Bitcoin Futures: How to successfully trade?
Becoming a successful trader is very difficult to master. In fact, statistical research confirms that most traders lose money. Why is it so challenging to master the art of profitable trading? There are several reasons why most traders lose money. Arguably, the three most important characteristics separating winners from losers are discipline, patience, and a pre-defined trading strategy. Of course, it’s rather difficult to teach discipline and patience. These are learned behavioral skills that can take years to master. However, we can certainly discuss profitable trading strategies. Let’s review a few specific strategies which have worked fairly well for trading Bitcoin futures.
Simple Trading Strategies Work Best
One of the biggest mistakes traders make is their belief that successful strategies must be filled with complex formulas and complicated rules. Nothing could be further from the truth. There is absolutely no empirical evidence that shows that profitable trading programs are inherently complicated. In fact, just the opposite is true. Simple trading methods usually produce the most consistent long-term results. Let’s review a few profitable strategies which have stood the test of time.
Support and Resistance Levels
The first trading strategy is a very simple chart pattern that identifies support and resistance levels. Please review Chart #1 below.
This chart contains two days of intraday trading activity for BTC. As you can see from the chart, there was heavy resistance at the 9822 level. Bitcoin made three attempts to penetrate 9822 over the course of 22 hours on Feb 17. This particular strategy places a buy signal @ 9822, waiting for Bitcoin to penetrate the heavy resistance line on its fourth attempt.
Finally, on Feb 18, BTC generates a bullish breakout when it crosses above 9822. The profit target is simply the trading range of the distance between the resistance line (9822 – 9481 = 341 + 9822 = 10163). This trade generated a profit of 341 points.
Let’s review another example that highlights a bearish breakout. Chart #2 displays intraday trading activity for Feb 14 and Feb 15.
In the early morning hours of Feb 15, the Bitcoin bears made three attempts to penetrate 10206. The bears were successful in pushing BTC below 10206 on the fourth attempt. This triggered a sell signal @ 10206. The profit target is the trading range of the distance between the support line. This trade generated a profit of 69 points.
Clearly, this particular trading strategy is very easy to follow. If you are a day trader, this is a great method to use because it produces several trading opportunities throughout a single trading day. If you want to increase the number of buy-sell signals, simply reduce the time period for each bar on the chart.
For example, the length of each bar for Chart #1 and Chart #2 is 10 minutes. If you prefer more trading activity, adjust the size of each bar to five minutes. Reducing the time period of each bar will increase the number of trade set-ups.
Support and resistance levels work incredibly well when markets are exhibiting a strong trending move. Conversely, when the market is locked in a trading range, the strategy performs poorly. This is why it’s critically important to always use protective stops.
True Range Breakout System (TRABOS)
Another good trading strategy is called TRABOS, which is an acronym for True Range Breakout System. This is a very easy approach to use. The first step is to select 60 minutes of trading activity. The best time period to choose is when the markets are very active with heavy volume. This usually occurs during the morning hours. If you review Chart #3 below, you will notice a box that represents 60 minutes of trading activity.
The second step is to calculate the trading range of the 60-minute box, which is 65 points. The third step is to determine the closing price of the final bar in the box. The closing price is 9649. The fourth step is to add and subtract the range against the closing price (e.g. 9649). The buy signal is 9714. The sell signal is 9584.
As you can see from the chart, the buy signal was generated @ 9714. What is the profit target? The target is 200% of the trading range (65 x 200% = 130 points). Therefore, the profit target is 9844. The target was elected fairly quickly after the trade was initiated. Very briefly, let’s review the trading instructions.
· Select 60 minutes of trading activity
· Calculate the 60-minute trading range
· Determine the closing price of the 60-minute trading window
· Add the trading range to the closing price (buy signal)
· Subtract the trading range from the closing price (sell signal)
· The profit target is 200% of the trading range
TRABOS is a very easy method to use to trade. If you prefer more activity with TRABOS, the easiest solution is to reduce the time length of the trading window. It’s not uncommon for aggressive day traders to reduce the trading window to 15 minutes.
TRABOS is very similar to support and resistance levels in terms of its ability to generate profits in a trending environment. TRABOS works best when Bitcoin moves in the same direction for an extended period of time. When BTC becomes locked in a trading range, TRABOS will lose money. The best way to limit your losses is to use protective stops.
Let’s examine one final strategy. This particular strategy involves the use of Fibonacci levels. It works best when Bitcoin is locked in a trading range. Specifically, the strategy generates entry signals based on various Fibonacci levels. The first step is to calculate the BTC trading range from the previous day. As an example, please review Chart #4.
The chart contains intraday trading activity for Feb 18. Therefore, BTC trading range was calculated for Feb 17. The second step is to generate Fibonacci levels and display each price level on the chart. The third step is to use the Fibonacci levels as buy-sell signals.
Quite often, Bitcoin will remain locked in a trading range for several hours between the Fibonacci levels. This strategy is an excellent way to successfully trade BTC when the cryptocurrency is moving sideways. For example, you will notice that BTC was stuck between 10121 and 10276 during the final eight hours of Feb 18.
The strategy produced a profitable sell signal @ 10276. The trade was covered @ 10121. You will notice that an excellent buy signal was created @ 9620. The position was covered @ 9774, for a profit of 154 points. Of course, there will be several unprofitable signals along the way. The best course of action is to always use protective stops.
Digitex Increases Your Ability to Be a Profitable Trader
The single biggest enemy for a day trader is commissions and trading fees. If you are an active day trader, excessive commissions can destroy your trading profits. Trading fees are the main reason why most day traders lose money. Even the world’s most successful day traders have openly admitted that commissions have eliminated the majority of their profits.
Before launching Digitex Futures, CEO Adam Todd was a highly successful day trader on the floor of the London International Financial Futures & Options Exchange. During his trading days, Adam despised having to surrender a large percentage of his day trading profits in the form of commissions and fees.
A little over two years ago, Adam began a personal journey to eliminate trading commissions by building a commission-free exchange called Digitex Futures. Today, Digitex is on the verge of unleashing a commission-free futures exchange. The mainnet launch is scheduled for April 27.
Digitex will dramatically level the playing field for the day trading community. Despite the fact that the futures industry has been in existence since 1848, the industry has never provided a commission-free exchange. Digitex will make history on April 27 when it becomes the first futures exchange to offer commission-free trading. Eventually, other exchanges will migrate to a commission-free format. However, Digitex will always be the first.
I’ve been trading BTC futures since 2017. Based on my experience, the most consistently profitable trading strategies are those that are based on simple rules. Overly complicated trading approaches rarely work. Keep it simple and avoid the temptation to overtrade.
In regard to DGTX, I’m convinced that the entire global futures industry will eventually follow the lead of Digitex by offering commission-free trading. Although it’s impossible to forecast the future, it certainly appears as though the DGTX token has tremendous upside potential, as crypto futures traders migrate to a zero-fee platform like Digitex.
Digitex Futures writers and/or guest authors may or may not have a vested interest in the Digitex Futures project and/or other businesses mentioned throughout the site. None of the content on Digitex Futures is investment advice nor is it a replacement for advice from a certified financial planner.