The nefarious world of volatile crypto trade needs the nerves of steel, concrete winning plan and tons of time to close the trade in profit. In India alone, more than 10 crore people own cryptocurrencies and in some countries like Pakistan people own cryptocurrency worth more than the federal reserves of the country.
The increased interest of people towards cryptocurrencies is due to the huge incentives. Some of the coin has even crossed 5000% in a year. People get carried away without realizing that there are around 17,500 cryptocurrencies and choosing the right one requires a lot learning, DYOR, and sheer stroke of luck. Without proper learning of the subject, you might end up losing all your portfolio with a slight move of the market against your position. We have already covered how to DYOR before investing in cryptocurrencies.
A trading strategy is the method that traders use to enter or exit a trade. In this article we’ll discuss the best tested crypto trading strategies to bag the maximum profits.
crypto trading strategies
- Day Trading:
This is an intraday trading which is used by the intermediate and professional traders. This trading strategy is used for shorter time i.e., a day. These traders look for opportunity of trade in shorter period of time and exit the trade same day they enter. This trading strategy is like a full-time job and not a side hustle. Day traders take the advantage of price fluctuation during a day and use this to bag the profits. Such traders need to adapt to the huge market volatilities and prepare accordingly.
- News Trading:
This can be a momentary trade with huge gain if you open a proper position in proper time and fast enough to close at the best you can. Stocks and cryptocurrencies follow news and move accordingly and if you have an insider news or an event is coming that you think could add to the asset’s value, probably it’s the time to open your position long. When Facebook announced its rebranding to meta, many projects already working in Metaverse were exploded. Below is the chart of Decentraland MANA which scored more than 500% in a single day, as a response to a positive news.
Traders need to understand the market expectations from the news and the understanding of market reaction is sometime more important than the news itself. This trading strategy comes with very clearer entry and exit points. Also, as there are many news and events happening every day, the traders are expected to get more opportunities every hour.
The news trading strategy could be even trickier if the news has already factored the price. Traders should never enter the running train as once they miss the entry point; they should seek more opportunity and not get carried away by their emotions.
“Buy the Rumor, Sell the News”.
- Swing Trading Strategy:
Cryptocurrency market never moves in straight line. The price makes higher highs and lower highs in bullish trend and lower highs and lower lows in bearish trend. The price movement in parallel channel make swing patterns that traders use to enter the trade. To understand it more, look at the below given chart of Ethereum.
Traders enter the trade at the bottom of the channel and exit the trade at the previous high of the trade. Such traders get more opportunities than others yet trend reversals can easily impact bad this trading strategy.
These trades require good understanding of support and resistance in the given platform. Traders should also know the length and duration of a market trend to successfully enter or exit a trade. Volume indicator can be helpful to such traders to spot if the coin price is losing or gaining momentum. If volume is increasing in the bullish market, it is very likely that the said coin might update its previous high and remain bullish. On contrary, if the volume is decreasing in the bullish market, the coin might not be able to update the previous high and even the support level can break downwards due the increased selling pressure.
- Trend Trading Strategy:
Theirs is phrase used in cryptocurrency trading, “The is your Friend”. A trend is an overall price movement of a project in relatively longer terms. Traders spot such trends with good support and resistance and enter the when it’s near the support level. The good thing about trend traders is they don’t really care about the market direction if it’s bullish or bearish. If the chart is making an obvious pattern, that’s the opportunity. It is very important for the trend traders to stay cautious and trend reversal might occur at any time. There are many indicators that can signal the trend reversal. You can learn about these indicators in our Technical Analysis article.
As in the chart above, Ethereum price is following an uptrend over a slope support in a bullish market trend. Considering this blue line a support, the trend traders can enter the trade anywhere near support. However, there are no obvious exits besides the resistance levels. This type of trade doesn’t require traders to sit all day peking at the price chart, however, it is important to choose a timeframe with more consistant trend. Using “Trailing Stop Loss Order” can be usefull in such types of trades as it mitigates the overnight risks.
It takes a lot of learning and practicing to succeed in cryptocurrency trading given its volatilities. The huge profits create a sense of FOMO to make traders enter the wrong trades a while the huge red candles frighten the new amateur traders to sell at the wrong exit points. Cryptocurreny traders should explore the all options and choose the one that matches their habits, time, and HODLing power as it crucial for the traders to learn how to ‘ride the trade’.
Important: Cryptocurrency trade involves increased risk and you are the sole responsible for your trade. The above analysis is the opinion of our technical expert who is not a financial advisor. DYOR (Do Your Own Research) before investing.