Crypto trading can be very volatile as it requires a spontaneous move and knowledge to continue winning. The idea that backs up entering any trade is for the sole purpose of making profit.
But as the trade goes, the market doesn’t go as planned and crumples some of our plans.This is true, especially for newbie traders.
Trading crypto is quite complicated at the beginning as you acquire a lot of loss. This is not to say the road is all rosy. In crypto you will trade at a loss one way or the other, but the loss to be minimal.
So how do you trade crypto without acquiring a massive loss? One of the best ways of knowing the right approach and strategy to use in crypto trading is to do a thorough research.
In this article we will be sharing some of the best and efficient crypto trading strategies that you can try to get the best result.
Scalping is a prominent and efficient method of trading crypto currency. It involves making various small trades in a short time, and making small profits.
The whole essence of scalping is to use more trading volume to increase the profits. Although the returns of investment (ROI) when scalping can be very small, trading with a large amount also increases profit.
Scalpers may enter and exit a market in seconds. Some have even adopted the idea of using automated bots to enhance and increase their trading frequencies. The whole idea is to enter and leave the trade before any long or short term fluctuation arises to alter the market.
However, it is not advisable to scalp when the market is uncertain as the best time for scalping is when the market is stable.
2. Buying Dips and Holding
Dips is a time when the price of the market falls to a very low level. When the crypto price is down, people often run away from the market, but this is one of the best times to buy. This is because overtime, the cryptocurrency market is most likely to bounce back.
The cryptomarket is a very volatile one as prices can quickly change. There have been several cases where Bitcoin and other coins have fallen dramatically and still recovered twice their previous price.
This crypto trading strategy is safe and involves a lot of patients as the profit can be really massive when the market recovers.
3. Range Trading
The range trading is a crypto trading strategy that depends on support and resistance, similar to those used in stock and forex trade. The trade requires the knowledge of candle sticks to successfully use it.
The candlestick chart has been used to check the models for support and resistance. These systems can be used to determine the volatility of the coin.
For instance, Bitcoin trades around $8,601.40 and $10,210 for a period of 30-days. This is about 9.4% change in price. Check out here.
If you understand these candlestick patterns correctly you can take advantage of them.
The idea is to buy the coin at the support level and sell it as soon as it reaches the resistance level. However, the only challenge associated with this strategy is that if the price breaks beyond the speculated range, it may lead to a loss.
If you are a range trader, you should also give attention to overbought and oversold zones.
A zone is overbought when the buyers have saturated their needs, so the stock will actually sell off. Oversold is the opposite, which means buyers’ needs are unsaturated, leading them to not sell off.
The indicators used for this purpose are the Relative Strength Index (RSI) and the Stochastic Oscillator.
Arbitraging is a process of buying cryptocurrency in a market and selling it in another market at a higher price. In the crypto market, there is freedom to create an exchange. This can lead to a significant difference in the selling and the buying price because of the variance in liquidity and trading volume.
How arbitrage trade works is that you open accounts on various exchange platforms, which you believe will give varying prices for the same coin. For instance, the Bitcoin trading price in Korea is 40% higher than the price in the US. So, traders usually profit by just buying bitcoin in the U.S and simply selling it on a Korea exchange.
The profit may range from low to high. However when engaging in arbitrage trade, ensure to put trading fees into account.
5. The Golden Cross and Death Cross Trading
This trading strategy is quite an interesting one. However, you have to understand the terms to be able to use it correctly.
The golden cross isa time in the market when a short term average of a cryptocurrency crosses the long term average. The short term average is the 50 days average while the long term average is the 200 days average.
Death cross is the opposite of the golden cross. It occurs when the short term average goes below the long term average.
To engage this strategy, you have to buy at the golden cross and sell at the death cross.
To do this, you have to confirm the occurrence of these crosses by checking the change in the trading volume. Some traders may use the RSI indicator or MACD, but using the volume indicator is best.
6. Fading Trade
It involves trading against the market trend. This is one of the riskiest trades in crypto trading strategy as engaging the wrong moves can result in a huge loss. In the same way, making the right move can give rise to more profits.
The fading trade is best to engage when there is a lot of volatility in the market which usually occurs when a country talks about banning or using cryptocurrency.
Regardless of the type of trading strategy you choose to use, understand that there are times when you will experience loss. This is because the crypto market is a volatile one.
Also as you trade, do not follow the crowd, go for coins that you have researched and believe in. You will win!