How to Trade Bitcoin CFDs

十月 30, 2017 11:11

Bitcoin's value, like that of any other commodity, will not continue to rise forever. Every trend has an end, and trading this new resource versus the Dollar gives some handy advantages over purchasing it outright. Bitcoin isn't backed by any physical asset, making it very difficult to value, other than by applying technical analysis to assist with short-term trade setups. This is where trading systems and proper money management come into play. That is your advantage over others who have yet to learn about Bitcoin CFD trading.

At this point, buying the dips would be a pretty logical choice (until proven otherwise), so we will explain how to use the current trend to your advantage (buying the dips). Before we have a look at a specific strategy, let's review other important aspects of Bitcoin currency.

The Bitcoin CFD Trading platform – MetaTrader 4

Yes, it's possible to trade cryptocurrencies via Admiral Markets, including BTC/USD. Traders can access BTC/USD and other crypto pairs using both the MetaTrader 4 and MetaTrader 4 Supreme Edition platform.

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The process is as simple as the following steps:

1. Download/open MT4;

2. Open a new account or log in;

3. Open a cryptocurrency chart (BTCUSD).

Source: Admiral Markets MT4, BTC/USD H1 Chart, July 16, 2017

What Influences Bitcoin's Volatility?

We would say that BTC is a bit volatile. Bear in mind that volatility is your friend as long as you apply proper money management. According to Forbes, Bitcoin gained popularity in China in 2013, and it was pretty common to see Chinese exchanges lead market rallies by up to 20%. It was not uncommon for individual traders to move back and forth between Hong Kong and Shenzhen, making profit through arbitrage by selling Bitcoin using smartphones on Chinese exchanges, withdrawing money through bank accounts or Alipay, and buying back Bitcoin on the Hong Kong side, where prices were more in line with international levels.

BTC showed a huge momentum, which can be easily seen on a weekly chart. At one point, the price was 2888.89. Buying BTC/USD has yielded many positive pips for traders.

Source: Admiral Markets MT4, BTC/USD W1 Chart, October 2012-July 2017

Current vs. Historical Price: Trending or Ranging?

We can easily say that the price is trending, even on higher time frames. When you spot a big trend on higher time frames, it means that higher time frame momentum is also transferred to lower time frames. Accordingly, lower time frames (H1, H4) piggyback the momentum from higher time frames and theoretically enable intraday traders to enjoy massive profits. At this point, the current scenario is to buy the dips on the BTC/USD currency pair due to the established bullish trend. To always stay up-to-date with the cryptocurrencies price as well as possible movements and trading opportunities, Admiral Markets offers free live webinars with our experienced professional traders and analysts.

Due to the lack of long-term historical data, we can only compare the current moment with recent history (since 2012), but it should be more than enough to go with the flow and use various strategies that might give us much more profits than simply buying the BTC commodity itself.

How to Trade Bitcoin CFDs

Trading Bitcoin CFDs is probably not much different from trading any other currency pair, commodity, or CFD showing a strong trend. The beauty of trading lies in its diversity, and through price action studies, traders should be able to make profits that make them financially independent and stable. Bitcoin CFD traders should be focused on:

  1. Riding the trend (uptrend until proven otherwise);
  2. Proper money management;
  3. Focus on the major sessions: London, New York, and Tokyo.

Buying a dip in BTC/USD is important because it gives traders the opportunity to join the market majority and ride the impulse. Of course, the trend will change, but at this point, BTC/USD is showing an exceptionally strong trend.

Proper money management is the holy grail of trading, and if applied correctly in a strong trending environment, it should theoretically make enormous ROI.

Traders should definitely be focused on major trading sessions as major trading centres provide the highest volatility in BTC/USD. Fortunately enough, our MetaTrader 4 (MT4) platform offers the instrument during the major market sessions 24/7.

It should also be mentioned that you should only trade Bitcoin CFDs with a regulated Forex & CFD broker, like Admiral Markets.

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Bitcoin CFD Trading Strategies

We recommend a scalping strategy in order to exploit volatility to your advantage.

Scalping the BTC/USD pair is done using an excellent Double MACD strategy that we also covered in the Forex 101 course. Due to volatility and trend, this strategy is suitable for trading BTC/USD on shorter time frames, such as m5.

The strategy for trading BTC/USD uses 2 EMAs (Exponential Moving Averages), 34 and 55, 2 Stochastics that are overlaid (8,1,3 and 13,1,3), MACD2Line indicator (34,89,34), or default MT4 MACD if you don't have the MACD2Line, and Admiral Markets Pivot available with MetaTrader 4 Supreme Edition. We have also included a complete template with all indicators that you can automatically load into your MT4 with the help of Forex 101. If you decide to use the strategy without Forex 101, this is how you can set it up on your chart.

  1. Open your 5m BTC/USD chart;
  2. Apply 34 and 55 EMA. Blue is 34 EMA, Red is 55 EMA. Both are set on close;Source: Admiral Markets MT4, BTC/USD M5 Chart, July 16 2017
  3. Add the MACD (34,89.34); Source: Admiral Markets MT4, BTC/USD M5 Chart, July 16 2017
  4. Add the Stochastic (8,1,3) and (13,1,3) overlaid in the same window. Source: Admiral Markets MT4, BTC/USD M5 Chart, July 16 2017
  5. Finally, add the Admiral Pivot set on daily pivots. Source: Admiral Markets MT4, BTC/USD M5 Chart, July 16 2017
  1. You buy BTC/USD when Blue 34 EMA is higher than Red 55 EMA.
  2. The price needs to pullback towards the EMAs. Ideally, it should stop at the EMAs or pullback slightly below them.
  3. The MACD is above 0 (or the MACD must show a blue histogram if you use the template from Forex 101).
  4. Any of the Stochastics should be below 20 and pointed upwards (ideally, cross 20 from below)
  5. The target is the next Admiral Pivot with the stop-loss below the previous swing low.

Source: Admiral Markets MT4, BTC/USD M5 Chart, July 12 2017

Bitcoin Day Trading Explained

For intraday trading, you might want to use our scalping strategy several times a day, or, eventually, if you have a day job and time doesn't allow you to scalp, you might want to use a day-trading BTC/USD strategy.

This strategy involves the MACD with the RSI and CCI indicators for intraday traders. To be able to apply this strategy, you will also need to download the award-winning MetaTrader 4 Supreme Edition as it requires the Admiral Pivot indicator. The Admiral Pivot indicator offers unpreceded customisability suitable for both intraday and intraweek swing traders.

Free plugin MetaTrader Supreme Edition

Indicators used for this strategy:

  1. RSI (10,close)
  2. CCI (14,typical price HLC/3)
  3. MACD (12,26,9)
  4. Admiral Pivot

The strategy is traded on M30 timeframe. Traders buy BTC/USD when:

  1. MACD>O
  2. RSI>50
  3. CCI>0
  4. The price is slightly above pivot point support

Stop-loss is placed below the entry point, while the target is Admiral Pivot resistance. In strong trends, this should be a winning day trading strategy for BTC/USD.

Source: Admiral Markets MT4, BTC/USD M30 Chart, May 14-21, 2017

Making A Profit with BTC/USD

At this point, simply buying BTC/USD is the way to go until the trend reverses. Bitcoin is reaching new benchmarks of value in the trading market, and by using our strategies, you may be able to profit, no matter if the trend is to the upside or downside.

There are many ways to potentially make a profit by trading BTC/USD, but due to strong volatility and hype, buying dips is currently the most profitable trading strategy.

Rest assured that we will provide you with the latest information should there be any changes. That is why we have regular, free live trading webinars withleading industry experts.

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Market Sentiment – The Impact of The Hype in the Media

Ever since BTC started to lift off, the market sentiment has been astonishingly bullish, while BTC/USD has rallied to 2888.89 – a historical high. The pair started to retrace, but the sentiment is very bullish still. The media are also over-hyping the BTC currency, but the real reason might be the technology behind the blockchain. Many industries have been exploring its benefits and limits, so we might expect the real estate industry to also take on the blockchain hype. BTC has gained popularity as the world's best and most profitable cryptocurrency, with more and more people joining the network on a daily basis. This might create a bubble, and the uptrend might suddenly explode. People treat it as a commodity.

The other problem with Bitcoin lies in the fact that as the price of Bitcoin rises, it is harder to get paid in fractional units. At some point, Bitcoin will have to re-issue coins (increase supply), but mentioning that might cause panic in the market and tank it, easily.

Out of these reasons, the solution is not to mine BTC, but rather to trade it versus other FIAT currencies, e.g., USD. You will also be able to trade it and make profit, even if it starts to drop and a downtrend develops. Don't forget that through our platform, you have 24/7 access to trade BTC/USD.

Trading BTC and Other Cryptocurrencies

Besides trading Litecoin versus the US Dollar (LTC/USD), Admiral Markets clients can also choose to trade CFDs on Bitcoin versus the US Dollar (BTC/USD), Ethereum vs the US Dollar (ETH/USD), and Ripple vs the US Dollar (XRP/USD).

Traders need to download MetaTrader 4, which grants them access to the market and/or allows them to follow price action on charts. The process is very quick and simple, so you'll be ready to go in no time. In the end, Bitcoin might not be the undisputed cryptocurrency, the trend can always change or reverse, but the invention of Bitcoin has certainly changed the world forever!