Bitcoin trading strategies from a different angle.
I would like to share some of my trading strategies that can be used at Bitmex that don't rely on indicators or technical analysis.
The following trade setups are presented as ideas that should be investigated and researched by looking back over your charts.
Don’t take my word for it but have a look for your self and you will quickly see repeating patterns that follow the setups I have outlined.
Note- This isn't a beginners guide to Bitmex as there are plenty of those already available. These ideas should be tested before committing real money.
1. Go with the FUNDING flow.
The perpetual XBTUSD contract at Bitmex has a funding event every 8 hours. Depending on the direction of your position when the funding clock ticks over you Either pay funding or receive funding. Some of these funding events are quite large. Anything over 0.05% can often move the entire Bitcoin market.
The basic setup
Wait for a large funding event and open a position in the direction that gets paid funding. This could be anywhere from 4 hours to 30 minutes before the funding event depending on the position size and stop loss used.
The funding is calculated on the total leveraged amount of a traders position.
So there are plenty of Highly leveraged positions that dont want to pay funding. This creates some interesting dynamics around funding time as traders look to either get out of their positions or load up to earn funding.
People are more likely to close positions that pay funding and open positions that receive funding so prior to the funding time you can jump on board.
I find it best to close out before the funding even though you would receive funding. This is because right after funding is paid there is likely to be a big move against you as everyone else covers their position after getting paid.
I’ll leave the specifics of how long before funding is best for the reader to experiment with but this is one of my best returning trades over a large sample.
Now would be a good time to go look at the Bitmex funding history. Mark out the Large funding and go check what happened before the funding was paid.
2. Mean reversion Hedge.
The Basic Setup
The idea is to open a hedge across the XBTUSD perpetual and a XBT futures contract. In this example XBTU18 is the futures contract.
As the futures price changes in comparison to the XBTUSD price your profit and loss changes over both positions.
The futures contract price is always moving between being traded at a premium and discount to the perpetual XBTUSD price.
If you are short XBTU18 futures and long XBTUSD then you want the futures price to move closer to the XBTUSD price.
If you are long XBTU18 Futures and short XBTUSD then you want the futures price to move further away from the XBTUSD price.
Things to consider
- Generally the futures contract will trade at a Premium to the spot price.
- The futures price will ALWAYS expire at the same price as spot. This is just a function of how futures markets work.
- You will either have to pay or receive funding on the XBTUSD position. The futures contract does not pay or receive funding.
The futures contract has 1 week to expiry and is $100 premium over spot. So you know for an absolute fact that the spread will reduce to $0 when the futures contract reaches expiry. (If not before)
You would short the XBT futures and long XBTUSD.
Once the futures price returns to the same price as the XBTUSD (Which it must) you close both positions and you will be left with a profit. (Before fees and any funding paid on the XBTUSD side)
3. Post funding blues.
As already mentioned in setup 1. the funding rollover at Bitmex can be quite an exciting time to trade. This occurs on the XBTUSD perpetual contract every 8 hours. Large funding over 0.05% can create significant market movements.
The basic setup
In the minutes before the funding event takes place you open an XBT futures position in the direction that PAYS funding. You close shortly after the funding event has taken place hopefully for a quick profit.
The XBT futures contract does not pay or receive funding but still closely follows the XBTUSD.
The seconds after the funding event XBTUSD is likely to move in the direction that paid funding as traders close their positions that received funding.
XBT futures closely follows the XBTUSD price so you can catch the move without having to pay funding!
Anywhere from an hour to 10 minutes before a large funding event the price will often move in the direction that earns funding.
As soon as the funding has been paid from longs to shorts or vice versa there can be a huge move against the direction of the funding.
The reason for this is everyone who opened a position to receive the funding instantly tries to close which moves the price in the opposite direction.
So there you have it.
A few trading strategies that could change how you think about trading Bitcoin in general. Research, back-test and look at the charts. These setups are easily visible and repeatable.
Feel free to use my Bitmex link. You can save 10% on fees for 6 months.
Remember Leveraged trading is highly risky and you can easily lose your entire deposit.