Cryptocurrency trading, which is quite similar to trading equities and commodities, has its own set of possible dangers and drawbacks. However, users do have the chance to reap long-term benefits as it’s an option but do so; users would have to analyse and devise beneficial strategies that can make their trading endeavour safe, enjoyable, and profitable.
To continuously gain profit in the cryptocurrency market, you must have a tested and proven strategy. Having a strategy helps to maintain your focus in the face of the continuous stream of news, economic data, and market events that can disrupt your analysis.
So, what exactly is a crypto trading strategy, and which one is best for you? Keep reading to find out.
Building A Balanced Portfolio
Cryptocurrency trading is still in its early phases, and despite the fact that several nations are actually starting to accept crypto, many individuals stay sceptical. Admittedly, central banks around the world are searching for efficient methods to control and regulate digital currencies.
As a result, signing up to a trader-broker platform is no longer risky, as it will connect you to different reliable brokers. If investors take the necessary precautions, they can mitigate their losses with the immense fluctuation of the market while also assisting in developing a diverse cryptocurrency portfolio to generate the highest possible Return On Investment.
What Is A Crypto Trading Strategy?
Creating a trading strategy for digital currencies would mean that users need to pre-determine their process as they carefully plan each trade and when to execute them. Crypto trading strategies typically indicate which trades are beneficial to execute, when to do them, when to exit, and how much of your capital should you be willing to risk on each market position.
Your crypto trading strategy is a pre-planned approach that you devise in order to accomplish maximum profit returns when buying, trading, or selling in the cryptocurrency markets. This strategy uses various analytical tools to identify preconfigured market conditions and price levels, as well as key resistance and support levels.
Here are the top crypto trading tactics you probably haven’t thought of;
1. Day Trading
Day trading strategy emphasises trying to enter and leave trades on the same day. In day trading, a trader performs his trade by using technical analysis to analyse and evaluate his trading asset. Because financial gain in such short periods can be marginal, day traders frequently trade multiple markets or asset classes in a single day.
However, traders will still use stop losses and scale in and out of positions, but you’re looking with just a little more earnings on each trade than a scalper. As with any trading strategy, a day trading style has risks that must be managed properly.
2. Dollar-Cost Averaging
When it comes to selecting the most suitable points of entry and exit in a cryptocurrency market, it is probably safe to assume that market timing is nearly impossible. With that in mind, ‘Dollar Cost Averaging’ is a reasonably sensible method of investing in cryptos.
DCA is a trading approach in which investors put in a set amount at regular intervals. This tactic assists investors in avoiding the time-consuming task of market timing and accumulating financial wealth over long periods.
However, in the DCA approach, formulating an exit strategy could be difficult. It generally requires an analysis of market trends as well as an understanding of the market cycle.
Understanding the value of technical charts can also help users in knowing when to exit the market position. Before deciding, cryptocurrency investors should look for oversold and overbought areas.
3. Swing Trading
Crypto trading transactions conducted with this strategy typically last more than a day but no more than a few weeks or months. As a result, swing trading is sometimes referred to as a medium-term trading plan because it settles between day trading and position trading strategies, giving traders more opportunity to ponder their judgement.
However, you won’t be able to make impulsive decisions as you would in a shorter-term strategy, but you will be able to make financial decisions with less sentimentality or rationality, which is why this trading approach is typically recommended for new traders.
Creating a crypto trading strategy that is appropriate for both your financial goals and individual characteristics is a difficult task. After reviewing some of the most popular crypto trading approaches, we hope you can identify which one will work best for you.
Follow and record each trading technique and keep a journal in which you document the outcomes of your trades so that you can easily identify which are super effective and which are not. However, be cautious not to depart from the predefined rules you set for yourself to determine which approaches produce the desired results and which do not.