How to Make a Low Risk, High Reward #Bitcoin Trade?

As I've talked about in my previous article, cryptocurrency is also traded by professional traders using Technical Analysis. If you create a chart and draw Fibonacci Retracement, you will notice that the price of bitcoin and most coins are bouncing off the price levels also known as support and resistance levels.

You identify the support and resistance levels by drawing Fibonacci Retracement in your charting program. I used the website Tradingview.com to chart my cryptocurrency trades.

Fibonacci in Weekly, Hourly, Daily, 5-Minute Chart

Fibonacci Retracement can be used in weekly, daily, hourly, and even in minute chart. If you are a longterm trader, you will be using the daily chart to look at the support and resistance levels on the daily price change. If you are a short term trader, you could also look at the hourly. And if you are a day trader, you would also look at the chart on the 5 minutes.

BTC-USD Daily Chart

BTC-USD 5-Minute Chart

How Do You Make a Low Risk, High Reward Trade?

A low risk, high reward trade is a trade that has a higher potential profit compared to loss. For example, such a trade can make you 10% profit if you are right compared to -2% loss if you are wrong.

Let's see an example right now from the current price of BTC-USD priced at $8500. If you draw Fibonacci Retracement on the hourly chart, you can see that the current price is just sitting right above 61.8% on the Fib level.

BTC-USD Low Risk, High Reward Trade on Hourly Chart

61.8% could be a support level. It means most trader's assumption is that the price won't go lower than the price at that level hence many traders buy at $8500. That's why it's called support. The price at that level is supported by traders. Also, if you look at the previous low on that chart, it recovered from $8359 and $8280.

Therefore, you can make a low risk, high reward trade if you also buy at $8500. You can make a potential 7% profit when the price go back to previous high of $9100+. If you are wrong, your loss is only at -1.6% if you put stoploss order just below the previous low at $8359.

If you want to take more risk, you could put stoploss at 50% ($8280) Fib level for a loss of -2.9%. Either way, your porential profit is more than your potential loss.

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