If you’re entering into the world of cryptocurrency trading wishing to make money on bitcoin, and perhaps trading more generally, one of the first skills you will need to develop is “trading the news”.
This term describes how traders predict future trends in the market, to make a profit from relevant news items.
The fundamentals of the process are simple enough and can be fun to learn. What’s more, most beginners who aim to make money on bitcoin can intuitively understand the basics fairly quickly, allowing them to start making predictions almost immediately.
News items are a great way of predicting short-term moves in the market which create promising opportunities for traders
However, although the basics are easy enough to grasp, effectively “trading the news” for consistent profits demands a highly organized, strategic and methodical approach. Those who are able to adopt best practice in this field will be able to make money on bitcoin and transform their trading from just a few quick wins to consistent gains. Here we will discuss the fundamental principles and a few key strategies to put yourself ahead of the pack.
First, to trade the news and start making money on bitcoin we will have to begin looking at a variety of news sources from mailing lists to news sites and more. Crypto Weekly is one mailing list we’ve previously recommended as well as news sites such as CoinTelegraph and CoinDesk. Alternatively, if you don’t want to trawl through dozens of news sites individually, find a news aggregator that can do the job for you.
One popular example is CryptoPanic, which will display cryptocurrency news from a variety of sources in one place alongside current trading prices. Alternatively, FAWS and Coinspectator are both highly respected with their own devotees. Experiment a little to find one which suits you best. News aggregators will allow you to quickly respond to unexpected or emerging stories as they happen without continually visiting dozens of sites.
For keeping on top of events and news items on making money on bitcoin and other cryptocurrencies that are announced in advance, a cryptocurrency calendar is highly recommended.
Perhaps the best known of these is Coinmarketcal. This calendar allows traders to filter upcoming events by coin, exchange, date and category. Alternatively you can choose to view upcoming events by how “hot” users have rated them. Alternatives include the nicely designed Kryptocal and Coinscalender.
The next step in understanding news is to classify and interpret news stories and the impact they may have on the market. How do we classify which stories are likely to be important and which are less so? Firstly, news related to the big coins such as bitcoin and ethereum are likely to have a much bigger consequences to the market as a whole, while news related to small, alternative coins – altcoins – will have a much more localized effect.
As a general rule you want to be observing news on the big players no matter which coins you are trading.
With any news event on making money on bitcoin you want to decide whether the story is something that has been confirmed or whether it is merely speculation and understand that even speculation can have strong effects on the market. Importantly, with periodic news or a scheduled event, the market will probably adjust before the announcement meaning that some of the biggest moves may come prior to confirmation.
Directional vs Non-Directional Bias
There are two main ways of interpreting news for trading to make money on bitcoin and other cryptocurrencies. The first is with a directional bias in which you predict the direction of travel for the market (either up or down) based on the news item. The other is with non-directional bias in which the only thing that matters is that the news will create some sort of price movement.
It is important to state once again that price movement for directional bias may occur before the news has officially been released (speculation). It is also important to note that a very strong price reaction may be followed swiftly by an adjustment in the opposite direction.
Therefore, when trading with directional bias it may be wise to observe how the market reacts to certain types of news items before jumping right in. Alternatively you may wish to examine how past news items have affected the market historically. Once you can match price changes to specific news events, you will begin to better understand how they can alter future prices and take advantage to make money on bitcoin. In any case, you will want to trade with directional bias only when you are sure you know which way the market will travel.
If you decide to trade with non-directional bias you will initiate what is known as a straddle trade.
If we think of upwards and downwards market movement as opposite river banks surrounding a small stream, straddle trading is when you put a foot on each bank and literally straddle the market.
This is a great way of profiting from volatility in the market when you are unsure which way the market will travel, but expect a news event to cause some price change. What’s more, straddle trading allows you to remove some of the emotion from the experience as there is no right or wrong. However, straddle trading is limited to markets where you can long and short trades and is probably best suited to make money on bitcoin for more experienced traders.
As with all activities, the more you practice, the better you will get at grasping the theories involved. Armed with the best news, up to date calendars and a strong sense of experimentation you should start to identify patterns in the market for yourself. Keep practicing and keep yourself informed with Getex.com.