Trading The Reversal In Bitcoin

3 min read

For a long time, I have been interested in bitcoin. I’ve been playing around with it since 2013 and I fully believe that the whole cryptocurrency ecosystem is only getting started.


e9a41a49a5da6b6492db0af0f4efe3deHowever, I’ve never featured anything related to cryptocurrencies on Smart Forex Learning! The biggest reason for this is that for a long time, I just saw them as a long-term investment holding, not something I’d actively trade. Nevertheless, I kept track of the price charts.


Interest in cryptocurrencies is growing and when I look at the bitcoin chart, it is starting to look like something I would trade. Cleaner charts, (relatively) less crazy spikes. It’s still not what you would call a quiet market, but a fast-moving market like this also provides us with opportunities.



The Bitcoin Reversal


In the past weeks, I really got interested in what happened with the bitcoin price! We could see a clean uptrend followed by a flattening of the moving average. At the same time, we could see clear RSI divergence, which indicates that the rally is losing steam.


Last week then gave us a double top with the second top being a spike into the highs, indicating a strong rejection of higher price levels. That’s when I became really interested! A classical reversal setup was right in front of me. I mapped out my local support and put a price alert on the break of this support. And what a clean break we got!




The red arrow pointing at the break of the local support is where I got in to short bitcoin. In any other market, this would be a textbook setup, they don’t often come as clean as this! Of course, the key with trading bitcoin (or any other cryptocurrencies) is that you monitor the price much closer than what you would need to do with other currency pairs.


A quick bounce up might happen in an instant and protecting your winners is paramount here. But it just goes to show that these reversal patterns happen in any market and from now on, I’ll be looking at setups in bitcoin (BTCUSD) as well as my regular currency pairs.



Trading Bitcoin


These days, a lot of FX brokers are starting to offer bitcoin trading. My broker (FxPro) already offers a bitcoin/usd CFD. However, you need to be careful with FX brokers and check that they offer enough liquidity. Be wary of bitcoin charts that have big gaps or prices that show huge spreads, as these indicate that your broker has almost no liquidity and trading it through their platform is not a viable solution.


Often you’re better off with trading bitcoin on one of the bigger cryptocurrency exchanges as they have much more liquidity. Examples of some exchanges you can look at are:



Are you trading cryptocurrencies or do you want to know more about trading them? Let me know in the comments!


FX and futures trader, using price action, market profile and order flow to trade markets. I also have an interest in trading psychology and algorithmic trading. Follow me on Twitter: @GhostwireTrader