How to Trade Bitcoin in a Volatile Market: Trading Strategies and Risk Management

Bitcoin (BTC), as a barometer of the cryptocurrency market, recently staged a ‘tug-of-war’ between $92,000 and $98,000, with bull traps and short-term pullbacks frequent, leaving investors both excited and anxious. The complexity of the oscillating market provides opportunities for traders, but also harbors risks. How to seize opportunities and hold ground in this wave of turmoil?

The ‘temperament’ of volatile market: opportunities and pitfalls coexist

Recently, Bitcoin price Hovering around $94,000, unsuccessfully testing the resistance level near $98,000 multiple times, and even encountering a bull trap with a ‘false breakout.’ Many traders have observed that the chips are highly concentrated, and market sentiment quickly switches between fear and greed. Any slight movement could lead to drastic price fluctuations. For example, a bull trap could be triggered near $97,500, followed by a drop to $92,000.

Factors driving these fluctuations include the Federal Reserve interest rate policy, potential support from the Trump administration for cryptocurrencies (such as rumors of acquiring Bakkt), and expectations for the approval of a spot Bitcoin ETF. From a technical perspective, Bitcoin is forming an ascending triangle pattern in the range of $95,000 to $96,700, poised for a breakout, but whether it breaks upward or retraces downward depends on the macro data and market sentiment. The price is testing back and forth between support levels (such as $92,000) and resistance levels (such as $98,000), providing traders with opportunities to buy low and sell high, but false breakouts and emotional trading may also lead to significant losses for investors who enter the market hastily.

Trading Strategy: Find Your Own Rhythm

In a volatile market, trading is like sailing in waves, the key is to find the right rhythm and steady the helm. The following strategies can help you capture opportunities in the Bitcoin market.

1. Range Trading: The Art of Buying Low and Selling High

The core of the oscillating market is the repeated fluctuation of prices within a specific range. Range trading takes advantage of this by buying at support levels and selling at resistance levels. For example, when Bitcoin stabilizes around $92,000, and the RSI (Relative Strength Index) indicates oversold (below 30) or the candlestick chart shows a hammer pattern, it may be a good time to buy. On the other hand, when the price is rejected at $97,500, and the RSI enters overbought territory (above 70) or the candlestick chart shows signs of stagnation, selling could be a good choice. To avoid false breakouts, it is recommended to set stop-loss orders 2%-3% below the support level, for example, decisively exiting below $91,000. Many users suggest that after selling short near $95,500, one can target a pullback to $92,000. This strategy is suitable for short-term traders who can quickly profit from intra-day or multi-day fluctuations.

2. Breakthrough Trading: Seizing the Starting Point of the Trend

The oscillating market is not always ‘standing still’. Major events such as ETF approval or macroeconomic data release may break the range and bring about unilateral market trends. The goal of breakout trading is to capture the start of a trend. If Bitcoin breaks through $96,700, accompanied by increased trading volume and stabilizes around $95,500 after a pullback, you can buy on the trend, with a target of $100,000. Conversely, if it falls below $92,000, and is resisted after rebounding to $93,000, consider shorting with a target of $85,000.

3. Trend Following: Using the power of indicators to ride the waves

Even in a volatile market, short-term trends can bring opportunities. Trend-following strategies filter market noise through technical indicators to capture brief one-way movements. Variable Length Moving Average (VLMA) and MACD (Moving Average Convergence Divergence) are powerful tools in the Bitcoin market, suitable for high-volatility environments. When MACD shows a golden cross and the price stands above VLMA, buying can be considered; conversely, selling when there is a death cross or the price falls below VLMA.

The fear and greed index is also a good helper. Buy when the index is below 20 (extreme fear) and sell when it is above 80 (extreme greed). Stop loss can be dynamically adjusted based on ATR (average true range), such as 2 times ATR. This strategy is suitable for medium and long-term traders to reduce the pressure of frequent trading.

4. Hedge

For risk-averse investors, hedging and arbitrage are good choices. Hedging can be achieved through derivatives, such as holding spot Bitcoin and shorting futures or contracts to hedge price volatility risk.

Risk Management: The ‘lifeline’ of stabilizing funds

The allure and coexistence of risk in the Bitcoin market, historically it has plummeted by over 80% multiple times. In a volatile market, risk management is the cornerstone of successful trading.

First of all, controlling the position is crucial. Do not exceed 2%-5% of the total capital in a single transaction to avoid losing everything due to one mistake. Secondly, strictly implement stop-loss and take-profit, such as setting a stop-loss of 2% below the support level, locking in profits near the resistance level, and preventing emotional chasing. Diversification of investments is also key. In addition to Bitcoin, you can pay attention to Ethereum (ETH) or Ripple (XRP) to reduce the risk of a single asset.

Market sentiment is a “reef” that needs to be vigilant. The fear and greed index can help you determine whether the market is overheated or too cold, avoiding FOMO (fear of missing out) or panic selling. In addition, closely monitor macro events, such as CPI data after May 7th, ETF approval progress, or Trump’s policy direction, which may break the consolidation pattern and affect trading decisions.

Short-term outlook: Opportunities in volatility

In the next few days, Bitcoin may continue to fluctuate in the range of $92,000 to $96,700. Breaking through $96,700 requires spot buying and positive news, targeting $100,000; if it falls below $92,000, it may retrace to $85,000, beware of panic selling.

Short-term traders can buy near $92,000 and sell near $95,500, with strict stop-loss. Medium-term traders can wait for a breakthrough above $96,700 or a drop below $92,000, combined with MACD and VLMA for trend following. Long-term investors may consider building positions in batches when the fear and greed index is extremely low, aiming for higher targets.

Conclusion: Calmness and discipline are the keys to victory

The oscillating market of Bitcoin is like an adventure full of opportunities and challenges. Whether it’s range trading of buying low and selling high, capturing trend breakthroughs, or trading with the trend using indicators, as long as you find the right strategy, you can ride the waves in this turbulent market. However, the unpredictability of the market reminds us that risk management always comes first. By staying calm, maintaining strict discipline, and leveraging technical tools and market insights, you can find your own rhythm in the fluctuations of Bitcoin.

Disclaimer: This article is for popular science and information sharing purposes only and does not constitute investment advice. The cryptocurrency market carries extremely high risks, so investment should be approached with caution.