The world of cryptocurrency is attracting more interest by the day, and while these assets are high-risk ventures because of their volatility, more traders have become open to investing in them. Nevertheless, given the risks at hand and the likelihood of losing all your investment capital in an instant, you need a solid plan before venturing into cryptocurrency trading. To get you started on this journey, here are the best crypto trading strategies.
1. Short selling
Going short is a great crypto trading strategy that allows you to leverage speculated price drops to profit off an asset. While many people invest in cryptos hoping that the price will go up, the nature of the market and volatility of these assets provides much room for short-selling. Seasoned traders love this strategy for its potentially high-profit margins. Still, it must be well-managed, and mastering the best practices from CryptoChronicle’s guide on shorting cryptos will help you avoid huge losses.
2. Range trading
There are several positives for cryptocurrencies, and one that most traders take advantage of is the fact that most assets trade inside a given range over a given period. By opting for range trading, you strive to maximize these “consistent” high and low prices known as resistance and support bands. The goal is to buy at the right support price and sell at a favorable resistance price, which calls for paying attention to market patterns as well as overbought and oversold zones.
3. Day trading
Day trading is a suitable trading strategy if you are out to invest most of your time and attention in seizing profit-making opportunities by the minute. This works by constantly taking and exciting positions while striving to gain from the countless intraday price movements. For better success, you will need to rely on technical indicators to help figure out these entry and exit points while trading more than one crypto asset.
Scalping is a good crypto trading strategy if you have an eye for finding market inefficiencies. To fully utilize these inefficiencies, you need to make several small moves over and over again within the shortest time. Most scalpers open and close their positions in a matter of seconds, with many using automated bots to make these processes simpler. Ultimately, the goal of scalping is to quickly enter and exit a trade before it becomes a news item or short-term fluctuations affect it.
Arbitrage is a pretty straightforward strategy involving buying a crypto asset in one market and selling it in another. You make profits by leveraging the spread, which is the difference in an asset’s buy and sell price. Since there is always a variance in asset liquidity and trading volume in the crypto world, keeping in touch with an asset’s price shifts in different markets will enable you to attain better gains from this strategy.
6. Dollar-cost averaging
No one can really tell when the best time to enter or exit the crypto market is, as it is near impossible to perfectly time the market. This is where dollar-cost averaging comes to the rescue. This strategy aims to save you from bearing the burden of sudden market swings when investing in a crypto asset. Instead of investing a huge lump sum into the market, you divide it into small amounts that you then invest over a given period.
7. Build a well-balanced portfolio
Today, there are different types of cryptocurrencies that you can trade, and to secure your investments, it is best to prioritize building a well-balanced portfolio. This will save you from sudden and unexpected huge losses when the value of a single crypto asset significantly drops, given the high volatility of these digital currencies. You will also have the upper hand when trading a variety of assets that helps minimize your overall losses while growing your investments.
8. Play crypto volatility
The volatility of cryptos does not have to be a disadvantage when you can use these ever-shifting and directionless movements to your benefit. One good thing you will love about playing crypto volatility is that it does not matter whether the market goes up or down, as you will still gain as long as it shifts. There are also several volatility trading techniques that you can use to make the most out of this trading strategy.
Trading crypto does not have to be cryptic when you can use the right strategies to minimize your losses and make the most out of this market.
Written by Adam Eaton