Welcome back Bitcoiners! I hope you're ready for day 3 of our 5 day journey through the basics of Bitcoin trading. Just in case you didn't see yesterday's post about indicators, you can see it here or Monday's post about charts is available here. I highly suggest you start at the beginning because we will be building on top of what we learned yesterday and Monday.

As you know by know my name is Andrew Cook and I am the Founder and CEO of Cook Investment Firm. We are based in beautiful Santiago, Chile and we trade Bitcoins for a living. Although we are professionals, trading is serious business. Just because we're good at and we're giving you advice doesn't mean you should do what we say. You're adults (I think), use reasoning and know that this is a complex subject. Having said that, all the information here is just advice and should not be taken in any other way. We are not asking you to invest with us, nor suggesting you should, we just want to help out the community. Above everything else, do your homework! Read, learn, watch and grow before making any trades. The trading strategies I will be talking about today are extremely basic, there are many more complicated ways to trade. Keep that in mind.

Now that's out of the way, let's get down to business. Trading strategies. I am not a mystic nor a guru. There is no magical formula that will allow you to make perfect trades. There also is not an easy route. If you want to make good or even great trades you must put in the time and effort it takes to gather the information, look at the patterns, follow the news and finally make the trade. But even when all of those things fall into place you still can make a horrible trade. Sell when Bitcoin is at the lowest it's been in weeks or buy when it's at its highest. Remember speculation is speculation, it should never be considered something else.

Basic trading strategy is: Buy low, Sell high. Saying that is 100 times easier than actually doing it. We'll be looking at some ways we can maximize this possibility.

• Short Term Trading (2 days or less)
• Long Term Trading (2 days or more)

We'll also be looking different approaches to trading.

• Moving Averages Crossover Trading
• Momentum Trading
• Technical Trading
• Fundamental Trading
• Chinese News Trading (Only applies to Bitcoin, mostly a joke, but still functional)

Short Term Trading (2 days or less)

The basic idea of short term trading is to take advantage of small gains and losses throughout the day. This type of trader normally trades a few times during the day or at least once every two days. This strategy in theory can work. Although personally I have never seen it. Most day traders (as there also known) lose more money then they make. Maybe they will make profits for one week or even two, but eventually they will almost always lose. Generally speaking day traders lose out on big long term changes in the market, because they are so focused on the day instead of the month. Many people trade this way and for some it does work. I've just never seen them.

Long Term Trading (2 days or more)

Long term trading is the idea that big changes happen over time and to take advantage of those changes you need to wait. An average long term trader, at most, trades once every 2 days. They can also go years without making a single trade. This style of trading is a lot more relaxed and less stressful than short term trading. You can relax and watch the price slowing zig-zag up or down depending on the market and only worry when it changes direction. Because this type of trading does not take advantage of the small or even medium changes you can miss out on that 5% gain. Long term trading is by far the safest way to trade. It is very hard to lose in long term trading, as long as you react when the time is right.

Know that you have an idea of what kind of trader you want to be, you can choose a strategy. There are many to choose from and I think it's best that all new traders try a bit of each. Some are emotional, some are logical but they all work when in the right hands.

Moving Average Crossover Trading

Remember when we talked about indicators, specifically MA and EMA. Well moving average crossover trading takes advantage of these two indicators. You may recall there are two lines, pictured here, a fast moving line (blue in this case) and a slow moving line (orange in this case). When these two cross, a moving average crossover trader will buy or sell. If the blue line crosses over the orange line at an upward angle the trader will buy. If the blue line crosses over the orange line at a downward angle this signals to the trader that he or she needs to sell. It's that simple. The MACD indicator is a great help when trading moving averages. It will allow the trader to see the trend sooner than the MA or EMA will show.

Momentum Trading

Momentum trading is probably the simplest here, but the least effective in making profits. The basic idea is you wait for a trend to have some momentum behind it and jump on or off. Here is an image where I show you where you jump on. This is a very good and safe way to trade. However, it only works on long term trades and one should not expect huge gains from this style of trading.

Technical Trading

I think 90% of /r/bitcoinmarkets are technical traders. This type of trader is addicted to charts and graphs. Every move in the market is “showing” a different sign. “I bet the price will do this because my chart says so”, if you have ever said that, you are a technical trader. Personally, this is what I am. Technical traders rely on math, triangles, history and a plethora of other things. There are both good and bad sides to this type of trading. The bad side is there is no relaxing, we constantly need to make a new chart that fits in with what the price is doing. We always need to find a reason behind what the price is doing, which can create massive headaches and an addiction to coffee, but there are benefits. Believe or not 70% of the time, markets really do follow trends and technical traders are normally the first to profit from it. However, that other 30% of the time, that markets do not follow trends, we lose, massively in most cases. If you don't like math nor geometry technical trading is probably not for you. But everyone should have a bit of knowledge about it. It can only help you.

Fundamental Trading

Fundamental trading doesn't really apply to Bitcoin, however I am covering it, because... it's fundamental. This type of trading takes a look at company analysis (earnings reports, acquisitions, debt, etc.) and then trades according to whether or not the company is doing well or not so well. Like I said this doesn't really apply to Bitcoin, maybe a little. For example, two days ago (3/5/14) Apple announced that they will be allowing Bitcoin apps into the App Store (not in those words, but that's the idea). In my opinion this caused the price to rise slightly yesterday, roughly $30 USD. This could be for other reasons of course, but I'm pretty sure it was because of that. If it is true you could say that Apple allowing Bitcoin apps is like an acquisition for Bitcoin. I know it's a stretch, but bear with me. That is the basis of fundamental trading, when the company is doing good, buy. When it's doing bad, sell.

Chinese News Trading

This is mostly a joke, but surprisingly it works quite well. Every time China releases a news statement about how they are banning Bitcoin. Sell! Almost every time they do, the price takes a massive hit, ~20% is common. Then after three or four days the price will level out and start going back up. That is your time to buy. You might think I'm crazy, but this so far is the most profitable way to trade Bitcoins in the last 6 months. Timing is everything though, miss it by an hour and you might as well just hold on to your coins. They normally release news on Friday mornings 2:00 a.m. (GMT), so keep you eyes open. Just a reminder, do not take this seriously, even though it has worked.

That's all I have for you today. I hope you learned a little more on your trading journey. Remember this is part 3 of a 5 part series that I will be releasing throughout the week around 15:00 EST. The next part will be released tomorrow (Thursday the 5th), and we will be discussing diversity and risk.

If you have any questions or concerns you can contact me here, on Reddit, or the IRC: Acook3, but the best way is through email: andrew.cook@cookinvestmentfirm.com

Also if you'd like to learn a little more about my company and what we do, you can visit our website:https://cookinvestmentfirm.com

Until tomorrow, happy investing!

Andrew Cook | Founder and CEO | Cook Investment Firm