Bitcoin trading is risky, but can be lucrative. The difference is that unlike your day to day stock trades, Bitcoin trading seems to be far more about market opinion than things affecting the actual value of the currency. After achieving a few 2% growth days, I decided to note down a few of the things I was looking at to make my buy and sell decisions.
It’s heavily based on people
You’ll notice quickly that bitcoin is far more sensitive to trade lines, moving averages, etc than the general stock market.
Hitting and dropping below a “ceiling” caused a huge drop in price as I write this, as the market traders “lost confidence”. Be prepared to make trades based on other traders assumptions. There was no “reason” for failing to break through the $470 ceiling to cause a drop in price, it was literally just investors who panicked and sold after the value failed to break through.
Look for these arbitrary signals and pay attention to them.
Big buyers, price goes up, big sellers, price goes down
It’s a basic economic principal, but it’s worth repeating. If there’s a couple of large trades sitting on the trading price line, it’s going to have an impact. This is especially true on markets such as coinbase exchange, where trades are free if it’s not an immediate trade.
Look at the depth chart
Similar to above, the depth chart gives a fantastic visual overview of where people are currently bidding on the price range. Just by looking at the chart you can more accurately gauge the current state of the bitcoin exchange.
I generally look for large differences close to the trading line. If a lot of people have placed sell orders, but the buy orders are dry, you know the price is going to continue to drop until the market hits more of an equilibrium.