A Beginner’s Guide to Crypto Trading Strategy
As an intending crypto trader, you'd need to equip yourself with adequate knowledge of whatever you are about to start. Crypto trading is similar yet different from traditional assets because of its nature. It differs from regular trading due to the market trading terms, volatility, media hype, regulations, and other factors.
The differing nature of cryptocurrency requires every trader or aspiring trader to take time to learn extensively:
- What crypto trading terms entail
- Expenses involved in trading
- What crypto asset to trade
- Rules binding trading in their locales
- Trading strategies and plans to use
- How to detect and avoid mistakes as a beginner and train instinctive characters to avoid impulsive buying or selling
A conventional trader goes in with two beliefs, to win or not. It will be wrong for an intending trader to believe all the hypes in crypto trading and not consider the downsides. Some qualities that make crypto trading advantageous to the trader could also be used around as a disadvantage. These might be crypto fluctuations, security threats, volatility, and others.
There are, however, proven techniques to put in place to ensure one benefits greater profit percentage than losses.
Crypto Trading Strategies
These are plans that are put in place before going entirely into crypto trading. It's essential to have a goal for every trade to track one's progress and keep one in check. Different strategies are suited for different trading goals. These include:
- Day Trading
Sometimes referred to as short-term trading, it defines a strategy to trade for hours on a crypto exchange. It's an excellent strategy to benefit from price advantages and exit the same day quickly. Day traders use technical analysis to reap from volatile crypto markets. This trade strategy is more suited for experienced traders because a single wrong move could lead to a loss on the trader's part. Day traders capitalize on price movements within a day.
(Referred to as a misspelled "HOLD" and an acronym for Hold On for Dear Life)
Popularly called position trading, this is a long time-term crypto trading strategy that is suited for traders that are in no rush. Short-term market changes have no impact on decision-making here, and they are sometimes called investors instead of traders. Traders, in this case, usually hold medium to significant crypto assets untouched for months to several years.
- Crypto Futures
This derivative crypto trading uses an underlying agreement to trade cryptocurrency. It's a strategy proven to hedge risk. It works by entering a deal to buy/sell crypto assets at a particular price and time in the future (a given date). The buyer will be on the gaining side if the cost of the specific crypto asset increases and the agreed selling price is lower than the market price, while it will be the other way round for the seller. Traders usually position some parts and not their assets.
- Arbitrage Strategy
This is used to benefit from price differences on different crypto exchange platforms. The prices of a crypto asset might differ from one platform to another. Traders seize this opportunity to gain through other exchange platforms.
- Dollar-Cost Averaging (DCA)
DCA is referred to as a less-risk/profit strategy. It is when crypto assets are traded in bits over some time. It's an excellent strategy to hedge against the effect of substantial price swings. The peaks of crypto assets are often undetermined and unpredictable; this strategy fits well as there won't be any significant loss since trades are made in bits. However, it's the same for the profit as well. They are also in bits.
- Swing Trading
Swing trading is also called a medium-term trading strategy. The duration is positioned between the day and HODL trading strategies. It's considered a safe zone and ideal for beginners. It gives ample time for crypto traders to consider their decision before the execution.
This is a proven strategy traders use to hedge against loss. And the fastest crypto assets are frequently traded when there's a price advantage within a short time frame that is typically less than an hour. The profits here are minimal and accumulate over a while. This will be an excellent strategy for traders that hold their crypto assets on their sleeves. It gives peace of mind to crypto traders that would instead have their assets and gain minimal than stake significant and lose hugely. It is also referred to as high-frequency trading because of the trading duration.
- Range Trading
Range trading is an active trading strategy that uses range. It detects the range at which the traders buy and sell crypto assets over a short period. It's also categorized as a strategy under day trading (short-term trading). An instance is when a coin at $1 is expected to rise to $2. Traders may use this range opportunity to trade and exchange for higher prices later.
- Trend Trading
This is a medium to a long-term trading strategy where crypto traders trade using trends as a tool. They hold their positions and trade according to fundamental and technical analysis trends. They know they are at risk of reversal, so they use some tools to be peers to their success rates. This differs from range trading in its movements. Here, the traders predict the crypto price to go in a way- upward/downward, while in range trading, it's one on both sides.
Conclusion: Time to revisit your drawing board
One of the essential attributes of a successful crypto trader is patience. Patience to fully understand and plan what you're getting info, study the market and diversify your portfolio, and earn a large scoop in the market advantage. It's essential to ensure you have a full-proof plan before entering the crypto world. Study different strategies and know what works when they enter the market with full force.
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