Crypto trading is based on speculating on price movements via a trading account, or buying and selling the underlying coins via an exchange.
Some Crypto Trading Strategies You Must Know
Cryptocurrency markets are decentralised, which means they are not issued or backed by a central authority such as a government. Instead, they run across a network of computers. However, cryptocurrencies can be bought and sold via exchanges and stored in ”wallets”.
Just like traditional trading, crypto trading comes with risks and pitfalls. In order to benefit from crypto trading and make it safe, it might be useful to learn crypto trading strategies that will help to increase income. Here are some of them:
Day Trading
This crypto trading strategy is based on taking positions and exiting on the same day. The main goal of a trader is to book profits amid intraday price movements in a cryptocurrency of his choice. Day trading may be very rewarding, enabling investors often rely on technical indicators to figure out entry and exit points for particular crypto.
HODL (Buy-And-Hold)
Using this kind of trading strategy, traders buy cryptocurrencies and hold them in their wallets for a long time. Afterwards, investors can benefit from increase of cryptocurrency’s value. HODL strategy enables traders to take advantage of long-term appreciation. Using this strategy in the most officiant way, investors can avoid the risk of selling low and buying high.
Arbitrage Trading
Arbitrage trading refers to the strategy under which a trader buys crypto in one market and sells it in another. The difference between the buy and sell price is known as ”spread”. Owing to the difference in liquidity and trading volume, traders can find an opportunity to book profit. But to use this strategy, traders must open accounts on exchanges that show a large difference between prices for the crypto that they are trading at.
High-Frequency Trading
High-frequency trading is a kind of algorithmic trading strategy. It involves developing algorithms and trading bots that help quickly enter and exit a crypto asset. Developing such bots needs an understanding of complex market concepts and a strong knowledge of mathematics and computer science. Therefore, it is more suited for advanced traders.
Dollar-Cost Averaging
When it comes to finding the perfect entry and exit point in crypto trading, timing the market may seem nearly impossible. So, a rather sound way to go about investing in cryptos is ”Dollar Cost Averaging”(DCA). This strategy refers to investing a fixed amount at a regular interval. It helps investors do away with the cumbersome job of timing the markets and building wealth in the long term. However, exit strategy could also be tricky in the DCA style. It requires the study of the market trend and understanding of the market cycle.
Scalping
This trading strategy is based on using increased trading volumes to book profit. Although there is risk involved, a smart trader takes care of the margin requirement and other important rules to avoid bad trading experiences. Scalpers analyse the crypto asset, past trends, volumes and choose an entry and exit point within a day.
Range trading
Range trading strategy is an active investing strategy in which a trader determines a price range to buy or sell crypto over a short period of time. Investors also rely on experienced analysts, who give out support and resistance levels each day. ”Resistance” refers to the point up to which the price may rise and therefore a resistance level is a price above the current price. In contrast, ”Support” is a level below which a crypto price is not supposed to fall, that’s why a support level is always below the current price.
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