Cryptocurrency capitalization continues to grow every day at a rate of 10-12%. Someone goes on to say that a bubble is forming on the cryptocurrency market, and someone is making hundreds of dollars from the quotes. Partly rumors of a bubble are justified. For example, if you look at how many exchangers cash reserves are available for withdrawal, it turns out that there will be enough of them for several thousand bitcoins at best. This means that one serious shock is enough for the whole pyramid to collapse – traders simply cannot cash out cryptocurrencies through exchangers, and these transactions are not interesting for banks.
Risk? Of course. This is a new tool to which traditional trading methods are not applicable. But this does not mean that you can not earn it. Read more about the cryptocurrency trading strategy.
Psychology as a tool for cryptocurrency trading
A special feature of the cryptocurrency market is that technical analysis does not work here. In fact, the market began to work in March 2017. This time is not enough to talk about testing on a historical period. With volatility, no indicator will work for 10-30% per day.
Fundamental analysis doesn’t work either. Influenced by news on futures on CME VTS has been growing for several days. On the news about the improvement of the IOTA system, it increased 2.5 times in 2 days, and the next day immediately collapsed by 40%. It is obvious that psychology is leading the cryptocurrency market.
Cryptocurrency trading strategy:
- Diversify risks. The cryptocurrency market is already filled with fiat money and in most cases there is overflow from one cryptocurrency to another. Analyze the correlation of bitcoin and ether with other altos from the TOP-20, invest simultaneously in coins with a reverse relationship.
- Example: after canceling the Segwit32, the PTS fell sharply, but the BCH immediately rose. Those who could close a stop out on the PTS, reinsured themselves on the growth of the BCH.
- Do not buy on a sharp rise, invest on a pullback. Despite the fact that the cryptocurrency market has signs of a pyramid, in the short term, it is still expected to further increase capitalization, alternating with kickbacks. Sharp growth suggests that inexperienced speculators began to enter the market en masse. At some point, the institutional investor will fix the position, after which the pullback will bring the speculators a loss. It is believed that daily volatility of 10-15% is a normal situation. Volatility of more than 25% means that it is better not to invest in cryptocurrency.
- Example: after a sharp rise to 17 thousand dollars. The US bitcoin for the day fell to almost 14. But then he recovered again to 15.5 thousand. Similar examples of rapid growth and no less rapid collapse – IOTA, Ripple.
- Analyze the glass of prices. If you see an order that makes up 20% of the total supply or demand, this may affect the price. But it can be a trap for “hamsters”. Do not invest in this coin. Also, do not place large orders yourself – the market may perceive this incorrectly.
- Example: price manipulation of cryptocurrencies with a price of a few cents or dollars. It happened with Hshare, which was unwound at the time of launch several times. After the collapse, the coin did not return to peak values.
Cryptocurrency trading strategy is to leave the market in time before the pyramid collapses (or a correction occurs). Greed and lack of risk management is another reason for the losses of traders. Be careful and remember that speculators are in charge of the cryptocurrency market, and your task is to replay them!