Cryptocurrency is a new trend of investing. But, with any investment, there are risks involved that make investing seem complicated and scary. But, it need not be complicated, we have put together a list of the 10 best strategies for cryptocurrency trading that will work wonders for you.
Crypto Day Trading Explained
Crypto day trading is a popular trading strategy that involves buying and selling cryptocurrencies within a single day. One of the most attractive aspects of day trading is the ability to take advantage of intraday price movements, which can provide highly profitable opportunities. Therefore, it is important for traders to have a keen understanding of how intraday market dynamics work and how to interact with them.
Day traders must be well-versed in a variety of trading strategies, as the approach taken will depend on the trader’s goals and preferences. Some traders take advantage of short-term price fluctuations by implementing a scalping strategy, while others prefer to focus on longer-term trends. Either way, intraday trading allows traders to use tighter risk parameters than they would be able to with longer-term trading, as the expected movements are smaller.
One of the advantages of intraday trading is that it eliminates the risk associated with holding positions overnight. This can be especially comforting for those who are risk-averse. Additionally, the size of trades made in intraday trading is typically larger than that used for a longer time horizon, allowing traders to allocate their capital more efficiently.
1. Trading Inspired by Events
This sector of the crypto market holds a significant impact on how the value of a certain crypto will turn out by the profits from certain events.
In layman’s terms, when a certain crypto is trending as it has a market breakout, that is when you should invest. This strategy requires you to be fast, efficient, and have a strong media presence, constantly monitoring the market is the most potent way to tackle this strategy.
2. The RSI Approach
The Relative Strength Index (RSI) predicts an asset’s price movements over a specific period of time. It’s an excellent tool for determining what your asset will do and making decisions accordingly. In this case, the RSI can also forecast cryptocurrency price changes. Such as whether it is overpriced, undervalued, oversold or exhausted. This approach is a favorite of many advanced traders.
3. The Day Trading
Day trading or “intraday trading” are trades that are more often than not opened and closed on the same day. Day trading in the cryptocurrency market is especially profitable due to the volatility of cryptocurrencies. Of course, day trading strategy involves more than guesswork.
You must have a solid cryptocurrency day trading strategy in place, as well as an understanding of fundamental and technical analysis. Most intraday traders rely on technical analysis to generate profitable trades.
4. The Method of Scalping
Crypto scalping is a fast-paced trading strategy that profits from small price movements. Instead of focusing on long-term positions and large profits, scalp traders rely on short-term trades that generate small profits from small price changes over and over.
5. The Act of Range Trading
The difference between the high and low prices in a given trading period is referred to as the trading range. Price movements in a defined range over time characterize range-bound trading. A trading range is defined by the presence of both a support and a resistance price, between which the price tends to fluctuate.
6. The Approach of HFT
It basically is the approach to a trading that utilizes the bots for quick entry and exit. Although many say that this method is for the pros, if you have a good grasp of knowledge of CS, and the market of crypto, it can be the perfect approach
7. The Easy Method of DCA
Building Wealth with Crypto Assets Using the Dollar-Cost Averaging (DCA) Strategy. DCA is a time-honored investment strategy that involves purchasing set amounts of stock at regular intervals, regardless of whether the price is high or low.
A strategy in which, rather than purchasing in one lump sum, the investment is divided into smaller sums that are invested separately at regular predetermined intervals until the entire amount of capital is exhausted.
Dollar-cost averaging reduces investment risk while preserving capital in the event of a market crash. It saves money, which gives you liquidity and flexibility when managing your investment portfolio.
8. Invest as You Can Afford
If only the experts had a nickel every time they emphasized such a statement! Never in any circumstances go beyond your limit.
9. The Arbitrage Crypto Method
Arbitrage trading in cryptocurrency works exactly like it does in traditional markets. Whenever a price inefficiency is detected, traders must quickly buy and sell an asset across platforms. The only distinction is that cryptocurrency arbitrage traders concentrate on crypto assets such as Bitcoin or Ethereum.
It is a very simple method, yet it can be complex if you take it to further levels. From a basic viewpoint, you just purchase certain crypto for market A and sell it to market B. The “spread” refers to the discrepancy between an asset’s purchase and sell prices.
10. The Algo Crypto Trading
Automated cryptocurrency trading, or Algo Trading, is the practice of using computer programs to carry out a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that a human trader would find impractical.
It is more of an advanced or intermediate strategy. One of the most difficult ways to manage cryptocurrency markets is through algorithmic trading, sometimes referred to as high-frequency trading.
Set Clear Goals and Define Your Risk Tolerance
Before you begin trading, it is important to set clear and realistic goals. These goals should take into account the volatility and unpredictability of the cryptocurrency market and your own risk tolerance. Consider factors such as how much you are willing to invest, how much profit you hope to make, and your time horizon for achieving your goals.
It is also essential to define your risk tolerance. This means understanding how much risk you are willing to take on in pursuit of your goals. Cryptocurrencies can experience sudden and dramatic price fluctuations, so it is important to be prepared for the possibility of losses. By setting clear goals and defining your risk tolerance upfront, you can help ensure that you are making informed and rational trading decisions.
Focus on a Limited Number of Cryptocurrencies
With hundreds of cryptocurrencies to choose from, it can be tempting to try to trade them all. However, this approach can quickly become overwhelming and ineffective. To succeed in day trading, it is essential to focus your efforts on a limited number of cryptocurrencies.
Many successful day traders concentrate on three to five cryptocurrencies at a time. By focusing on a smaller number of assets, traders can gain a deeper understanding of how those assets behave during the day. It also allows traders to more closely monitor the markets and make more informed trading decisions.
Implement Proper Risk Management Techniques
Risk management is essential in day trading, particularly in the cryptocurrency markets. Prices can move fast, and losses can quickly accumulate. To protect yourself and limit potential losses, it is critical to implement proper risk management techniques.
One effective method is to set stop-loss orders. A stop-loss order is an order to sell a cryptocurrency if it reaches a certain price, helping to limit potential losses. Another technique is to take profits at predetermined levels. This means setting a target price for selling a cryptocurrency, allowing you to lock in profits before prices start to fall.
Get Well Informed
What all these strategies have in common is that you should have knowledge of the markets. Remember not to take any step before properly researching it. If all is done right, your journey to becoming an expert trader will be a walk in the park.
Crypto Day Trading FAQs
This depends on the individual trader, though in general, trading over a shorter time frame is considered more complex than over a longer time frame. Day trading is more involved to holding assets for more than 24h.
There is no universally superior day-trading strategy, as each trader is unique and needs to select a strategy that aligns with their understanding and comfort level. Some of the strategies more widely used by independent traders include technical analysis, scalping and range trading.
This depends on various factors, such as a trader’s experience level, skill and account size. Generally, it’s advisable to start trading in a lower-risk environment by choosing larger-cap coins with relatively high levels of volume. A good starting point to consider is the list of top 30 cryptocurrencies (based on market cap). You can then further narrow it down to your preferred choices from this list. If you seek more intraday volatility, then expand the list to include the next 30 cryptos by market cap.
Disclaimer: Investing can be quite a wild ride – especially when you don’t know the terrain! To keep things from getting too rocky, take some time beforehand to get familiar with all of the risks involved. Our site is here to up your investor game by providing all available intel about platforms and trends, but we don’t take responsibility nor can we be held accountable as advisors. That being said, it’s still important for you to make educated decisions that match what works best for YOU – just remember: no amount of savvy will guarantee success or protect against loss so invest money you can spare.
