Top Trading Strategies in Cryptocurrency
Trading

Top Trading Strategies in Cryptocurrency

10 месяцев назад

Using a set of strong trading strategies can reap great rewards, but any mistake can turn your portfolio red. Here is a list of top trading strategies that can provide huge gains!

Top Trading Strategies in Cryptocurrency

Содержание

Crypto trading is a process of buying and selling crypto tokens at a specific and agreed-upon price. In crypto trading, an investor buys and sells coins directly using an exchange. You can either hold a coin if you think the prices will rise or sell it if you think the rates will decline.

Strategies Used in Crypto Trading

It would be best if you design a strong strategic plan to understand a volatile trading arena to make favorable investments in cryptocurrencies. First, you should understand the volatility in market volume, trending coins, and primary strategies to cope with the potential challenges and attain a strong market position. In this context, you should know the following strategies:

Range Trading

Mostly, a token/coin tends to move for a longer period inside a certain range. For example, the range of Bitcoin remained $8,602.40 to $10,211 for a whole month-long period. This ±9.5% range was called volatile when the chances of Bitcoin breaking above the range within the next 24 to 48 hours increased.

Source: TradingView
You should keep in mind that there are many small tokens/coins in the world of cryptocurrency which are easy to manipulate. Many times whales end up manipulating the prices of these tokens to attain profit from a range. Sometimes, these manipulations also occur in the prices of coins with large market cap, for example BTC or ETH. If you understand this manipulation process, you can also take advantage of them. If you are interested in range trading, you will also have to pay strong attention to oversold and overbought zones. By overbought, we mean that the traders have saturated their profits, and now they might sell off the token, while oversold is the opposite situation. 

Arbitrage

Arbitrage is an important crypto trading strategy that involves purchasing a coin from one exchange and selling it on another at a higher rate. This potential difference in buying and selling is known as “spread.” The rates of purchasing and selling usually differ from one exchange to another due to differences in trading volume or liquidity. You can also create accounts on different exchanges and take advantage of the arbitrage trading by checking out prices of tokens on different platforms. You can also use CoinMarketCap to check the prices of tokens in different trading pairs on different exchanges.

Scalping

Scalpers frequently make bigger profits from an increased trading volume as many of them prefer using trading bots to increase the number of their trades. Mostly, scalpers tend to exit a trade before any potential fluctuation drastically changes the coin price. If you want to make maximum profit from scalping, make sure to stay active in the market, identify the range of fluctuation and open multiple trades at the same time.
When it comes to single trades, return on investment (ROI) from scalping is quite small as scalpers tend to make profits from small fluctuations in lower time frames. For example, taking 0.10% from five different trades with a collective investment amount of $100,000 is a fair profit. Scalpers make several trades simultaneously, which means that these small gains result in large profits at the end of the day.

HODL

HODL-ing is one of the most practiced crypto trading strategies used by traders. It involves holding certain asset(s) for a long period of time, regardless of the fluctuation in price, to rip huge gains. One of the best aspects of HODL is that you only need to buy the coins without setting any stop-loss order. However, you must take all aspects into account before adopting this strategy as it can either make you or completely break you. For example, you purchase Ethereum and its price increases by 15-20% within 48 hours of purchase. It means you are making a good profit, but you also risk losing a portion of your initially invested amount if the price declines. Yet, most crypto traders use the HODL strategy, by buying an asset especially when the rates are low and hold it for long term to make profits as the price of that asset increases.
Crypto traders need to understand the primary rules and market trends to adopt the HODL strategy. First of all, you have to trust your instincts as uncertainty and confusion lead to wrong decisions. In this regard, it is advised to only invest the amount of money you can afford to lose. It is also notable that the HODL strategy is vulnerable to market volatility and short-term price fluctuations in a crypto market. However, holding an asset for a long-term saves investors from getting affected by short-term price fluctuations.

Smart Trading

Smart Trading is one of the most prominent trading strategies among the crypto traders that is mostly used in the Futures market where most exchanges offer the options of “stop-loss” and “take-profit”. This trading technique offers traders a strong control over risks and returns and helps them in planning their positions. 

Notably, a smart trading strategy offers two types of trading options, i.e. short and long. It is highly advised to keep on booking small profits instead of waiting for a huge chunk to build up.

You should put a stop loss whenever you open a position and move it up slowly (in case the price is moving in your favor) and bring it to a break-even point. Similarly, you should set multiple take-profit orders to book small profits after small intervals.  

Which Strategy Is More Suitable For You?

All the investment strategies are suitable and profitable for you as they come with several pros and cons. For the best results, you should research and understand all the potential strategies and tactfully choose the most suitable one. If you rely on your preferences, allocate your funds using at least three of the above-listed strategies. Choosing the lowest risk strategy will be more favorable for you to adapt.

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