Cryptocurrency trading has seen tremendous growth in the last few years as it has emerged as one of the best sources of passive income. These digital currencies such as Ethereum, Ripple, Litecoin, Bitcoin, and other cryptocurrencies, have gained widely in popularity since their inception.
Much like stock trading, cryptocurrencies can be traded in financial markets through crypto exchanges or brokerage trading platforms.
As most beginner traders think that trading such a volatile asset class is extremely simple, but this is the first and principal reason behind their failure.
Traders can’t win on the basis of technical analysis or fundamental research alone. So, it becomes unquestionably necessary to use various crypto trading strategies to analyze and execute trades successfully.
Generally, a cryptocurrency trading strategy can help traders to survive in the cryptocurrency market. Nobody can give you 100% assurance that you will consistently have a profit.
Somehow, a good cryptocurrency trading strategy will increase your profit chances while also helping you mitigate the losses. In other words, having a trading strategy in place makes you prepared for the possible outcomes.
If you’re too in a dire need of finding an effective cryptocurrency trading strategy, we can help you do so. Continue reading this article till the end to fully understand the topic.
Top 4 Effective Strategies For Cryptocurrency Trading
As the market is evolving quickly, there are several cryptocurrency trading strategies available for traders. However, finding the best one is quite challenging. But in this case, put all your worries in the box as we have come up with the four best strategies for cryptocurrency trading.
Here is a brief overview of these trading strategies to get started:
Day Trading Strategy
Crypto Day Trading strategies involve the practice of buying and selling these digital assets on the same day. Advanced traders take the benefit of the volatile nature of the cryptocurrency markets and gain small profits from minor price fluctuations by executing several different trades.
Trade with heaps of unmistakable sets is the main thing that traders should discover. In this sense, day trading crypto is the best and most effective strategy as the crypto market operates 24 hours a day, 7 days a week, so traders can get extra time benefits.
Day traders need to investigate a ton of data and be prepared to interface each trap with bearish or bullish patterns. As a trader, you should dive deep into understanding the value changes of cryptocurrencies and use them for profitable trading.
On the other hand, most people relate intraday trading as a simple way to get rich. Indeed, this seldom occurs. But that doesn’t happen every time. A crypto day trading strategy may give both enormous profits and losses.
Ideally, day traders often use price action and technical analysis to formulate trade ideas. The aim of a trader while adopting such a trade is to generate small gains amid intraday price movements of crypto coins.
Tips For Day Trading Cryptocurrency
- Traders should always choose the cryptos with high volatility and increased trading volume.
- Always try to implement a money flow index indicator.
- Always try to trade the crypto market in the first part of the trading session as price movements are higher at starting.
Swing Trading Strategy
Swing trading is both a short and medium-term trading strategy that involves holding this digital currency for a longer period of time like a week or sometimes a month.
This strategy is executed by taking the benefits of the volatility waves, which can take a time span of several days to roll out. Swing traders typically use a combination of fundamental and technical indicators.
In fact, Swing traders typically gain profits which are based on price action trends or technical indicators. The main focus of swing trading is to catch the valuable price movement.
Traders always look for cryptocurrencies, which are highly volatile and have high trading volumes. For example, swing traders always try to take advantage of daily charts for opening and closing the positions and also for applying the stop loss.
Tips for Swing Trading Crypto
- Trade when all the trading indicators show the same signals.
- Look for the long-term positions in a bullish market while the short-term positions in bearish markets.
- Try to avoid short-term indicators and charts.
Position trading, also popular as trend trading, is an effective cryptocurrency trading strategy where the cryptos are held for the long term for several months as traders always look to take the benefit of the directing trends. Position traders open the long position in an upward movement and the short position in a downward movement.
Position trading is done typically using fundamental analysis. In position trading, traders assume that the value of cryptocurrency will move in the same direction as the trend. Some of the common strategies used in position trading are range trading, support, and resistance, pullback trading, etc.
Tips for Position Trading Cryptos:
- Avoid short-term price movements.
- Open the long if the price breaks above the high resistance level.
- Always keep the proper trading plan.
- Always try to set stop loss 1 ATR at the down level of the buildup.
Scalping is considered the best cryptocurrency trading strategy which involves the practice of making profits from small price movements. Scalp traders or scalpers make several trades during a single trading day.
They buy and sell crypto coins within a matter of minutes. Scalpers always look for volatile cryptocurrency. Scalping reduces the risk of attracting colossal loss by using trading bots to automate their trading activities. It is described as High-Frequency Trading.
Scalping is an advanced crypto trading strategy due to its complexity. It requires a high understanding of the dynamics of the crypto market. Scalping is usually suitable for big traders as the profits are always of a small amount; therefore, they execute a larger lot size.
Tips for the Scalping Cryptocurrency:
- Always focus on the high volatile cryptocurrencies
- Square off the position in a lower time frame.
- Try to identify the current price trend before opening the position.
Cryptocurrencies are highly volatile; therefore, traders can earn a good profit, but at the same, it includes a high risk also. Traders, especially beginners have to understand the dynamics of the crypto market thoroughly to master it.
Before deciding to trade cryptocurrencies, you should first carefully consider your financial goals, knowledge, level of experience, market information, the importance of investment decisions, and risk appetite.
In addition, there are several cryptocurrency trading strategies; some of which are listed above. Executing these strategies correctly definitely will help the traders to earn money and reduce the loss.
However, you’ll need to open accounts on good cryptocurrency exchanges or a brokerage trading platform such as ABInvesting to execute these trading strategies more efficiently. For instance, if you’re a day trader, you should choose an exchange with low or zero trading fees.
Alternatively, you can make use of a demo or paper trading before executing these strategies on a live trading account. As cryptocurrency is a highly volatile market, enter only after taking investment advice from market experts.