One of the most popular forms of investment nowadays is none other than cryptocurrency. The market capitalization has already gone past a whopping $1 trillion this year, which means there is a lot of money involved. However, before you decide to engage in cryptocurrency trading, you should be aware that there is a great deal of risk involved because of the market’s high volatility. You have to have a solid plan in place if you hope to succeed. If you are not cautious and don’t use the right strategies, you will end up losing all your money. Of course, this is something you want to avoid and here are some cryptocurrency trading strategies that can help:
Anyone who has decided to enter the world of trading should know that different resources and strategies are involved. You can choose from active strategies, which require a great deal of time and attention and have to be monitored constantly, or you can go with passive ones that offer a hands-off approach for the most part.
The former are obviously more popular and day trading is one of the most popular active trading strategies you will find. Settling on this strategy for crypto trading means that you will be required to enter and exit trading positions on the same day.
If you decide to use this strategy, you will be capitalizing on price movements of cryptocurrencies that occur within a day, which are also referred to as intraday price movements. Day trading involves making use of technical analysis as well as price action, due to which it is considered a suitable strategy for advanced traders.
Another active strategy to explore for cryptocurrency trading is known as trend trading, also referred to as position trading. It involves holding a position for an extended period of time, usually a couple of months. If you decide to use this strategy for trading cryptocurrencies, then you will be required to keep up with directional trends, along with knowing how to take advantage of them. Trend traders use fundamental analysis for deciding their investment strategy, which means considering events that will require a lot of time to play out.
This strategy can only be successful if the cryptocurrency in question continues to move in the direction of the trend expected in the future. However, trends may change and you need to be aware of this fact as well. A trend reversal is always a possibility, due to which it is better to incorporate a number of technical indicators, such as moving averages and trend lines, which can boost your chances of success.
This is another active strategy that you can check out for cryptocurrency trading and it focuses on small price movements that are repeated over and over again. Plus, scalping also involves benefiting from inefficiencies that may exist in the market, such as a gap in liquidity. Those using this particular trading strategy will open and close their positions in a short span of time, often in a matter of seconds.
Scalping can prove to be extremely lucrative, as long as you know how to find the inefficiencies in the crypto market and exploit them. You will be able to make a profit every time this happens. However, you should bear in mind that this strategy is quite complex, due to which it is best for skilled and experienced traders. It requires in-depth knowledge and understanding of the crypto market and you also have to have high liquidity.
If you decide not to use these active trading strategies, you can consider a passive one for cryptocurrency trading. This is the popular buy and hold strategy, which as obvious from the name, means buying a cryptocurrency and then holding on to it without focusing on the market fluctuations that may happen. This strategy is usually suitable for the long-term and getting into it means paying no regard to entry price or timing.