Cryptocurrency Trading Strategies: News Based Trading
It is rightfully assumed that cryptocurrency prices are strongly affected by news. News based trading is one of the popular methods to trade on cryptoexchange. Let's have a closer look at some of the fundamental principles you need to adhere to in order to preserve and increase your funds.
Most traders operate as follows:
- When news are bad, all traders fear a drop in price and engage in a “sale”.
- When news are good, they buy cryptocurrency.
This is an adequate response to news. However, in terms of making profit this is not always the right strategy.
If you want to make profit, the right strategy would be the opposite one:
- When news is bad, buy cryptocurrency.
- When news is good, sell cryptocurrency.
In this case, you'll be able to make profit since cryptocurrency price is lower when news are bad.
A lot of beginning investors and traders notice that news have an impact on the Bitcoin price. A lot of them try to trade based on their own interpretation of the news. They soon can see that they suffer losses or fail to make profit by misinterpreting an event.
The key reason for misinterpreting is using an unreliable source of news or, more often, a source that publishes the news too late for making trading decisions.
Therefore, you need to find an adequate source of news. One of the best sources is forums and blogs. It's also important that forum and blog participants share their trading knowledge and experience and analyze errors and problems.
Some players on cryptocurrency exchanges set up groups tasked with initiating cryptocurrency price movement in the right direction. They can have significant means and use them to rapidly increase or decrease the price.
However, local manipulators don't need to spend their own funds — they could just make a stir around a piece of news and force traders buy or sell cryptocurrency. This is exactly when manipulators make a profit by making the right bids. If an exchange has a chat, it's an advantage for manipulators since they can use it to directly influence traders.
There's some speculation — though having no proof just yet — that certain global news regarding cryptocurrencies are also initiated by manipulator groups. Operations of some exchanges were even suspended this and last years on suspicion of using insider information.
Therefore, even if you trust your source, you must always double-check all news, employ analytical tools and compare price movement on various trading platforms.