What Is a Crypto Trading Strategy? 5 Crypto Trading Strategies Explained

Crypto analysis tools are software platforms or applications designed to help crypto investors and traders navigate the digital asset market. They provide a wealth of information at your fingertips, from tracking price movements and market trends to analysing blockchain data and providing predictive insights. One of the key strategies utilised by successful crypto traders is technical analysis.

While there is no one-size-fits-all approach, there are a few strategies that usually work well for beginners in the crypto sphere. In today’s article, we discuss five popular beginner-friendly crypto trading strategies to consider. This one is quite popular too, it’s a mix of different smart orders such as Stop-Limit and Trailing Stop-Loss. This strategy offers a good risk and return control, helps to better plan positions you’re entering and exiting. Day trading in the cryptocurrency market is especially profitable as cryptocurrencies are quite volatile.

Crypto spot market

It’s similar to arbitrage trading because you may only be holding onto crypto assets for a matter of minutes — and you’re probably not going to make a big profit on those trades. Crypto day trading is a high-risk strategy involving the frequent purchase and sale of cryptos in the pursuit of short-term profit. Anyone who’s interested in day trading crypto should know where they plan on trading, have a detailed day trading strategy, and stick to their entry and exit points. Traders rely on arbitrage opportunities to earn profits through cryptocurrency or Bitcoin trading strategies. Arbitrage is a trading method in which a trader purchases cryptocurrency in one market and sells it in another.

• A lack of liquidity can be disastrous to the entire crypto market, causing slippage and increasing the risk of a flash crash.
• Not ideal, but if you continue to hold it will likely go back up and besides, you still have the Bitcoin.
• This is discouraged as it’s more financially secure to segregate your financial investments from your personal pocket change.
• It involves executing multiple trades within a single day to capitalize on short-term price movements.
• Scour through a few different crypto trading sites and take note of where the lowest and highest prices are.

The MFI can be used in addition with the RSI to check whether the price of BTC is trending towards a bullish or bearish divergence. The long straddle — also known as the buy straddle, option straddle, – or just straddle — involves the purchase of both a put and call order. The call and put orders in a long straddle are on the same cryptocurrency, striking price, and expiration date.

Implementing Long-Term Holding Strategy

You’ll find the nerves of steel and intuitive trading platform through research, research and more research. Let’s take a look at the X-factor in this gumbo, that is, the best crypto day trading strategies you can use. When an individual invests a fixed amount of money at regular intervals (e.g., monthly) in a specific asset, regardless of its price fluctuations it is considered dollar cost averaging.

• Though Bitcoin is likely the best-known digital money, thousands of cryptocurrencies already exist.
• Day trading cryptocurrency can be highly profitable for some, but it’s often quite stressful, demanding, and may involve high risk.
• Trend or position trading involves holding positions for a few months to profit from directional signals.
• Arbitrage involves buying cryptocurrency in 1 market and selling it in another market at a higher price.

For example, when the RSI makes higher lows while the price pushes for a lower low, this is seen as a strong bullish signal. It shows sellers are losing momentum, and the market is ready for a reversal. The so-called bullish divergence historically results in a significant bounce.

Get Crypto Price Data with CoinGecko API (Python)

For example, let’s say you buy a single crypto coin for $2,000, and you think it’s going to rise by $100 by the end of the week. You’d then commit to a range between $2,000 and $2,100 and sell the coin back onto the exchange while its value remains within that range. A cryptocurrency is a digital currency supported by a global network of computers. You’ll often hear people refer to cryptocurrencies as “cryptos,” but both terms mean the same thing. This name stems from the process in which crypto is kept safe and secure using digital encryption techniques.

• Swing traders may use a combination of technical and fundamental factors to formulate their trade ideas.
• With one of these factors, a trader could provide substantial returns to the group and help improve their trading strategy.
• As a beginner, you probably want to choose a trading strategy that involves medium to long-term trading and investing.
• Just like with crypto exchange fees, if tax is not accounted for, it can lower your profits.
• The day trader earns regardless if the price rises or falls in the long straddle.
• Now notice here how the lows are going in clearly different directions.

Therefore, conduct your own research before adopting any trading strategy. Arbitrage, market-making, liquidity detection and momentum trading are four sorts of HFT strategies. As previously stated, arbitrageurs look for price differences between two identical assets and benefit from the price discrepancies on different exchanges.

How much can you make day trading crypto?

These time frames tend to show stronger shifts in the mid-to-long-term trend. Looking at the chart below, we can see that there were three key RSI divergences on the recent bitcoin/U.S. The yellow lines show the discrepancies between the RSI indicator and the price. The best times to look for divergences are when the price is in either the oversold or overbought areas.

• Ultimately, the decision to engage in day trading should be made based on individual risk tolerance, time commitment, and expertise in market analysis.
• With careful analysis and risk management techniques, they can take advantage of short-term fluctuations to generate significant profits.
• When an individual invests a fixed amount of money at regular intervals (e.g., monthly) in a specific asset, regardless of its price fluctuations it is considered dollar cost averaging.
• Some notable exchanges offering this type of trading include Binance, Kraken and StormGain.
• As a beginner, a smaller and more passive strategy will generally be better for those with less experience and a lower risk tolerance.
• Unlike traditional financial markets, cryptocurrencies operate in a decentralized manner, meaning they are not controlled by any central authority like banks or governments.

Instead of constantly monitoring price movements and trying to time the market, you choose to hold onto these assets for an extended period, perhaps years. By doing so, you aim to capitalise day trading strategies crypto on the overall growth trajectory of the cryptocurrency market. Finally, TradingView deserves a mention for its renowned charting capabilities and technical analysis features.

Start trading

If you had just purchased $100 worth of Bitcoin, it would only be worth $90. Not ideal, but if you continue to hold it will likely go back up and besides, you still have the Bitcoin. You would then pay back $900 to the exchange, and you would have doubled your investment. Say you want to purchase $1000 worth of Bitcoin because you believe the market is about to go up, but you really only have $100 to spend.

When scalping, all you’ve got to do is take out a crypto position and then sell that position back onto the exchange based on small price movements. Unlike arbitrage trading, scalping doesn’t rely on monitoring every exchange on the globe and reselling elsewhere. You simply buy crypto, monitor the price throughout the day, and then sell when its trading price is higher than the amount you paid.

CryptoJelleNL

By analysing sentiment towards specific coins and tokens across various social media platforms, it offers insights into overall market sentiment towards certain cryptocurrencies. Coupled with price tracking and market analytics features, LunarCrush can be a valuable tool for understanding investor sentiment in real-time. There is a robust platform where you can share information and learn from other traders, meaning that you can get to know other day traders and even bounce ideas off them. There’s a learning section for those who want to read up on the subject, and pricing is clearly noted on the site. You can open an account for free, start trading and enter the crypto market right away.

After all, a lot of cryptos have been known to fluctuate pretty dramatically, and you’ve really got to know your stuff to make an informed forecast about where prices are headed. To help give you an idea, let’s explore some of the most effective active and passive crypto trading strategies. You’ve probably already heard of the biggest cryptos like Bitcoin (BTC) and Ethereum (ETH).

Best for Businesses Wanting Exposure to Cryptocurrency: ICONOMI

Let’s say you are considering getting started with cryptocurrency trading. You might be wondering which coins are the most popular and widely traded among traders. In this section, we will explore some of the popular cryptocurrencies that are commonly traded. Scalping is the white water rafting – strategy of trading cryptocurrencies and is not recommended for beginners. The crypto scalper can maintain calm in the face of adversity, jump into the market for a few pips and exit for a profit. Most platforms are moving towards a fee-less approach to trading, due to the sudden boom.

• Technical analysis is a trading discipline predicated upon the idea that a trader could predict an asset’s future price movements, given its historical price action.
• Once you’re set up on a platform, it’s time to pick what you’re interested in investing in.
• Another way to gain investment exposure to Bitcoin is to buy shares in a company with significant Bitcoin exposure, such as a Bitcoin mining company.
• Choosing the lowest risk strategy will be more favorable for you to adapt.

The platform makes buying and trading cryptocurrencies simple, while also providing high levels of security and transparency. In addition to its user-friendly interface, it offers trading, institutional benefits, and digital storage to consumers in more than 100 countries. A crypto swing trader will aim to take advantage of an incoming or ongoing trend.

What is cryptocurrency?

One of the most significant advantages of cryptocurrencies is that they do not require the involvement of a financial institution as an intermediary, which can lower transaction costs. Furthermore, people who are wary of established systems may find this feature appealing. The cryptocurrency market is open 24 hours a day, seven days a week and is not physically transacted from a single location. Instead, individuals can conduct cryptocurrency transactions in various locations globally. Read our guide on crypto derivatives to understand how to trade Bitcoin futures.

• Leverage trading is basically the practice of creating larger positions than you actually have capital for by borrowing money or assets from the exchange.
• The best part about market structure is that it works well on even the lowest time frames.
• However, they invest for the long-term if they foresee upward market movement.

It will comprise the kind of assets to invest in, the frequency of your trades, and your investments’ size. Devising a crypto trading strategy that suits your financial goals and personality style is not an easy task. We went through some of the most common crypto trading strategies, so hopefully, you can figure out which one may suit you best. Scalping is an advanced trading strategy that isn’t recommended for beginner traders due to its complexity. Other than that, scalping is generally more suitable for large traders (whales).