How Trading BTC/AMZ Can Boost Your Portfolio: A Step-by-Step Guide
The concept of decentralized finance was introduced through Bitcoin back in 2008. Such was the significance of the “original” cryptocurrency. All coins that were introduced after Bitcoin are often labeled as altcoins because they are alternatives to Bitcoin. So, for any cryptocurrency trader, Bitcoin is a pretty important instrument. It is like the center of gravity in the crypto world. As of 2023, Bitcoin has the largest market capitalization among all the cryptocurrencies. Many institutions and individual investors have invested in it. Many institutions have leveraged Bitcoin’s underlying technology – the blockchain.
Just like Bitcoin in the crypto industry, Amazon is a pretty big name in the tech industry. E-commerce was revolutionized thanks to the way Amazon operated. Amazon’s stock is part of the famed “FAANG” group of stocks, a grouping used to represent the biggest tech names in the industry. While the year 2022 has been a tough one for most of the large tech firms, Amazon is still a giant in its own right. Traders and investors have a lot of interest in stocks like Amazon, and every development in the company is closely tracked.
As a crypto trader, wouldn’t it be great if you could trade a pair of the most significant cryptocurrency and one of the most significant tech names in the business? Cerus Markets offers a CFD for BTC/AMZ (the stock ticker is AMZN while the CFD symbol is AMZ). Want to know more? Then read on.
Trading Pairs and Trading Crypto vs Shares
Usually, pair trading is something common in forex trading. A simple example is trading USD/AUD with USD/JPY. Essentially, when a trader has identified some sort of correlation between the Australian Dollar (AUD) and the Japanese Yen (JPY), then a strategy is formulated to simultaneously have positions in USD/AUD and USD/JPY. Usually, when two instruments have some sort of relationship, they can be pair-traded. The relationship could be a negative correlation. That way, if one goes up, the other goes down. So, a trader can be long in one instrument while short in the other that is expected to move in the opposite direction.
If a trader hypothesizes an underlying relationship between two assets based on historical data, and if the two assets have not been behaving as per that historical relationship, then traders tend to expect a mean reversion behavior. That is also a common pairs-trading strategy.
Pair trading involves two instruments. In the above example, it was USD/AUD and USD/JPY. However, what if you could have exposure to two correlated assets with just one instrument? What if you could play on Bitcoin and Amazon at the same time? That is possible with a BTC/AMZ CFD.
Before You Begin Trading BTC/AMZ
Before you trade any cryptocurrency versus a share, it is important to study the cryptocurrency and the company of the share. You will have to do some research to understand the drivers of the price of the two assets. Getting yourself familiar with a publicly listed company should not be very difficult as there is plenty of information available freely. Understanding a cryptocurrency may require understanding why it was introduced, what is its use case, how large investors view it (liquidity flows), and what its vulnerabilities are.
Once you have a basic understanding and can comprehend the price action, it is then necessary to decide what your trading time horizon is. Are you going to hold the position for a few hours and make an intraday trade? Are you a positional trader who has the conviction to take a position and hold onto it for a few days/weeks? Know what your trading style is and how you want to trade a cryptocurrency vs a share.
Strategies for Trading BTC Against Amazon
You can trade Bitcoin against Amazon via the BTC/AMZ CFD. CFD stands for contract for difference and it is a derivative instrument with leverage. When someone says BTC/AMZ, they mean that Bitcoin is the base currency while AMZ (Amazon shares) is the quote currency. It means the number of Amazon shares required to buy 1 BTC in the same way that USDGBP means the number of pounds needed to buy one US dollar.
There are multiple ways in which you can trade BTC/AMZ. You can either look at the 5-minute or 15-minute chart for short-term (or intraday) strategies. The key is to read the price action and trade accordingly. Short-term strategies could look for breakouts or breakdowns. Chart patterns like the cup-and-handle and triangles/wedges could be useful. Intraday moves tend to be fast and violent so you have to be careful and have your risk management in place. More on that later.
As a positional trader, you may want to use a daily or weekly chart and look at the overall trend. Is the price making higher highs and higher lows? Or is it making lower highs and lower lows? There is a saying, “the trend is your friend”. You could go long at a low if the trend is up or you could go short at a high if the trend is down.
A swing trader can try to identify a channel of support and resistance. Going long at support and exiting near resistance can be one strategy. If you can figure out the relationship between Bitcoin and Amazon shares, then you can formulate all sorts of strategies. The key is to find out whether Bitcoin moves in tandem with Amazon, in the opposite direction, or whether there is no relationship between the two.
Simple trading indicators can also be very useful to validate your thesis and generate a signal to trade. Moving averages, relative strength index, Bollinger bands, Fibonacci retracement, etc. are some of the technical indicators that Cerus Markets offers its users.
Don’t Forget About Risk Management
Cerus Markets CFDs offer leverage up to 100:1. It means that you can pay $100 and take a position worth $10,000. Sounds great doesn’t it, especially if the trade goes in your favor? But have you thought about what happens if you are leveraged 100X and the trade goes against you? What if you took a BTC/AMZ position for $100 and the price went 100 points against you? You would face a loss of $10,000. It might be your entire trading capital – gone in just one trade. Obviously, we don’t want something like that happening to any of our users. Therefore, when you trade leveraged products like CFDs, it is important to manage your risk at all times. Trade with stop losses, use Cerus Markets’ alerts feature to keep yourself up-to-date with the price action and size your positions properly.
We hope you now have a basic idea of how to trade BTC against Amazon. We want you to know something else. We are currently running a 100% welcome bonus offer for new sign-ups. So, if you are ready to trade some BTC against Amazon, get ready to open a new account with us.