Crypto News Trading – Everything You Need to Know
Do you like reading news related to cryptocurrency? Really? What if we told you that you can make money while reading news related to cryptocurrency? You would absolutely love it, wouldn’t you? Well, we’ve got good news! You can make money by reading crypto news. Please note that this article is not a financial advice.
This concept is called crypto news trading, and we’ll tell you everything you need to know for crypto news trading. We’ll tell you what it is, how it works, how you can become good at it, and more.
Are you excited to learn about crypto news trading? Awesome, let’s start.
What Is Crypto News Trading?
Crypto news trading means keeping track of the news, and making an investment decision based on the news. If the news indicates that the price will go up, then you buy an asset, and if it indicates the price will go down, then you sell the asset.
Why do news impact the market price? Because it tells the investors whether something good or bad has happened to the asset. For example, when the news that the peg had been broken between TerraUSD and USD then investors started running away from LUNA, as if it were a lion chasing them.
The goal of the news traders is to make profits from the short-term voalitiliy. This is because whether the impact of the news is short-term or long-term, the investors have to make a quick decision. Therefore, if your goal is to make long-term investment and earn huge profits, then crypto news trading isn’t the best option for you.
Have you noticed something in the last sentence of the previous paragraph? The words “the best” were in italic for emphasis. Why did we said that, “if your goal is to make huge profits then crypto news trading isn’t the best option for you?” We could have said that, “if your goal is to make huge profits then news trading isn’t right for you.”
We went with the former option because you can make huge profits as a news trader. Sometimes, a news hits the market so hard that the market start moving at an extremely rapid pace. The crash of LUNA is a great example. Therefore, it’s possible for you to make huge profits as a news trader, but it’s unlikely that you’re going to, because short-term investments usually don’t pack huge profits.
Before we talk about how you can start news trading, we’re going to talk about one more point. News traders don’t always make a decision after the news comes out. They are analysing the market price movements, and sometime acquiring any other information that could become the news that will affect the market price. In case they know about certain information that is going to become a news in the future, they may make their decision even before the news comes out.
For example, a news trader using BTC finds out that the price of BTC will decrease after certain news goes live, then the trader may sell the asset even before the news goes live and doesn’t incur any loss.
How to Start Crypto News Trading
Alright, now it’s time to start crypto news trading. Ok, it’s not the exact time to start, but soon after you’re done reading this section, you can start crypto news trading.
Are you excited to learn all the tips we want to share with you? Awesome, let’s start.
Fetch News Using News API
Crypto News APIs brings you latest crypto news across the web.
You can get news from articles, videos, social media posts, and etc. You can select the biggest news stories in the crypto industry, or you can get the top news related to a specific category or even an individual coin.
You can select the type of information you recieve by using the filters. Not all crypto news API providers offers filters, and we recommend you don’t use such services. You can use them if it offers what you need, but you’ll need specific information in many cases, so it’s important that you find a crypto news API provider that offers many filters as well.
What sort of filters should you look for in a crypto news API provider? Here are the major filters you should look for in a crypto news API provider:
Data For Specific Type of Coins: You should be able to get news for specific type of coins, such as Meme Coins and Stablecoins.
Individual Coins: The filter options shouldn’t be just limited to broad type of coin such as Meme Coins and Stablecoins. You should be able to get data for individual coins as well. By individual coins we mean a specific cryptocurrency such as, Bitcoin, Ethereum, and Dogecoin.
General News Sentiment: This is a big one. General news sentiment is the sentiment score for general news you get regarded cryptocurrencies. The positive score means the news is going to have a positive impact on the price of crypto, neutral score means that there is going to be a little to no impact, the negative impact means that the price of crypto is going to decrease.
You should ignore the news with neutral scores, sell the asset if the news for that asset has a negative score, and purchase the asset if the score is positive.
News From Specific Media Platforms: In case you only need news from a specific platform, then it would be a real bummer if you get thousands of news stories in your feed that aren’t from that platform. Finding 10 news stories from the one platform from a list that contains thousands of different stories from various platforms is going to be super time consuming.
Ideally this feature shouldn’t be limited to specific categories, but you should be able to get news from specific platforms such as specific channels, pages, and websites.
These were the major features you should look for in a crypto news APIs. However, crypto news APIs can have many more features, and ideally you should go that offers the best price + these features + more features. In case getting the 3rd things (more features) is too expensive, then you should go with the best price + these features.
The last thing we want to discuss is that how you can start using APIs. We’re going to be brief about it, because we’ve got a lot to cover. The first thing you’ll need is an API key, your API provider will give it to you. To use customization filters, you can get the scrip from your API provider. One more point to note is that these scripts should be simple, and don’t require you to figure things out.
One of the best way to get crypto news is to use Algory Crypto News Aggregator. It allows you to choose from over 100+ filters and alerts, and you’ll always be the first one to know about all the latest news.
Create An Intraday Strategy
By fetching the news, you’ll become familiar with the news that is going to make an impact and whether the news is going to make a negative or a positive impact. Now, it’s time to choose your strategy.
As a news trader, you should use an intraday strategy. An intraday strategy is a strategy that is executed within a day. Intraday trading is also known as day trading. To get a good understanding about day trading, read this simple and info-packed article. While you can use strategies that take longer than 1 day, most of the time you’ll need to use an intraday strategy.
In this section, we’re only going to share the intraday strategies. The intraday strategies we’re going to share with you are going to be some of the best strategies. Let’s start, shall we?
Momentum Trading Strategy: Intraday trading is all about momentum. You need to make the right decision at the right time. As soon as the news breaks out, you should make the decision right away. Sometimes, it’s ok even if you make a decision about 30 mins or so after the news has breakout, but usually such time period is considered too late and you’re better off not making an investment.
For how long you should hold on to the assets depends on the market directions speed. If the price of a coin is changing at an extremely rapid pace, then you shouldn’t hold on to it for more than an hour, and sometimes even a few minutes. If things are not moving too fast, then it may be ok to hold on for 1 full day.
Whether you should bet in favor of the cryptocurrency or against it depends on the market sentiment score. If the sentiment score is positive, then you should purchase the asset. In case the sentiment score is negative, then you should sell the asset or use a short-position using future trading or spot trading.
Reversal Trading Strategy: In case you’re a beginner, you should try to stay far away from this strategy. It requires you to be super active and you’ve got to have extraordinary temperamental control. If you don’t like putting in an extreme amount of effort, and you’re not super good at controlling your emotions, then you definitely shouldn’t use this strategy.
In case you shine in these two areas, let’s talk about how the reversal trading strategy works and what benefit it provides. The benefit of reversal trading strategy is an insane amount of profits. While it’s super hard to become good at the reversal trading strategy, the insane profits make it worth it.
Now, let’s talk about how it works. Your goal is to bet against a trend. When the market goes in a downward trend, you don’t move with the market. You wait for the right movement and then you open a long position.
How to spot the right movement? First, let the market move downward. You don’t want to invest during this time because it’s probably the worst thing you can do. Not long after, you’ll realise that the market have entered the accumulation stage.
In this stage, the market will stop moving downward. It won’t go upward either, but it’ll stop declining. This is a sign that the uptrend might be coming soon.
First, you need to identify the support and accumulation stage as soon as the accumulation stage comes. This is why you must work actively during a downtrend every day until you found these two things.
The support can come in two different timeframe. Daily timeframe and weekly timeframe. If the support is occurring in the daily timeframe, it means you’ll find the accumulation stage in the 1-4 hours timeframe. In case the support occurs in the weekly timeframe, then you’ll find the accumulation stage in the 4 hours to 1 day timeframe.
The next step is to find the right way to set up the trade. While we are not going to get into the details about all 3 steps, we’re going to tell you their names.
- Support & Ressistance
- The Breakout
- The Pullback
Gap And Go: The last strategy that we’re going to discuss is the gap and go strategy. The gap is the price difference that occurs from the time the news was released to the next day at most. The benefit of this strategy is that it’s not risky, and even beginners can pull it off. The downside is that the profits aren’t huge, but it’s still a pretty good option for beginners.
You purchase the asset as soon as the news goes live. By the end of the day, or the beginning of the next day, if the price goes the way you expected it to go, you win. One thing to note is that you shouldn’t wait longer than 1 day, because the longer you wait the bigger the price fluctuations. If the market moves far in an opposite direction that the direction expected it to move, then you’ll receive huge losses. Since your goal is to minimize the risk, you should close your position within 10-20 hours after the news has been released at most.
Paper Trade Your Strategy
The last thing we like to recommend you is that you paper trade your strategy before trying it in the live market. Paper trading your strategy means you try out your strategy in a software. It helps you find out whether there is a flaw in your strategy, and you don’t have to risk real assets. The only downside of the paper trading is it’s a bit time-consuming. Unless you can’t afford to waste any time, we highly recommend doing paper trading.
To understand how you can test your strategy without risking the real assets, we recommend you read this amazing post on crypto back-testing.
The Elon Effect
The last advice we want to give you is to follow Elon Musk on Twitter. Does this comes to you as a shock? Are you thinking that, “why would crypto news traders be interested in following a social media account of a person that isn’t even a big crypto influencer?”
If that’s what you’re thinking, then you my friend know nothing about crypto. Elon is a big deal in the crypto world. While he hasn’t created any cryptocurrency, he has shown multiple times that he can influence crypto market.
Let’s go through a few examples to see how much Elon can Influence the crypto market.
- In Feb 4, 2021, Elon praised Dogecoin in his tweet. Surprising to many people, and not so surprising to others, the price of Dogecoin increased by a whopping 10% within an hour. It’s a massive impact by a single tweet that isn’t even saying that the price of Dogecoin is going to increase. By the next day, the price was up by a whopping 50% compared to when it started.
- His Tweet about Tesla accepting Bitcoin as a payment helped Bitcoin reached its highest price at the time. Soon after that Tweet, for the first time in history Bitcoin reached a staggering $65,000.
- On Dec, 14, Elon Tweeted that Tesla would start accepting Dogecoin as a trial run. You know what happened? Dogecoin experienced a 43% boost in its price.
As you can see, the Elon Effect is real. Therefore, following Elon Musk’s Twitter account is definitely worth it as a news trader. However, there is one point worth highlighting. You shouldn’t make decisions based on Tweets such as praise of a certain cryptocurrency. The chances of people buying or selling a cryptocurrency just because Elon tweeted a nice thing about it are pretty low. Although, it has happened multiple times in the past, things usually don’t work that way. You should only make a trading decision if Elon is praising the cryptocurrency in a crazy manner, or if he has made a huge news such as accepting a cryptocurrency as a form of payment.
