BITCOIN OPTIONS & MARGIN TRADING TIPS USING TRADING BOTS: Maximizing Profits and Minimizing Risks in Bitcoin Options and Margin Trading with Automated Bots (2024)

By CYNTHIA DENNIS

"Bitcoin Options & Margin Trading Tips Using Trading Bots" is your comprehensive guide to leveraging the power of trading bots for optimizing your strategies in the world of Bitcoin options and margin trading. Whether you're a seasoned trader or a newcomer to the crypto space, this book offers practical tips, advanced techniques, and insight

• Language: English
• Publisher: CYNTHIA DENNIS
• Release date: Dec 7, 2023
• ISBN: 9783988316585

CYNTHIA DENNIS

Cynthia Dennis, a seasoned cryptocurrency expert based in the financial hub of New York City, is the esteemed author of "Bitcoin Options & Margin Trading Tips Using Trading Bots." With a wealth of experience, Cynthia shares valuable insights into maximizing profits and minimizing risks in the dynamic world of Bitcoin options and margin trading through automated bots.

Book preview

Cynthia Dennis

Bitcoin Options & Margin Trading Tips Using Trading Bots

First published by Cynthia Dennis 2023

Copyright © 2023 by Cynthia Dennis

All rights reserved. No part of this publication may be reproduced, stored or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise without written permission from the publisher. It is illegal to copy this book, post it to a website, or distribute it by any other means without permission.

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Contents

Chapter 1: Comprehending Cryptocurrency Market Cycles

Chapter 2: Market Manipulation Tactics and How to Avoid Them

Chapter 3: Leverage Trading Strategies

Chapter 4: Trading Mistakes You Must Avoid

Chapter 5: Margin Trading Tips & Strategies

Chapter 6: Best Crypto Trading Bot Platforms

Chapter 7: Option Moneyness & Put Call Ratio

Chapter 8: Options Skew & Market Parameters

Chapter 9: Trading Tips: Options Expiry Dates

Chapter 10: Bitcoin Options Trading

Chapter 11: Deribit Position Building Strategies

Chapter 12: How to Avoid the Gambler’s Fallacy

Chapter 13: The Law of Small Numbers & Trading

Chapter 14: Confirmation, Survivorship and Hindsight Bias

Chapter 15: Correlation, Recency & Attribution Bias

Chapter 16: How to Avoid the Sung Cost Trap

Chapter 17: How to Become a Disciplined Trader

Conclusion

Chapter 1: Comprehending Cryptocurrency Market Cycles

Imagine yourself at the end of 2021. Bitcoin has just reached its highest historical value and shows no signs of slowing down. Certain alternative cryptocurrencies have surged tenfold, or you find yourself holding a significant quantity of one or more of these alternatives.

The objective is clear: reaching the moon. It’s right within your sight, and now that you’re almost there, you start to realize that you never seriously considered the most important question in cryptocurrency investment: When should I cash out? Perhaps you shoot past the moon, and anxiety sets in as you watch all your profits vanish due to fear, uncertainty, and doubt (FUD). However, in this section, I will focus on a range of indicators that can help you create a personalized exit strategy for leaving alternative cryptocurrencies, regardless of the specific coin you hold.

Developing a robust exit strategy requires a fundamental understanding of the asset in question. This understanding begins with putting everything into context. The global economy consists of numerous financial markets, including real estate, foreign exchange, stocks, and many others. Most of these markets follow recognizable cycles—perhaps yearly or every four years, or even longer 12-year cycles. Sometimes, these longer cycles include smaller cycles of a few months or weeks. These cycles can evolve over time, often extending as a market matures. The cryptocurrency market, being relatively young, exhibits high volatility due to uncertainty surrounding its true valuation. Established investors, who hold the majority of wealth across global financial markets, tend to be more cautious and risk-averse. This tendency is particularly evident when dealing with new markets based on unfamiliar technologies. This was the reason behind Mastercard’s withdrawal from the Facebook Libra project. CEO AJ Bangor explained, When you lack an understanding of how money is generated, it manifests in ways you find unfavorable.

In contrast, younger investors are tech-savvy. We have a strong grasp of how Bitcoin works and are familiar with numerous promising alternative coins. Our inclination is towards risk-taking, and many of us struggle with a pronounced hope addiction towards our preferred alternative cryptocurrencies. Moreover, cryptocurrency markets are accessible to more than just professional traders; all that’s needed is an internet connection. This accessibility attracts many inexperienced investors, further amplifying market volatility and day-to-day irrational behavior. Amidst the daily chaos in the crypto market, a discernible market cycle emerges upon closer examination. This cycle, averaging about four years, encompasses a bull market lasting two to three years, followed by a one to two-year bear market, depending on how you interpret indicators.

This cycle in the cryptocurrency market seems to be driven by the Bitcoin halving phenomenon. Bitcoin miners’ block rewards are halved every four years. Assuming demand remains steady, this sudden supply reduction eventually leads to a surge in Bitcoin’s value. Since most alternative coins closely correlate with Bitcoin, they also experience a significant increase during this period. This surge in value attracts media attention, drawing both experienced and novice investors into the cryptocurrency space. The most recent halving occurred in May 2020, leading many to speculate that a major market shift is imminent or perhaps already underway. Unlike the previous cycles, the current one sees a greater influx of smart money from financial institutions and experienced retail investors in the crypto space. This is partly due to global regulatory bodies conducting thorough research and acknowledging that cryptocurrencies have broader applications beyond just Twitter hacks and ransomware attacks.

Currently, the cryptocurrency market consists of anywhere from 7,600 to over 8,200 coins and tokens. The combined market capitalization of all these assets is approximately 562 billion dollars. For an up-to-date visualization of the global cryptocurrency market capitalization, please refer to:

https://coinmarketcap.com/charts/

As of the beginning of 2021, Bitcoin holds the largest share of this pie, boasting a market capitalization of around $543 billion. This places the cryptocurrency market in a relatively modest position compared to other financial markets and assets like gold. To put things in perspective, the foreign exchange market has a value of approximately $6.6 trillion, while the market capitalization of gold stands at about $9 trillion. Many observers interpret this divergence among markets as an indication that the cryptocurrency market still has significant room for growth.

Now that we have a solid understanding of the cryptocurrency market, let’s take a close look at the individual components within it. It’s common knowledge that Bitcoin is the first cryptocurrency and maintains its dominance. As a result, any other cryptocurrency is categorized as an altcoin. While this classification may be open to debate, it remains crucial to acknowledge, and here’s why. The likelihood of any altcoin’s market capitalization surpassing Bitcoin’s in the near future is slim, even during the next bullish phase. The main reason behind this is that Bitcoin remains the focus for institutional investors and experienced retail traders. Major corporations are unlikely to invest in altcoins with the same enthusiasm as they do with Bitcoin. Even Ethereum, despite its efforts, faces challenges in capturing the attention of serious investors. Some of this hesitation might be due to the impending launch of Ethereum 2.0, a development that has led significant investors like Greyscale, who hold Ethereum, to consider ETH 2.0 a substantial investment risk.

Compared to altcoins, Bitcoin has notably lower volatility, and this volatility has been decreasing over the years. Moreover, Bitcoin’s price movements have a significant impact on altcoins. As Bitcoin rises, so do altcoins. If Bitcoin experiences a rapid surge, several altcoins tend to experience short-term declines, especially those with smaller market capitalizations. Why does this happen? Primarily because many altcoin investments come from cryptocurrency enthusiasts seeking quick and substantial gains. When Bitcoin starts to rise, a lot of these investors shift their focus from altcoins to the Bitcoin market. Conversely, when Bitcoin’s momentum slows down and its price drops, market sentiment takes a hit. Altcoins tend to perform well when Bitcoin’s value appreciates gradually or remains relatively stable. This trend partly comes from opportunistic investors becoming cautious of Bitcoin’s price dynamics and those of the top altcoins, leading them to explore the riskier waters beyond the top 10 or 20 altcoins.

Understanding the relationship between Bitcoin and altcoins is crucial, as your eventual altcoin exit strategy will be heavily influenced by Bitcoin’s performance. The upper limit of your altcoin’s potential growth is essentially determined by the extent of Bitcoin’s market capitalization. While it’s true that Bitcoin’s market capitalization is likely to continue growing during the bullish market phase, setting a plan to sell your altcoin