In the last few years, interest in cryptocurrency trading has intensified due to the stories circulating about these digital currencies. However, one thing to remember is that this form of trading is regarded as a high-risk, high reward activity. There is no way to guarantee returns in crypto trading and if someone is telling you so, then you need to steer clear of them. But, there is no denying the fact that it is a lucrative way of making money, even if it is not for everyone. Price fluctuations, high volatility, Ponzi schemes, pumps and dumps, shady exchanges, exit scams, and the limited regulatory oversight are some features you need to bear in mind before you jump onto the bandwagon.
Furthermore, it is also vital to remember that if you want to start crypto trading and actually profit from it, then you need to understand the basics of technical analysis. Even though it may seem foolish to you to look at charts, draw lines and identify key price levels, it can prove to be one of the best tools at your disposal during cryptocurrency trading. Someone who has had experience with forex and stock markets will be aware of technical analysis, but it is a tad different in the crypto space because of the volatility of the instruments in question.
The cryptocurrency market moves fast, the movements in price are way more volatile and they also tend to be sensitive to price manipulation. Even though it may seem a bit complicated initially, you can make the profits you want by combining it with effective crypto trading strategies. As long as you are vigilant and smart about your strategy and trades, you will have a fun and profitable experience. Some of the cryptocurrency trading strategies that you can use are:
Every beginner needs to be familiar with the fundamental crypto trading strategy known as Hodl, which is suitable for the long-term. You need the least possible experience and skills in trading for this strategy, which means literally anyone can use it. The strategy earned its name through a misspelling of ‘hold’, which was coined back in December 2013. The core concept of the Hodl crypto trading strategy is to buy a crypto that has potential and then hold it for a long period of time in the hope of selling it for more in the future. This sale can be made after a year, a couple of years, or even a decade.
For this strategy to be effective, you just need to know how to buy a cryptocurrency and how it can be stored securely. Cold storage wallets are mostly used by hodlers, such as paper wallets, or even hardware devices like Trezor or Ledger. While the longer game is your focus, this doesn’t mean that you shouldn’t take profits whenever it seems possible, or at least after there has been a major surge in price. It is a great way of staying liquid and also giving yourself a treat for the smart decisions you have made. If you are only holding on and not trading, you may end up making some irrational decisions at some point.
This particular strategy is where technical analysis (TA) and charts come in. If you want to be good at swing trading, then you need to become acquainted with the fundamentals of technical analysis. This will help you in monitoring the market and also develop a sixth sense for some major price movements. The swing trading strategy focuses on making the right move at the right time. The goal is quite straightforward; making as much profits as possible during swings in the crypto market. Whether the prices are moving upwards or downwards, you should always try to take advantage of any potential movement.
Successful swing traders are interested in capturing a part of the expected movement and then jump to the next opportunity all the time, but this can also mean making several trades in a week. The goal should be to set solid entry points, take profit and stop loss levels before making a trade and then sticking to them. Aiming for a profit of $100 to $200 is acceptable, as long as the risks are outweighed by time rewards. There are cases where $1,000 moves are signaled by the market, but catching them with 100% accuracy is incredibly difficult. Thus, your priority should be to secure profits by moving stop losses higher.
Day traders are people who spend most of their time trading cryptocurrency because they live off of it. Whether it is margin trading, buying or selling cryptocurrencies, or exchanging perpetual contracts, these traders will make a dozen different contracts on a daily basis for catching favorable price movements. This form of trading can offer immense rewards, but it is not without its challenges, especially for novices. They often have problems because they don’t have a lot of knowledge about fundamental and technical analyses or a lot of experience in the crypto market.
It can take months of losses, or even years in some cases, before you might be able to call yourself a profitable day trader. When it comes to the crypto market, day traders have to keep up with the charts and keep a close eye on all price movements. They should be ready to cut their losses, switch their biases frequently, and turn in breakeven trades for avoiding bear or bull traps and losses. Day traders have to learn to befriend crypto price fluctuations and survive on them, regardless of the direction of the market’s movement.
The focus of day trading is making quick and sharp decisions that are meant to maximize your profits and minimize your risk exposure. As no trader is 100% right all the time, you need to be ready for closing positions in significant losses as well.
Master these prominent and useful cryptocurrency trading strategies and you can choose from any of them, depending on your experience, budget, and understanding.