Classic trading strategies

[1pool Ltd.]

Trading is like betting, it is only gambling if you lose  
To win, you need to pick trading strategies where the benefits outweigh the risks. This is why I want to share the most popular trading strategies on 1Fox with you, according to our data:

The speculative long/short trade
By far the most popular trading style is to speculate on rising or falling prices. If you believe, for example, that Bitcoin gets banned by a big country in the near future, you could open a leveraged short trade on BTCUSD and profit from a falling market price. If you believe that big financial institutions are going to invest in Bitcoin, you could open a long position and profit from the expected market price increase.

Hedging your cryptocurrency (Bitcoin) against price declines
Opening short positions is great way to hedge your cryptocurrency against price declines.

Consider the following example: The Bitcoin price is at 9000 USD and you own exactly 1 Bitcoin. You have the fear that the Bitcoin price could decline in the coming months and want to keep your USD value. This can be achieved by opening an unleveraged BTCUSD short position with a size of 1 BTC:

If the price falls from 9000 to 5000 you would profit with +0.8000 BTC. The total account balance of 1.8 BTC at a Bitcoin price of 5000 is exactly 9000 USD, your initial USD net worth. If the price rises from 9000 to 14000 you would lose -0.3572 BTC. However, the remaining account balance of 0.6428 BTC at a price of 14000 is again 9000 USD.

Lending fiat currency
Trading platforms usually have a system that keeps the index price on pair with the traded price. On 1Fox for example, this is called the funding rate and it can be expected that this rate is usually positive. This means that long positions pay and short positions receive funding payments in the long term. Opening unleveraged short positions can be interpreted as lending fiat currency to long traders.

Consider the following example: The average funding rate is 0.05% per day on the BTCUSD market and you intend to "lend" USD to others. This can be done by converting USD to BTC, transferring these BTC to 1Fox and opening an unleveraged short position. It the above section (Hedging your cryptocurrency (Bitcoin) against price declines) we learned that short positions keep a fixed value in terms of USD no matter how the market price moves. If we hold such a short position over a longer period of time and the funding rate remains positive, the USD worth of the position will constantly increase. To "realize" these profits, you have to close the position and convert your BTC back to USD.

A side-effect of this trading strategy is that you are virtually not exposed to BTCUSD price movements, which is certainly a pleasant feature for some traders.

Arbitrage trading
Arbitrage is defined as the purchase of securities on one market for immediate resale on another market in order to profit from a price discrepancy. This results in immediate risk-free profit.

An example: Imagine that you can enter the BTCUSD market (go long) at a price of 8000 and exit it at 8050 on another exchange or trading platform. Making these two trades will not change your BTC or USD exposure, but you will profit from the price difference instantly.
Of course there are also more advanced strategies like placing a Limit Order at a price below/above the potential entry point of another market. Once your Limit Order gets filled you can instantly "rebalance" your exposure by making a Market Order on the other trading platform with an instant profit.

Market making
A market maker and places an order both on the buy (long) and the sell (short) side of the order book hoping to make a profit on the bid-ask spread. Especially in times of low price volatility, the volume of buys and sells will be roughly the same. A market maker can generate profits by constantly "buying low" and "selling high". On most exchanges there are many competing market makers which rely on sophisticated trading algorithms.
If you are interested in becomming a marketmaker on 1Fox, there is a fundamental trading bot that you can build on if you are able to program.

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What trading strategies have you used in the past? With which outcome?

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[Tytanowy Janusz]

Hedging your cryptocurrency (Bitcoin) against price declines
Opening short positions is great way to hedge your cryptocurrency against price declines.

Consider the following example: The Bitcoin price is at 9000 USD and you own exactly 1 Bitcoin. You have the fear that the Bitcoin price could decline in the coming months and want to keep your USD value. This can be achieved by opening an unleveraged BTCUSD short position with a size of 1 BTC:

If the price falls from 9000 to 5000 you would profit with +0.8000 BTC. The total account balance of 1.8 BTC at a Bitcoin price of 5000 is exactly 9000 USD, your initial USD net worth. If the price rises from 9000 to 14000 you would lose -0.3572 BTC. However, the remaining account balance of 0.6428 BTC at a price of 14000 is again 9000 USD.

This strategy is used in different scenarious in my opinion. For example you would like to open possion on gold mining business but without risk of gold price change. Thats why you buy shares of the company and opens short position on gold. Now you have position that is based only on performance of company instead of performance of company and gold price. Or you want to open possition on korea market without risk of change price of its currency. Thats why you also open short position on KRW/USD

If you have bitcoin at 9000$ and you feel that its going to fall than sell it. U had 9000$ bitcoin now you have 9000$. In your strategy you had 9000$ in bitcoin and 9000$ in short position on bitcoin (18 000$ locked in trades). Explain it to me how this strategy is better than just selling bitcoin ?

If bitoin will go up you are earning on bitcoin position and loosing the same amount on short position.
If bitoin will go down you are loosing on bitcoin position and earning the same amount on short position. Its the same as just sell.

[gantez]

I see you talk of hedging, hedging is a way that you trade against your already open position. For instance, if you are on a buy while on a loss, you enter a sell positive of the same leverage. This is meant to wedge your trade for total lose though but for me, I see it as a waste of your time.

In this hedge market, you will be so frustrated because it will be trading either way until you can find a running away space If you can, otherwise the market can go back to hold on you again, expecting you to go on another hedge. Funny way of trading, it burns your account and waste your time.

[STT]

Hedge is for actual holdings I think, 2 positions exactly opposite would sometimes be a way to close the trade.    Where as a hedge is usually a more liquid way to speculate on a cold wallet holding for example, hence its convenient and more secure then releasing funds.

I think the most classic trade scenario I can think of is a break of low volatility.  So identifying a series of declining highs against maybe  flat support on the lows.   Then the trade would pick up the momentum that occurs after either support breaks or the trend of lower highs fails to continue, a breakout. 

[binghope]

Previously in 2017 I had a long-term trading campaign. I only invested in a bitcoin section but then I saw that it would be risky if I was trading for one coin so I learned more in trading.

[dangershadow]

Thanks for sharing.
Good strategies

[boyshx]

Lending fiat and market making are the worst ways of trading your money according to my experience. You can get screwed at anytime in them and when we consider the fact that we are in crypto space which is anonymous and no where to reclaim stuff it can get difficult over the time.
I am mostly into long/short term trading and find no differences in hedging from the long term holding. Thats the safest way to make profits and also you get additional security of your holdings as you loose nothing unless and until you are not selling the coins here.