The crypto trading market is very volatile, and things go either way amazingly fast. Because of this, it is important for traders to have enough skills to survive both, uptrends, and downtrends.
There are numerous trading strategies that investors can use to survive the shortcomings of the crypto trading market. Even when the market is in the red zone, there still are some strategies that you can use to continue earning profits.
When the Bitcoin price is down, many will tell you that the best strategy is to simply hold. This term is used with a meaning of “hold on for dear life” is among the most popular ways to avoid falling victim to unexpected changes in the market.
While Bitcoin is known for its huge price dips, it is also known for recovering at some point, and when that happens, Bitcoin price is generally able to reach new heights. However, there are other good strategies that can help you take advantage of the volatile market instead of being afraid of it. Also, keep in mind that simply holding Bitcoin might end up costing you a lot of money if you are not a very long-term investor.
Among the best strategies, you can find online for falling Bitcoin prices are shorting, trading with leverage, and many others.
Shorting Bitcoin
The main goal behind Bitcoin shorting is to sell the cryptocurrency at a high price and buy it back at a lower price. Unlike regular traders who like to buy low and sell high, short-sellers are looking at the market differently.
They are selling for a higher price, only to buy the crypto back for a lower price. If you are shorting Bitcoin and your prediction about the falling prices in the market is correct, you will be making a profit from the price movement between when you sold your Bitcoin and when you bought it back.
Short-selling Bitcoin is extremely popular in the market due to the high volatility of the prices in the market. If you see a negative trend in the market that you believe will cause the price to depreciate in the near future, you can use this strategy and earn profits quickly, short term.
However, although immensely popular, shorting Bitcoin can be a complex process especially compared to shorting other assets. There are several methods of short selling Bitcoin and all of them have their own level of complexity as well as risk and reward ratios.
One of the most popular ways to short sell Bitcoin is using crypto exchanges that accept Bitcoin shorting. While using these exchanges, you will be required to borrow the cryptocurrency from a broker or other willing lender.
After receiving the Bitcoin, you will sell it immediately. If your predictions are correct and the price drops, you will buy back the amount of Bitcoin you have borrowed at a lower price. Then, you will continue by returning the Bitcoin to the broker or lender. However, note that in most cases, brokers, and lenders charge fees for this process.
Leveraged trading
Another exceedingly popular thing that many traders are doing is trading with leverage. So, let’s say that the price of Bitcoin dropped from $50,000 to $28,000 and you lost $22,000 for each Bitcoin you had.
If you opened a short trade using leverage, you would be able to make much greater profits. Depending on the brokerage and platform you are using, you might be offered different amounts of leverage.
Also, there are other ways to trade cryptocurrencies other than directly buying them. There are many people who are using CFDs to trade cryptocurrencies. In most cases, CFD traders are able to use higher leverage, which can be helpful to make profits during downtrends.
However, the risks of leverage should not be underestimated. As much as it can increase your profits, it can also increase your losses.
Trading using bots
An especially useful thing to do for avoiding losses when you are trading during a downtrend is to use a trading bot. In most cases, when there are negative developments in the market, traders tend to panic and have a hard time controlling their positions. Trading bots can help you a lot in this situation.
There is a huge selection of trading bots available in the market, one of the profitable solutions being Bitsgap bots for automated trading. There are several trading bots offered by the company, one of them is the Sbot bot strategy which is a highly effective solution that uses conservative risk exposure. This is frequently used for minimizing the loss when the market falls. This bot strategy can generate returns when the market is up and where there are sideways trends.
The company also offers crypto investors the Classic Bot strategy, which is very profitable when in an uptrend market. The best time to use this strategy is when you are expecting the market to have a huge uptrend.
Deciding which trading strategy to use when the prices are going down in the market can be quite a challenge. However, since there are so many options available, crypto traders should not have a problem making profits even in a downtrend.