The world of cryptocurrency investing can be complicated. Beginners and even those who've been there from the very outset have to cope with the odd curveball in a still-young sector.
“Cryptocurrencies are risky investments that are subject to substantial price movements. This is only one of many risk concerns that crypto investors, particularly newcomers, must understand if they want to make money in this new asset class with a market cap of more than $2 trillion. With these numbers in mind, you'll need to have some basic investment strategies while managing your crypto assets,” advised trader and startup business lender Shane Perry of Max Funding.
With that in mind, we invite you to look through these hand-picked cryptocurrency trading strategies that can help you achieve favorable results.
A trading strategy may be defined as a comprehensive plan for your trading actions. This allows you to build a structure to guide you through all of your trading attempts.
A trading strategy may also help reduce financial risk by removing many unneeded choices. While a trading plan isn't required, it can come in handy. If anything unexpected occurs in the market (and it will), your trading strategy, not your emotions, should determine how you respond. Put another way, having a trading strategy in place prepares you for any eventuality. It keeps you from making rash, impulsive judgments that might cost you much money.
Here are some of the most popular strategies we've seen expert traders use for crypto trading and investing.
HODL is a term coined when a user on an online forum accidentally misspelled the word "hold." It's also often abbreviated as 'Hold On for Dear Life.'
Simply put, HODLing is the practice of purchasing a large amount of bitcoin and storing it safely for the long term. When you consider Bitcoin's spectacular surge in value since its birth, HODLing is a simple technique with minimal subtlety, yet it has proved profitable for many.
This trading strategy entails buying and closing positions on the same day. A trader using this strategy aims to benefit from intraday price fluctuations in cryptocurrencies of their choosing. Traders and investors often use technical indicators to determine points of entry and exits for specific cryptos to make a profitable trade.
Market participants often depend on expert analysts, who provide daily support and resistance levels. The term "resistance" refers to the maximum price that it may reach. Hence a resistance level is a cost that is higher than the current price. "Support", on the other hand, is a range below which the price of a cryptocurrency is not intended to fall; hence, a support level is often lower than the reference price.
This trading method involves increasing trade volumes to make profits. Despite the danger, a savvy trader pays attention to the margin requirement and many other crucial guidelines to prevent having a negative trading experience. Scalpers examine the crypto asset, historical patterns, and volume levels. Then they decide on an entrance and exit point in a day.
Quant traders (Quantitative Traders) use High-Frequency Trading (HFT), an algorithmic trading approach. This requires generating algorithms and trade bots that help in the speedy entry and exit of a crypto asset. The creation of such bots requires a thorough comprehension of complicated market principles and a solid foundation in mathematics and statistics. As a result, it is more suited to experienced traders than beginners.
It's essential to consider that finding the optimal entry and exit points in a crypto market is impossible. Hence, 'Dollar Cost Averaging' (DCA) is a valuable strategy to get on trading cryptocurrencies. DCA is a term that refers to spending a certain amount at regular intervals. This method allows traders to avoid the time-consuming task of market timing and build long-term wealth.
However, in the DCA approach, exit strategy might be challenging. It necessitates a thorough examination of market trends and a grasp of the market cycle. Reading technical charts may also help determine when to exit.
Cryptocurrency trading is still in its infancy. While several governments encourage cryptocurrency trade, others remain suspicious. Central banks worldwide are working on better methods to control digital currencies, making crypto trading a dangerous proposition. There are, however, measures that may assist investors in avoiding severe volatility.
Building a well-balanced cryptocurrency portfolio that includes Bitcoin, Ethereum, and Dogecoin can help you fight volatility. Furthermore, traders can invest a certain amount of money in various cryptos monthly. This will enhance your risk tolerance methodically, allowing your portfolio to provide favorable long-term returns.
It's not simple to develop a cryptocurrency trading strategy that fits your financial objectives and personality. We've looked through some very prevalent crypto trading strategies so you can see which one is right for you.
You should follow and monitor each trading strategy to see what works and what doesn't while adhering to the standards you've established. Create a trading notebook or sheet to track the success of each strategy.