Bitcoin Trading Lessons from the Greece Rally

While stocks tumbled worldwide, bitcoin traders enjoyed a 20% rally. This post looks at the do’s and don’ts of trading bitcoin in large rallies.


Overall, the rally was welcomed by BTC.sx clients after a period of stability. We have selected five real trades that highlight the different strategies traders can deploy in a rally.

In the below graphs, yellow circles represent positions being opened and the purple circles represent positions being closed.

1. Buy the Rumor, Sell the News

Direction: Long
Leverage: 10x
Open price: $222
Close price: $253
ROI (inc. fees): 96%

Our first client has employed an old stock market tactic of ‘buy the rumor, sell the news’. This is based on the premise that the price of the asset will move in anticipation of major news.

They implemented this strategy by going 10x long during a price dip on the 1st of June. The client then held their position open for almost the entire month, finally taking their profits on the 29th of June — the date Greece failed to repay their IMF debt.

It is quite likely that this client saw a lot of parallels between the situation in Greece and the Cyprus debt crisis in the spring of 2013 (chart above).

With this view on the market, the client went long with the expectation that the price would repeat history and rise as another Euro Zone country enters a financial turmoil.

2. Buying Momentum

Direction: Long
Leverage: 10x
Open price: $250
Close price: $65
ROI (inc. fees): 38%

In contrast to the first example, this client adopted a short-term approach. Their strategy was based on the concept of buying momentum, which means that it is likely the price of bitcoin will continue to rise for a limited time period.

The timing of this client’s trading with momentum can be better seen by applying TradingView’s momentum indicator (chart below).

The client’s position was opened at an initial spike in momentum, suggesting that the price had potential to rally further. When the momentum hit unsustainable levels — over 15 on y axis — the client took his profits knowing that the rally had lost steam.

To use momentum in your own trading at BTC.sx, simply click the graph icon and then select momentum from the list of technical indicators:

1. Click graph icon

2. Select momentum

3. Begin trading momentum!

3. The Bear

Direction: Short
Leverage: 10x
Open price: $254
Close price: $241
ROI (inc. fees): 40%

Our third client demonstrates a bold strategy of shorting the price during a temporary correction. Although this is a risky approach, it allows traders to continue to generate profits while the market takes a break.

These corrections can be difficult to identify early on, however there are a few tips traders can use.

Firstly, when volume begins to decline, as it has done in the above example, it indicates that a price rally may have reached its peak. Secondly, moving averages and the MACD can be used to identify trend changes. These have been covered in our trading guide series.

4. The Risk-Taker

Direction: Long
Leverage: 5x
Open price: $243
Close price: $263
ROI (inc. fees): 28%

The fourth trade shows a more risky approach to the first client. In this case, our client initially followed the market during an aggressive rally by going long with 5x leverage, at a price of $243.

Although they could have realized a substantial profit within 24 hours, they were hungry for further gains. When the market turned against the client during the 23rd to the 28th June, they continued to hold up until the date Greece failed to repay their debt.

However, traders should not always take such a risky approach. When trading bitcoin it is easy to become greedy and fail to take profits. The below chart demonstrates how exuberance can lead to lower profitability:

In hindsight, this client was fortunate that the rally continued after they decided to not take their profits.

5. The Impatient

Direction: Long
Leverage: 10x
Open price: $242
Close price: $241
ROI (inc. fees): -7%

The biggest mistake we see clients make at BTC.sx is closing positions too soon.

While it is easy to say this in hindsight, it would have made financial sense for the client to have kept their position open. This is because of the timing of BTC.sx’s daily funding fee.

An interest rate is charged every 24 hours after a position has been opened. In the above example the position had been open for 26 hours. This means that the client could have left their position open for 22 hours at no additional cost.

If our client had waited that extra 22 hours, the second rally would have turned the position profitable. This is point is indicated on the above chart by the blue circle.

The lesson to be learnt here is to use not close unprofitable positions when you have only just paid to keep the trade open for another day.

Conclusion

Overall, the Greece price rally created great opportunities for traders. The key lessons from BTC.sx clients are:

  1. Plan your trading in advanced, considering what news might influence the future price of bitcoin
  2. Trade momentum in volatile periods
  3. Take profits sooner rather than later
  4. Do not close unprofitable positions when the daily funding fee has just been paid.

If you want to use the power of leverage / margin trading to increase your potential returns, check out BTC.sx. We offer up to 10x leverage and direct market access to Bitfinex, Bitstamp and itBit.

Alternatively, if you prefer more passive investments, check out Magnr. We provide interest bearing savings accounts for bitcoin, with a promotional interest rate of 2.18% AER.