those without any experience. Most will argue that the best thing to do is spend 40-100 hours learning about Bitcoin, its goals, and underlying technology. Others argue that reading and understanding the whitepaper is enough. For most, however, it is important to understand Bitcoin in the context of our existing economy. And the best way to do this is by reading “The Bullish Case for Bitcoin” by Vijay Boyapati.

By learning about a project’s fundamentals and building a conviction on its main thesis, you will be able to stomach unexpected volatility and hold through emotional rollercoasters.

Avoid trading with leverage

Leveraged trading is the poor man’s way to join the rich crypto club. In essence, you are able to make trades on exchanges by using more money than you have available. So-called leverage trading is extremely risky, as a small price move could liquidate your whole account, in which case all your funds are lost.

Most traders explain that leverage is very dangerous for inexperienced investors and recommend users to not use more than 3-5x leverage in any situation. Most, however, are more inclined to risk and choose to trade using 125x leverage or more, where allowed.

It’s important to understand that the crypto markets are a test of patience and conviction, as we go through cycles that take its price higher and higher. As prolific trader Tetranode says, “bull markets are for unleveraged farming. Bear markets are for buying”. Keep in mind that this article does not aim to provide financial advice. We only state our personal opinion on the markets and offer an educational approach to improve your trading skills.

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