Several investors were in for a harsh surprise as Bitcoin lost its entire gains within minutes. It dropped around 12%. Investors began to panic.
BTCUSD has found support around the $9,600 range now. Traded volume continues to be less, but the fear that initially gripped the markets is gone now.
BTC volatility: Importance of limit and stop-loss orders
After the crash, BTC rose and found a reliable support zone. The fear vanished as investors gulped down the losses. A lot of investors would likely stay out of such volatile movements now.
In such a scenario, it is best to put Limit orders and Stop-loss orders instead of market orders. The stop-loss would always be a cushion against such devastating swings. A lot of traders forget its importance when trading in such volatile markets.
Short term trading strategies in BTCUSD
Let us look at the four-hour BTCUSD for taking the swing trades. The trendline joining the highs and the lows give the impression of a rising wedge, which is a bearish pattern.
The region above the trendline around the $10k range is the psychological resistance level. Bitcoin might move in within the trendline bound zone.
The opportunity for trading will arise when BTCUSD crosses over the upper trendline. That will be the opportunity to enter a long position. The target would be around $10,000, with a gain of 3%.
Another trading opportunity would arise in case BTCUSD retests the upper trendline and falls below. That would give the chance to make a short trade. In both the trading strategies, there should be a stop-loss in place.
Traders should always keep in mind the risk to reward ratio more than 1:2. That way, even if 50% of the trades go wrong, the trader will still be profitable.