We all are well aware that the process of purchasing and selling crypto tokens at a set and agreed-upon price is known as crypto trading and an investor buys and sells coins directly through an exchange in crypto trading. Well, do you know when to buy a coin, or sell it if you believe the rates will fall? Below we have mentioned a few tried and tested crypto trading strategies that you can use while making fortunes through a cryptocurrency of your choice.
Strategies for Crypto Trading
It’s preferable if you create a solid strategic strategy to grasp a turbulent trading environment and make profitable cryptocurrency purchases. To deal with probable challenges and achieve a strong market position, you must first comprehend market volume volatility, trending coins, and major tactics. In this case, you need to be aware of the following strategies:
Because market values frequently shift horizontally, there may be few opportunities to enter a market. During sideways trends, markets fluctuate within a range defined by resistance and support bands.
Range trading exploits non-trending markets by detecting persistent high and low prices, referred to as resistance and support bands, in non-trending markets. The concept of trading inside a limited range may be applied to a wide range of markets, including forex, stocks, and cryptocurrencies, allowing traders to buy and sell when an asset is oversold or overbought.
Long before the introduction of the crypto market, arbitrage was a pillar of traditional financial markets. Despite this, there appears to be greater excitement in the crypto world about the possibility of arbitrage possibilities.
It is most likely due to the cryptocurrency market’s significant volatility when compared to other financial markets. This means that the prices of crypto assets tend to fluctuate a lot over time. Because crypto assets are traded across the world on hundreds of exchanges at all hours of the day and night, arbitrage traders have significantly more opportunities to benefit from price differences. A trader would just need to notice a discrepancy in the pricing of a digital asset across two or more exchanges and conduct a series of transactions to profit from it.
Scalping is a crypto trading strategy that entails taking modest, frequent gains in the hopes of gaining a large profit by the conclusion of the trading day. Because the bitcoin market is volatile and changes swiftly, scalping is popular. Scalp traders seek to profit on little price changes. Their objective isn’t to earn a large profit on each deal, but to generate little gains repeatedly. If they execute it correctly, their trading account will expand over time. Leverage and tight stop-losses are frequently used by scalpers.
Your trading style and risk profile will determine which coin is ideal for scalping. Beginners would generally choose Bitcoin over other cryptocurrencies since it is less volatile and hence more stable. For a scalping Bitcoin strategy, you may utilise multiple indicators or a Bitcoin scalper bot or EA to automate your trades.
HODL stands for “hold on for dear life,” and it’s a word used by cryptocurrency investors. HODL is really rooted in the standard buy-and-hold investing strategy, even though it appears to be a hilarious misspelling of the word “hold.” HODLing is a more aggressive tactic than merely holding, thus the term Hold on for Dear Life. This suggests that you should hold crypto — or stock — even if the market is incredibly volatile.
For investors who may ordinarily try to time the market, this method can be a sensible way to go. Hodl can be used to assist investors to resist the impulse to panic-sell when the market is falling. This is particularly wise for inexperienced investors who are prone to emotional or impulsive reactions. Day traders or FX traders who aim to profit from market volatility may be similar to investors who do not employ the HODL method. Rather than focusing on the long term, these investors try to buy cheap and sell high, or short sell, to benefit from minor market changes.
This trading method entails entering and quitting positions on the same day. Traders who use this strategy seek to profit from intraday price fluctuations in a cryptocurrency of their choice. Some investors use technical indicators to determine entry and exit points for certain cryptos in order to make a profit.
High-Frequency Trading (HFT)
Quant traders utilise HFT, which is an algorithmic trading strategy. This entails the creation of algorithms and trading bots that aid in the speedy entry and departure of a crypto asset. The creation of such bots necessitates a thorough comprehension of complicated market principles as well as a solid foundation in mathematics and computer science. As a result, it is more suited to experienced traders than newbies.
It’s advisable to consider that timing the market is close to impossible when it comes to identifying the optimum entry and exit points in a crypto market. So, ‘Dollar Cost Averaging’ is a good technique to go about investing in cryptos (DCA). DCA is a term that refers to investing a certain amount at regular intervals. This method allows investors to avoid the time-consuming task of market timing and achieve long-term riches.
Exit strategy, on the other hand, might be difficult in the DCA approach. It necessitates a thorough examination of market trends as well as a grasp of the market cycle. Reading technical charts can also assist you in determining when to depart.
Build balanced portfolio
Crypto trading strategy is still in its infancy. While certain nations encourage cryptocurrency trade, others remain suspicious. Central banks all around the world are working on better methods to control digital currencies, making crypto trading a dangerous proposition. There are, however, measures that can assist investors in avoiding severe volatility.
Furthermore, investors can invest a certain amount of money in various cryptos on a monthly basis. This will enhance your risk appetite in a methodical manner, allowing your portfolio to provide favourable long-term returns.