Similar to trading commodities and equities, crypto trading is also full of various pitfalls and risks. And you need nerves of steel, an intuitive platform, and a winning game plan to be successful in the market. Being enthusiastic is not enough, you will need to devise trading strategies that can help make trading safe and fun at the same time.
So, in this post, we are going to be talking about the top trading strategies in the crypto industries which we believe you should know about too. The goal of any crypto trading is to achieve the most profit possible, and that is what these strategies are designed to help you achieve.
Top Crypto Strategies in the Market
#1: Range Trading Strategy
Oftentimes, a crypto asset can trade inside a certain price range for a long time. For instance, Bitcoin traded between $8,400 and $10,000 for a period of 30 days. That is about a 10% range. But anything can happen in the crypto world. This 10% range can change to 42% in just 24 hours.
Crypto volatility is driven by even the smallest things in the market. In some cases, some big players in the market can systematically manipulate the price of a crypto asset either up or down from a range to their favor. When you notice this kind of pattern, you can easily take advantage of that to make some profit.
With a Range Trading strategy, you will want to pay close attention to oversold and overbought zones. What are these zones? Overbought zones simply refer to a situation when buyers have saturated their needs, giving a hint that the stock will soon sell-off. The opposite happens with oversold. So how do you identify these zones?
There are chart indicators on your stock chart program to help you find these zones. Other indicators often used for this purpose also include relative strength index (RSI) and Stochastic Oscillator.
#2: Dollar-Cost Averaging Strategy
It can be pretty hard to find the perfect entry and exit point in a crypto market. And that is where the Dollar-Cost Averaging strategy can be of great benefit. This strategy involves a certain amount of money at a regular interval. With this, you won’t have to bother your head about the complex work of trying to get the market timing right or building wealth in the long term.
However, the only downside here is that crypto exit strategy can be tricky with this type of trading strategy. Here, you will be studying the market trend and trying to understand the market cycle. You can also leverage technical charts to have a good idea of what time is it to exit the market. Adequate understanding of overbought and oversold regions will also come in handy here too.
#3: Day Trading Strategy
There is a reason this strategy is called day trading. It actually involves taking positions and exiting that same day. The primary aim of using this strategy is to book profits and intraday price movement in any crypto the trader has chosen.
You will also need to rely on technical indicators to help you identify entry and exit points perfect for a particular crypto.
This strategy usually feeds and takes advantage of increased trading volume to profit. Here, traders can choose to exit a trade even seconds after entering such a trade. At the same time, many traders also leverage automated bots to increase the frequency of their trading cycles. The primary focus of any trader using this strategy is to quickly exit a trade before any price fluctuation comes in.
Although the ROI on trades done using this strategy is small, staking a large amount and trading frequently also means having a substantial amount of money in the end as those small gains add up.
#5: High-Frequency Trading
This is also referred to as algorithm trading strategy. It involves building trading bots and algorithms that will help you enter and exit a crypto asses as soon as possible. However, for you to develop such bots, you will need to have a good understanding of mathematics and computer science, and how complex market concepts work.
However, this type of crypto strategy is more suited for advanced crypto traders than it is for beginners.
#6: Arbitrage Strategy
The concept behind this trading strategy is very simple, and so it is a perfect strategy even for beginners. It simply involves buying cryptocurrency at a lower price in one market and selling at a higher price in another market. The difference between the price in the two markets is what is called “spread”.
To begin with this strategy, you will need to have a portfolio in any exchange platform you think will show significantly different prices for the same crypto asset. For instance, if the spread between the price of Bitcoin on a US exchange and on South Korean exchanges is high, you can make a good profit just by simply buying from a US-based crypto exchange selling it on South Korean exchanges.
Another important thing you have to consider when using the Arbitrage trading strategy is the trading fees. If the trading fees on an exchange where you are selling your coin may wipe out the gain you thought you are making from the trade.
Above are some of the top trading strategies you can use to make the most out of your trading venture. However, regardless of the strategy you choose, just know that cryptocurrencies are highly volatile, and that is why you need a strategy in the first place. But just as you are having your trading strategy, don’t forget to have your exit plan ready too