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5 crypto trading strategies

Cryptocurrency is one of the most popular forms of investment in the current era. Bitcoin alone accounts for $6 billion of daily online transactions, not to mention the other coins yet to be specified.

However, before you proceed to cryptocurrency trading and investing, you need to realize that this is a very high-risk venture and thus you should be careful to put your appropriate strategies in place, or you will just lose all of your investment capital otherwise.

Let’s go over some of the proven strategies that can help you on this journey.

Day Trading

As a digital asset investor, you should be familiar with various resources and strategies. There are two types of trading strategies:

● Active Trading – requires more time and attention and involves constant monitoring; Active strategies are more popular, and one of the best-known active trading strategies is day trading. If you settle on this strategy, you will need to enter and exit positions simultaneously.

● Passive Trading – allows for a more hands-off approach.

 Day traders aim to capitalize on proven movements that occur within one trading day, also known as intraday price movements. They create their trade ideas through technical analysis and price action, so day trading is often best for advanced traders.

Scalping

The last active strategy on our list is scalping, which focuses on small moves repeated repeatedly and taking advantage of inefficiencies in the market, such as gaps in liquidity. Scalpers open and close their positions in a short period, sometimes even in a matter of seconds.

Scalping can be a lucrative strategy if the trader knows where to find these market inefficiencies and exploit them. Every time that happens, they can make a small profit, which will become sizable if they see many inefficiencies over time. Scalping isn’t a good tactic for beginners as it’s incredibly complex, requires detailed knowledge and understanding of how markets work, and has very high liquidity.

Trend Trading 

One of the active strategies, trend trading, also sometimes known as position trading, is a tactic in which an investor will hold their position for a more extended period, usually a few months. If you choose to be a trend trader, you need to keep up with directional trends and take advantage of them.

Trend traders decide their investment strategy based on fundamental analysis, which considers events that will probably need a lot of time to play out. For this strategy to be successful, the underlying assets will have to keep moving toward the trend they are expecting to see in the future.

However, trends can change, and every trader needs to be aware of that. You should be prepared for the fact that a trend reversal is always possible. That is why traders usually incorporate multiple technical indicators in their strategies, such as trend lines and moving averages, to increase their chances of success.

Index Investing

Index investing focuses on buying ETFs, which you can purchase on centralized cryptocurrency exchanges, finishing off with another passive investment strategy. You can create a crypto index by creating a basket of your assets and then making a unique token to track their combined performance.

The only requirement for this basket is to have assets with a reliable price feed. This method isn’t viral now, but it probably will be in the following years, allowing for a more hands-off approach.

Buy And Hold

If none of the active strategies seem like something you would be interested in, you might explore passive ones such as the buy and hold strategy. In this strategy, investors purchase a large sum of assets and save them for a long time without paying attention to market fluctuations.

It’s usually used in long-term investment portfolios, and traders who get into it don’t regard timing or entry price. They just want to enter the market. People who use this strategy do so with the idea that if they are patient enough, the entry price won’t matter, nor will the timing.

Buy and hold isn’t concerned with technical indicators and is almost always based on fundamental analysis. If you opt for it, you won’t have to monitor the performance of your portfolio often, just from time to time.

However, since cryptocurrencies are a hazardous type of asset, this strategy should only be applied to a trustworthy currency such as Bitcoin. There are an estimated 18.67 million in circulation.

Our Thoughts

Investing in and trading cryptocurrencies like any other investment can be risky, turning off possible investors. Knowing the right strategy and great discernment when following the market can come a long way.

Source: World Financial Review/5 Crypto Trading Strategies Worth Examining Further/June 18, 2021

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