Even though the first-ever cryptocurrency was launched more than a decade ago, there were a few people who adopted it. Today, post-COVID pandemic, the number of people adopting crypto has skyrocketed.
Besides trading in the stock market, the crypto market allows many to participate, make a profit, and help grow their wealth.
If you are a crypto user and wish to multiply your wealth, then this article will serve you well as we dive into the strategies of crypto trading that are quite common among crypto traders. There are two methods for increasing the value of your cryptos: short-term trading and long-term trading. However, if you wish to watch your investments grow, a smart crypto investor would have a combination of both short-term and long-term trading.
We will now take a look at cryptocurrency trading strategies that are quite common among smart crypto investors.
Day Trading Strategy
When you enter and exit a position in the crypto market within the same day, it is called a “day trading strategy” or an “intraday strategy.” The idea here is to enter the market based on the research and wait until the price trend favors you. The position is kept open for a few minutes to a few hours before being closed.
Day trading strategies are quite common and profitable as cryptos are very volatile. The price fluctuation is quite massive, thus attracting many crypto traders. The only way to get lucky with the trade is to do research using both fundamental and technical analysis for creating entry and exit strategies. However, most crypto traders rely on technical indicators and analysis while executing.
Day traders base their strategies upon price action, volumes, chart patterns, and other such indicators to determine their entry and exit strategies.
Scalping Crypto Strategy: It is an intraday trading strategy, and crypto traders will make successive trades with small changes in the price trend. Each position is kept open for a few seconds to a few minutes. Since the price trend changes a bit, the profit margin is quite low, ranging from a few cents to a few dollars. The crypto trader will ensure huge profits by trading in bulk volumes. Thus, a change of a few cents or a couple of dollars magnifies when these traders trade in bulk.
Arbitrage Crypto Strategy: Another of the most popular trading strategies that are quite popular with these traders is the arbitrage trading strategy. The strategy is quite simple: traders buy cryptocurrencies from one platform and sell them for a profit on another crypto platform. Since there is hardly any price difference, like in scalping, traders trade in bulk.
Crypto Range Trading
There are times when the price trend of cryptos will be limited, or rather restricted, in a certain range for a long time. Sometimes this is caused by the involvement of big crypto traders, or “whale traders,” who will systematically manipulate the price fluctuations to make a profit. Smart crypto traders will look for cues, take advantage of the market, and make substantial profits. These traders keep an eye on the overbought and oversold zones.
Overbought denotes that buyers’ requirements have been met and the stock is likely to sell, while oversold denotes the reverse. You may locate these zones by using the charting indicators that come with any reliable charting tool. The “Stochastic Oscillator” and the “Relative Strength” Index have often been used as indicators for this purpose.
Trading in cryptocurrencies can be quite lucrative for short-term traders. All you need to do is get your research right and stick to the plan no matter what. More emphasis is given to technical analysis since you, as a crypto trader, can analyze the price of cryptocurrency based on historical data. Based on this information, you can strategize your entry and exit from the market.
Risk management tools
One of the smartest ways to make a profit is by ensuring that you have all your risk management tools in place. The idea behind this is that the cryptocurrency market is quite volatile, so predicting the price of cryptos can be challenging. To minimize the loss, features like “Stop-Loss” and “Trailing Stop-Loss” can be used. These strategies offer good risk management and help with better control. You can enter and exit the market. The strategy is based on placing only two orders. The “Stop-Loss” feature ensures that you do not lose a lot of money if the trade happens to go bad.
It is also advisable to use the “Take-Profit” feature, which automatically ensures that you make a profit when the price of the crypto meets the given conditions. With these risk management features, you can strategize your trades accordingly to ensure substantial profits.
Another available feature is the use of trading bots to enhance the crypto user’s trading experience. These bots work on an algorithm that is based on charts and graphs of historical data. These bots execute trades based on the given market conditions, ensuring that they make a huge profit.
One of the most widely used strategies is HODLing onto the cryptos. Holding or HODLing on to cryptos for a long time ensures that a substantial profit can be made in the future. Traders will buy cryptos based on their research. They choose those cryptos that will give the best possible returns.
These crypto traders know that the price of these cryptocurrencies will appreciate after a long time. Once the price of these HODLed cryptos appreciates, they will then sell them for a substantial profit. The time frame between buying those cryptos and HODLing onto them before selling them for a profit can range from a few months to a few years.
Since cryptos are volatile, both the risks and the possibilities are endless. As there are possibilities to make a profit, so are the losses. One of the best approaches is to buy these cryptos based on your research without setting any risk management features like “take-profit” and “stop-loss.”
Cryptocurrencies are highly volatile; the price trend tends to fluctuate a lot. Thus, many traders trade them, as their inherent volatility offers several opportunities to make huge profits. It is always wise to understand all the aspects of cryptocurrencies before investing in and trading in them.
Invest in cryptos that you are willing to lose and that will not harm your financial well-being.
Since most of the crypto exchanges are going bankrupt, it is better to store your cryptos in a cold crypto wallet.