Many Bitcoin trading tactics are used by traders, but can all of them be proven successful? It all depends on the execution and setup of the trade. In the following, we round up trading tactics that are commonly recognized in the world of crypto assets like Bitcoin.
Arbitrage
Arbitrage is a trading strategy that takes advantage of the difference in the price of one crypto asset on two other exchanges. This tactic is carried out by buying into one Exchange at an affordable price and then selling it on another Exchange at a higher price simultaneously.
Please analogize the price of masks in different countries, depending on the number of wants and supply (demand and supply) in each country.
For example, the price of a box of masks in Indonesia is IDR 200 thousand and in China IDR 350 thousand because the demand for masks in China is higher than Indonesia. Here the arbitrage technique can be used, namely buying masks in Indonesia and then selling them in China and doing it many times.
However, trade in physical goods across national borders requires quite a lot of costs and takes a long time.
And in the crypto world, arbitrage is easier to implement because the transition of crypto assets such as Bitcoin from 1 Exchange to another can be processed in a few moments.
In simple terms, the process is:
- Buying BTC on Exchange A
- Send BTC to Exchange B . Wallet
- Exchange BTC for IDR then see how much profit you can make.
- Suppose you have a capital of IDR 10 million that you deposit to buy Bitcoin on Exchange A and Exchange B.
- BTC Exchange A Price : $9900
- BTC Exchange B price : $10,000
- ROI: (10,000 – 9900) / 9000 = 1.11%
Therefore, if you do arbitrage of Rp. 10,000,000, then the ROI is around Rp.
111,000. But ROI is still in the form of gross (gross profit) so don’t forget to check fees (fees) at each Exchange.
You need to recognize that the margin of this tactic is generally thin (under 1%), to outsmart it, make sure you choose an exchange with low fees such as Luno (0.2% for takers and 0% for makers).
Leading indicators
Another tactic you can use is to watch for signs when price movements occur within a certain time or period that you expect.
In the world of trading, there is what is known as a leading indicator, which is a sign that many traders use to signal buy/sell (buy/sell) Bitcoin price movements to help you predict future price movements.
For example, if you want to buy or sell Bitcoin, you can also watch the leading indicators by paying attention to price movements in Bitcoin on other exchanges.
Generally, the speed of Bitcoin price movements on a number of Exchanges is not exactly the same because Bitcoin price movements are controlled by the wants and offers on each Exchange, which of course are different.
Let’s say there are two Exchanges, namely Exchange A and Exchange B. Because the demand and supply on Exchange B is getting higher, the price on Exchange B is moving earlier than Exchange A.
When you want to buy Bitcoin on Exchange A, look at the price movements on Exchange B.
If the price on Exchange B starts to move up, generally Exchange A will also move up.
Before Exchange A also went up, here you had the opportunity to buy Bitcoin and when the trend on Exchange B showed a continuous upward price trend, therefore you could sell the Bitcoin that you bought initially.
Some exchanges used by Indonesian traders as leading indicators of bitcoin prices are Bitstamp and Binance.
Market timing
In our previous article, we mentioned that it is important for a trader to pay attention to price movements because they can affect the state of the market.
There are many market trends that traders generally use as signs when it’s time to buy or sell.
Bull and Bear market
A bull market occurs when there are more consumers than sellers or the purchase value is higher than the marketing value (the wants are higher than the supply), so that’s when a bullish trend occurs.
In this trend, bulls (consumers) play more of a role because the increasing demand will make the Bitcoin price gradually rise.
When there are more sellers than consumers, or more supply from wants, then the price of Bitcoin will start to fall. This kind of market trend is called Bear market.
Breakout
Price movements on any Bitcoin exchange or exchange never just go up or down forever.
There is a certain “boundary line” or level where opportunities can hinder the movement of the price trend.
However, here is your opportunity to take advantage of these levels as a price base to complete market orders, either sell or buy.
The “boundary line” is called Support and Resistance.
Support as the lowest level on the Bitcoin price chart at which traders will be interested in buying because the price is seen as cheap.
And Resistance is the highest level that attracts traders to sell because the price is considered high.
Bounce
Besides that, there is also something called a bounce, which is to take advantage of the reflection of price movements when they reach support or resistance.
Then, why not just sell right at the resistance level or buy right at the support level?
Because you need verification if that support or resistance hasn’t broken yet. The price movement up or down can be really up and down and fast until it immediately breaks through one of those levels.
The following reflection is a signal if the support or resistance level is still strong.
In addition, the bounce of support and resistance can end where the price will break certain levels.
At such times you can try breakout trading where you take advantage of the break of support and resistance assuming that if the break of support or resistance tends to be followed by a rally.