Since it was first developed, cryptocurrency has had an unpredictable and at times volatile history. Despite this, it has become one of the most popular ways to invest money and also an increasingly popular way for people who do not want the constraints of a regular monetary system to buy and sell goods. If you are looking to invest in bitcoins yourself, then there are a few ways you can do so, some of them relying on more traditional trading techniques than others. Here are some of the best crypto news-based trading strategies that you can use to increase your portfolio and hopefully make a profit.
One traditional way of building a portfolio uses modern portfolio theory. Otherwise known as MPT, the modern portfolio theory originated in a 1952 essay by American economist Harry Markowitz.
MPT involves investing in a number of different market weighted assets that do not have any correlation to the other. Because these assets are not related to each other they have no link to the prices associated with them. For Investors, this means that even if they are in your portfolio for a long period of time, they do not affect each other and therefore lower your overall risk.
When it comes to investing in bitcoins, however, it doesn’t always work as well. This is because although prices vary in different countries, bitcoins are usually linked together so when one rises they all are affected in some way. While this works well when prices are rising, it can increase your overall risk when prices start to fall.
Another traditional strategy that can work well with bitcoins is breakouts. Essentially breakouts have support levels and resistance levels associated with it. The support level is usually the price at which a particular asset will not be fully below. By contrast, the resistance level is usually a price above which an asset will not tend to rise.
The idea of a breakout is to invest in an asset that is going above its resistance level as this could be setting a new trend. While most investors will tend to sell when an asset reaches its resistance level, those who favor breakouts usually wait to see if it rises above its threshold.
This can be a good way to invest in bitcoins, however, the volatile reason why they react can also be detrimental to the breakout strategy. The price of bitcoins can rise and fall sharply, meaning investors will have to be quick on their feet to take advantage of breakouts. It also means they need to be cautious in case the price of bitcoins falls below its resistance level.
Day trading has become an increasingly popular way for people to trade their bitcoins. Day trading means you buy and sell your bitcoins on the same day, maximizing opportunities. That means if the cryptocurrency is having a particularly volatile time, you can still make a decent profit.
In the world of crypto trading strategies, nothing is off the table. Many analysts and investors believe that cryptocurrencies are not governed by the rules and that trading strategies that worked well for other commodities many years ago, can still be fruitful for cryptocurrencies today. This makes trading in cryptocurrencies one of the more flexible ways to invest your money.