Trading the news, or sentiment, is something professional traders often despise.
Indeed this kind of trading stands on thin ice and can’t be at the core of an overall succesful strategy. Anyway, given the odd nature of cryptocurrency market, once the proper set up is met, trading the news can bring you sizeable results.
Before considering the trade, look for this pointers.
- news must be high impact
They must touch on a big topic, something that’s well-known to almost all cryptocurrency users, as a whole or as altcoin sub-community.
- news must come unexpected
A dev meeting a deadline for release a product won’t qualify. On the other hand, a dev missing the deadline could.
- news must carry a clear indication of price direction
If you’re in doubt about the effect the news will bring to price sentiment never engage in trade.
Let’s see a couple of recent examples.
- Craig Steven Wright is Satoshi
Can you imagine something more high impact than that?
Even if rumors of Wright’s claim circulated for a long time before he openly claimed to be Satoshi Nakamoto, the endorsement he received by big characters in the community lent his last claim a totally new credibility.
The news were clearly bearish: 1.1 millions bitcoins were suddenly eligible for selling.
Price dropped accordingly.
- The Slock.it DAO opens the crowdsale
Even if the crowdsale was in the air for weeks, nobody ever committed to a clear deadline.
When the news hit the wire it came as a big surprise.
The news were clearly bullish, since ETH price had collapsed in the previous days and suddenly anybody and his mother needed ETH to jump on the DAO wagon.
ETH price soared 25% in few hours.
When you spot a chance to trade the news:
- go in early as possible.
In you’re late on the news stay out. You want to be the frontrunner not the frontrun.
- go out quickly.
Make sure to be out when the profit-taking stage begins. Never get greedy on such trades.
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