Traders of crypto have several tools that allow them to properly assess the cryptocurrency market. One such tool is called Bitcoin Technical Analysis.
With this method, crypto traders can get a better picture of the market sentiment and isolate emerging trends in the market. The data that will be gathered is used to make more accurate predictions and valuable trades.
For today’s bitcoin technical analysis, we’ll talk about some new bitcoin trading ideas and strategies to help you maximize profit.
It’s worth pointing out that trading strategies are only effective if the trader does their due diligence about the method and adhere to it. Any deviation or failure to recognize trends can result in significant capital losses. So please research these strategies
before applying them.
3 New Trading Strategies for Bitcoin Trading
For this bitcoin technical analysis, we are going tackle some investment strategies that pertain to an app on the Bitmax coin exchange. This is mainly due to the overall configuration of the exchange.
It is worth noting that this isn’t a walkthrough to the exchange itself. Instead, these are trading ideas for investors who are already familiar with the Bitmex interface and have prior experience with bitcoin investing.
Mean Reversion Hedge
The main way that traders can capitalize on this strategy is to create a hedge between an XBT futures contract and XBTUSD perpetual. In this instance, the XBTU18 counts as the futures contract. So as the futures price changes in comparison to XBTUSD, both your profit and loss margins will change accordingly as well.
The futures contracts tend to move in perpetuity to the underlying value correlated with XBTUSD. The price also changes depending on whether it’s bought at premium and discount rates.
Thus, if you have short XBTU18 futures and long XBTUSD, then you will want the futures price to approach the XBTUSD price. Before you consider this strategy, you need to take into account the following factors:
There’s this scenario that your futures contract is going to expire in approximately one week, and it’s at present $100 premium over spot. So, you can expect that after one week, the spread will drop from the initial $100 to $0 after expiration. This is with the
assumption that it doesn't expire before the time is up. What’s the best strategy in this scenario? You need to hold XBTUSD as a long game while XBT becomes the short position.
What do you wait for? You wait for the futures price to go back to parity with XBTUSD. If you choose to close those positions, you should be left with a sizable profit. However, for XBTUSD,there are fees associated with withdrawals, so be sure that you keep this in mind.
Follow the Funding Flow
As a crypto investor, one of the most important contracts that you should pay attention to is the XBTUSD contract. This particular deal features a funding event that happens every 8 hours. You either receive funding or pay funding depending on the positions you hold once the event is up. While it doesn’t look like much, the funding events can be rather significant. Anything over 0.05% can have a significant effect on the bitcoin market.
To capitalize on the funding flow, you will, of course, need to wait for the event to happen.
You, the trader, should then be
in a position that leaves you open to positive funding. This particular position and the waiting could be as long as 4 hours to half an hour. This also depends on the stop loss that the trader uses.
There’s a simple method to better understand your funding position and that’s to know that it’s calculated by the total leveraged amount of a brand-new trade position. This basically implies that there are certain positions that are highly leveraged. Because of this, they do not want to pay for funding. This persisting event produces an almost tidal dynamic when concerning funding positions. So, you can see traders who load up to take advantage and there are those who pull out before they’re called to pay in.
Therefore, there’s a great chance that investors will close their positions if they’re set up to pay for funding. This is more likely if they can set up a new position which will receive funding instead. For this reason, it’s crucial for a trader to devise a strategy around this ebb and flow of funding. In general, it’s best to close your position prior to the funding drop. This is because that after you receive funding, there will be major measures that will work against you. You can trust that the others will secure their position after getting paid.
Checking out the Bitmex's transaction histories every now and then is one of best ways to secure an advantage and do some great research on the side. You might find larger funding and transactions and you can evaluate their status both before and after funding. It bears repeating that the trader must intensively research the mechanics of how this strategy will work for him. That includes the ideas on how to make the first move. Overall, this is indeed one of the best methods that you can employ within this exchange.
Post Funding Blues
The funding turnover trend really does present an exciting opportunity to trade. Why not? As previously mentioned, the funding event happens every 8 hours. When a large funding is paid, which is usually 0.05%, it can have a significant difference in the market.
When the countdown timer on a funding cycle ticks down, you open up an XBT futures position that pays in funding. A few instances after the event, after you have successfully secured your position’s uptick, you close it out. When done right, you have secured a solid profit from the release.
Although the XBT futures contract will not receive funding from a turnover, it will nearly follow the XBTUSD once the funding is released to that. A few seconds following the
funding’s release, the XBTUSD will gradually move towards the direction of the paid funding. This is because that many traders and investors are likely to close their positions in order to take advantage of the rollover.
Since the XBT futures contract follows such positions very closely, you can indirectly capitalize from the increase with that XBTUSD. In essence, you get to actively benefit without having to pay funding.
If you want to use this method, know that the window for this strategy can range from 10 to 16 minutes. This indicates the time when positions transition from paying to earning funding. The main reason for this is that traders who opened a position to earn funding will immediately close which swings the price towards the opposite direction.
Bitcoin Technical Analysis: Final Thoughts
That wraps up three of the newer trading strategies that you can use to maximize your profit. Again, these are all concepts that might or might not work with you. It will be up to you to research your options and ensure that you don’t end up on the biting edge of these ideas.
Like with everything about bitcoin investing, you will have to put in the time and money in order to make a solid profit. If you are looking to make a quick buck, these are not the strategies that you are looking for.
If you have any questions about these trading methods, feel free to leave a comment below.