Since crypto started gaining popularity, many traders have been attracted to it, and they are continuously evolving cryptocurrency trading strategies to conquer bigger wins. However, few of them remain constant and popularly known worldwide.
The recent emergence of a pandemic taught us that crypto could be used to make quick bucks when most of the market had come to a standstill. Many traders who trade in the stock market use the same techniques to trade in crypto. Let us discuss top 7 strategies so that you can apply and try them for yourself.
It is the most common technique used by day traders who make huge profits. The strategy is to make a small profit over a short period.
So how does this technique work? The only thing that needs to be kept in mind is your trading duration. In scalping, the duration is narrowed down, the maximum being an hour.
A trader’s biggest asset is their trading volume. The number of trades far exceeds the profit in any transaction. Generally, traders don’t wait long enough for any huge gains within the market since the fear of loss gets to them.
In other words, these traders will quickly enter and exit the market taking advantage of small movements. The main driving force is to maximize profit and reduce losses simultaneously. Instead of making large profits for every transaction, the aim is to maintain a high win or loss ratio.
There is a 50-50 chance of losing and winning. It’d help if you concentrated more on your profits since it’s the best way to achieve higher wins. Losing your money in a few trades is still a possibility.
This type of trading strategy avoids volatility which can be unpredictable, booking losses instead of incurring profits. The trade is carried out in a calm market when the price fluctuation is not as huge as in a volatile market. The traders exploit such thin market conditions.
Since there are limited time frames, one can exit the market quickly if anything goes wrong. It is the most appealing part of this strategy that makes it even more attractive to the traders.
However, there are a few pitfalls. Traders might have to practice patience and discipline to do well under this strategy. Another setback is that the trader would feel as though they are competing with the trade bots.
- Reverse Trading:
It is one of the most advanced cryptocurrency trading strategies popular amongst traders. It is based on the market’s overall reversal tendency.
It would be best if you have an eye for details. To understand the current market trend, you need to pinpoint the exact moment when the trend reverses. The traders trading in the bearish market will quickly switch to trading in the bullish market and book profit. Since these traders are well versed in spotting sudden changes, they can even predict the highs and lows of the day while making money.
The only catch is that if the traders incorrectly predict the reversal timing, they can incur losses.
- Momentum Trading:
Momentum trading is the best and the most straightforward strategy. Even though the entire strategy revolves around the market’s momentum, it is also the riskiest strategy.
The main component of this strategy is the volume, which also defines the volume trend that the market is currently following.
- Buy the Dips:
If you are new to the market, you might feel that this trading strategy cannot be beneficial. However, you can make the best out of the market conditions. For example, people generally feel grim when there’s a drop in a crypto’s pricing. However, this is the best time to buy those cryptos.
Although the cryptocurrency market is going as strong as the stock market, there are certain factors that cause price dips with recovery when favorable conditions appear on the horizon. Moreover, the cryptocurrency market is quite volatile; thus, bullish or bearish conditions do not last long; there are spells of normalcy where the market is calm.
If you were to take a look at the historical crypto trend, you could see a strong upward trend in the price of Bitcoin. However, there were times when Bitcoin, too, is undervalued.
The cryptocurrency market is quite media sensitive. People rush to buy crypto when the positive crypto news is on social media or platforms, and the reverse occurs when the negative news circulates in the market.
The only catch is that you cannot make quick profits and might have to wait around.
- Update yourself with the latest trend:
It is the most popular cryptocurrency trading strategy that almost all the traders who do not understand market sentiments follow. Such a risk-averse strategy depends on the latest trend rather than swings.
The traders open long when the market is on the upswing and trade short when the market is declining. There is no better strategy other than conforming to the latest buzz regarding crypto news on social media.
Once the trend has been identified, the traders follow the trend and exit the market when the trend changes. It is also called positional trading. To maximize profit, traders also indulge in margin trading.
The only pitfall is that the crypto market is very unpredictable, and the traders require some kind of cushion protection from a sudden price change.
- Fade trading:
If you wish to gamble against trend trading, you can surely try your luck in fade trading. However, it has a catch. If your prediction fails, then you will incur huge losses. Nonetheless, you can book huge profits if you make the right move. Such a strategy works best when the market volatility is high.
These situations generally occur when some countries plan a crackdown to ban cryptocurrencies.
- Range Trading:
The two concepts which are widely used in both stock and forex trading are also being used in crypto trading. The first and foremost component required to carry out this strategy is to understand and gain mastery over candlestick charts. Such a theory revolves around buying cryptocurrencies at the support levels, and selling the same at resistance levels.
The goal is to ensure that the price remains in the range and watch it go beyond a particular level once it breaks the limit.
In conclusion, irrespective of the strategy you choose to invest in, you must understand that you will make losses due to the inherent volatility of cryptocurrency.
There are ample opportunities in which the market will present itself. However, it would help if you kept your emotions in check while trading; if you have too much greed or sadness, you might as well start making losses.
Instead of relying heavily on others’ views concerning crypto investment, you should conduct your research and settle down with one of the strategies you are comfortable with. Never invest in too many coins if you are a beginner or new to crypto trading.
Remember, the top traders are the ones who master their emotions while trading. So if you don’t give in to your urges, you too can make practical investments and huge profits.
Hey, this is Johny Sehgal. I am the owner and caretaker at Finance Jungle. I completed my education in BSC and now heading towards the digital marketing industry. I usually have interests in reading, playing games and watching movies. I also love to write content based on quality information. The main motive of mine is to provide the top and best quality information to my readers. Finance Jungle is the blog for the same.