In the age of digital technology development, it is not surprising that this type of money has gained rapid popularity. It's also not surprising that a lot of people want to make money from them. However, it is an activity connected not only with high profits but also with high risk. Therefore, doing it without sticking to a certain plan is a doomed option in advance. In other words, the first thing an investor needs to do is to choose the types of cryptocurrency trading that are good for him and decide on a strategy.
The best crypto trading strategies
It is a clear algorithm of operations, which is based on the analysis of charts. Relying on these strategies, experienced traders simplify the process of trading. However, there are many ways that allow you to earn on cryptocurrency. How to decide which one you need? How to find the best cryptocurrency strategy? You will learn about some of them, which are recognized by the majority of investors as the most profitable crypto trading strategies.
This cryptocurrency trading strategy consists in the fact that the user buys some coin, after which he only has to wait for the moment when its value will increase.
It is worth noting that this trading method is only suitable for those investors who do not intend to trade in the next few years at least. Consequently, if the user believes in the growth of the cryptocurrency, he can assemble an investment portfolio of several digital assets of his choice. In addition, it can be called a cryptocurrency trading strategy for beginners because its principles are quite simple.
What are the advantages of this strategy?
- No need for regular market analysis. This method does not apply to active day trading when one has to devote at least several hours to trading.
- Due to the various digital assets in the portfolio, the investor diversifies the risks of possible depreciation of the currency.
- It is possible to significantly increase investments. By tens and sometimes even by hundreds of times. For example, consider how the value of Ethereum has increased over the years. It became more expensive by more than 200 times. We cannot rule out the possibility that a similar thing will not happen with any other cryptocurrency.
However, before taking advantage of this crypto trading strategy, you should also study its disadvantages.
- The money will be frozen for several years.
- No one guarantees that the digital assets will rise with one hundred percent probability.
- There are no earnings on small trades.
This tactic should be handled with extreme caution, so as not to lose future investments. Active trading is absent here, the most benefits you can achieve if the currency is bought at the start.
What are these strategies for cryptocurrency trading? It is the implementation of trading on two exchanges at the same time. The trader will need to follow the rate changes regularly and wait for the difference between the rates of one cryptocurrency to become higher than a selected value. After that, it is sold on one exchange and bought on another. Respectively, where its price is higher - the sale, lower - the purchase.
It is considered the best cryptocurrency trading strategy. However, it must be used with extreme caution and attention. To trade on arbitrage, you will need accounts on those exchanges, on which you are going to trade. And you have to open them in advance - cryptocurrencies are very volatile, and the time you spend on creating an account and adding money to it before the trade may cost you the deal.
Also, keep in mind that each exchange takes a commission. Also, a trader who will actively apply this strategy in trading will sometimes have to transfer cryptocurrency between accounts. Consequently, it is necessary to necessarily take into account the withdrawal fee.
The main idea of one of the strategies for trading cryptocurrency is making small deals in big amounts, i.e. dozens and sometimes hundreds of fast deals during the day. When the price of an asset moves at least a few pips, the deal is closed, which is the main feature of scalping.
For example, you can open 100 up or down trades during the day, each of which will bring $5 on average, taking into account losing positions. Thus, in one day, you can earn a conditional $500.
When doing scalping, the profitability will depend on many factors: the size of the deposit, the level of take profit and stop loss, the trader's goal for the day and, most importantly, the trader's psychological stability. Experienced traders believe that this is the best crypto day trading strategy.
Pullback Trading Strategy
The currency rate never moves in a straight line. The trend is always opposed by small movements in the other direction. This is called a correction or pullback. These situations can occur at the moments when traders either fix profits or decide to change their decisions. However, in fact, other various factors can also play a role - for example, a certain day of the week, or even a case. This situation is also profitable.
One of the trading algorithms is shown below:
- The colour of the candle determines the priority direction of trade. In this case, if the current daily candlestick is bearish, it is necessary to work exclusively on selling, and for bullish - for buying. This filter is optional, but some traders claim that it improves your accuracy.
- The Relative Strength Index (RSI) and Money Flow Index (MFI) should be above 50 if you are buying, and below if you are selling.
On the basis of these data, the trend line is constructed. The conclusion of the transaction is carried out at the time of its change (change in the trend). At this point, it is necessary to check the MFI and RSI indicators for accuracy. It can be used for any type of asset and timeframes.
Day-trading is another popular strategy for crypto trading. As you can guess from the name, it is intraday deals. It is several or even dozens of deals that are opened and closed within one trading session. Most often, the decision of a deal is made on the basis of technical analysis.
The goal of a day-trader is to make money by making small profits from multiple trades in the cryptocurrency market. At the same time, unprofitable trades must be closed quickly, so that the loss from them does not exceed the profit received from trades. The specific feature of crypto day trading strategies is that traders never move their position through the night - all transactions are closed before the end of the current trading session.
Pros of Day-trading:
- Potential for big profits. What attracts most in day trading is the potential for speculative profits. After all, making a profit in a short period of time is much more pleasant than waiting for several weeks or years.
- The possibility of learning. Why do most traders choose day trading? The reason is that this style gives more possibilities for learning and experiments, while the risk of losing deposit is minimal.
One of the disadvantages of day-trading is that it requires maximum attention and focus on the price chart during the whole working session, or at least during the main time periods. Accordingly, you will spend more time.
The biggest disadvantage of this approach is the huge amount of time you need to devote to the market. You need to constantly monitor a lot of charts and the constant change of prices. You need to monitor the news and have time to open positions quickly. This pace is not suitable for everyone, and if you're not sufficiently prepared, it's easy to lose control and part of the budget.
This trading method can be considered one of the best crypto trading strategies for beginners.
It does not require analysis of various charts and statistics, it is enough to repeat the operation of an experienced trader. In other words, you copy deals of your chosen trader, as a result receiving the same profit as he did. Or you lose the same amount of money if the trader's deal was unsuccessful.
There are two types of copy-trading:
- Automatic. It is widespread among beginners traders. All they need to do is to choose a platform that provides this service, register, pay for the tariff and choose one or more traders to follow. Copying of deals will be carried out automatically and will be displayed in a personal account.
- Manual. Used by investors with already some knowledge of the cryptocurrency market. News and thoughts shared by professionals are tracked here. Closed channels or groups are even created in social networks, where investment gurus advise when to buy and sell assets.
You should be responsible for choosing a trader, as well as choosing a platform for work. This is a key point in this strategy. It is necessary to give preference to more experienced investors, whose transactions in most cases are profitable.
The advantages, first, include the saving of time. There is no need to spend hours analyzing the market, conducting technical analysis, or studying charts. But at the same time, by repeating the operations of professionals, one can learn the basic principles of trading on cryptocurrencies.
The main risk is the absence of any guarantees for positive results of deals, which is typical for almost all investment strategies. There is also a risk of falling for the tricks of fraudsters, so the right choice of platform and trader is a very important criterion for success.
However, if you choose the platform and trader carefully, copy trading can become the best strategy for crypto trading.
In addition, you can do crypto automation trading with various trade robots.
Crypto futures trading strategy
A futures contract is an agreement to buy or sell a cryptocurrency, which is executed on a specific date at a price predetermined by the parties to the contract.
Cryptocurrency futures only appeared in 2017, but they have already gained popularity among investors as a tool for hedging risks and making speculative profits. The scenario of futures trading is the same as with other instruments: to make profitable transactions, the trader must correctly predict in which direction the price of the asset will change. That is, a forecast is made for the future value of the asset and a futures contract is purchased.
Crypto futures trading strategies are used for the following purposes:
1. Gaining profits from playing on the value difference.
2. Hedging (insurance) of risks.
In the first case, a trader can buy e.g. Litecoin Futures, hoping that later the price of LTC will go up. If his forecasts turn out to be correct, he can benefit from the difference in value.
In the second case, there are several risk minimization scenarios that can be implemented. For example, a miner, fearing that the value of the coin he is mining may drop sharply in the future, can protect his earnings by opening a futures contract to sell at the current price. Or a trader can open two positions in the opposite direction, thereby minimizing his risks and losses in case his predictions turn out to be wrong.
Why are futures considered the most profitable crypto trading strategy?
The popularity of this strategy can be explained by the following points:
- Ease to use. This type of trading is not difficult, even for those who have just started their way in cryptocurrency trading. For example, you don't need to have access to the liquid cryptocurrency market and your own safe digital wallet to make a trade.
- Convenient trading strategies. As a rule, there are no restrictions or limits on futures (for example, you can often find restrictions on shorting), so the implementation of various trading strategies works much better with crypto-futures than when trading real cryptocurrencies, especially when it comes to day trading.
However, there are certain risks here as well. They are primarily related to the high volatility of digital assets.
We have considered quite popular strategies for crypto trading, which, if studied each of them well, definitely bring you a high income. It is important to remember that a correctly chosen strategy for trading cryptocurrency can help a trader to achieve even more success than he has at the moment. Investing a small amount of money today, there is a good chance that it will turn into millions in a couple of years.