A Beginner’s Guide to Crypto Trading Strategies
These days, everyone is making money from cryptocurrency. Some celebrities who back cryptocurrency and own millions in the Bitcoin currency include Gwyneth Paltrow, Johnny Depp, Ashton Kutcher, Snoop Dog, and Pitbull. But you don’t have to be a celebrity or insanely rich to make money from crypto. (Not that we aren’t saying it wouldn’t be great to be insanely rich or famous.) With the right crypto trading strategies, you can make money from crypto. However, it can be stressful to figure out which ones to use, especially if you’re a beginner in crypto trading.
Fortunately, this article will review the best crypto trading strategy options you can try. Finally, you can make money from crypto. As for getting famous, we’ll leave that to you. Read on to learn more.
Day Trading Crypto Strategies
Before we go into crypto day trading strategies, we must review what day trading is. Day trading is a short-term trading style involving trades that you buy and sell on the same day, sometimes referred to as “intraday trading.”
Day traders use these strategies to profit when a particular financial asset or asset price moves.
Market Conditions Needed
Two market conditions must be present for day trading to be a profitable way of trading. The first of these is liquidity. Traders must exit or enter trades fast, with the prices staying the same. When a market has low liquidity, the problem of slippage occurs.
Slippage happens when a prominent position can’t liquidate at a price desired by the trader. As a result, this could eat into the profits of the trader. When slippage occurs, it’s necessary to sell the position in increments, and each order will end up having a lower price than the previous one. This leads, overall, to smaller gains by the time the absolute position’s been sold. For this reason, the liquidity condition must be present in the market.
Volatility is another market condition that needs to be present. When there isn’t volatility, prices on the market aren’t moving, meaning there isn’t a chance to buy low and sell high. For day traders to buy and sell on the same day, markets must be going up and down on a short-term basis, which is why volatility is a necessary market condition for crypto day trading. It’s also important to be aware of the role of Bitcoin mining in markets. For example, suppose miners sell most of them while mining their coins. In that case, this could increase the downward pressure on prices for a while.
Sentiment And News Analysis
Now that you know what market conditions need to be present when day trading cryptocurrency, we’ll review some crypto day trading strategies. The first of these is sentiment and news analysis. Note that there are more popular strategies than this used by short-term traders. However, studying the market sentiment overall and looking at headlines can be a strategy you use when Bitcoin trading. Big news items have the potential to move crypto markets quickly. For example, in the middle of April 2021, Turkey announced that using cryptocurrencies, including Bitcoin, as payment would be banned within Turkey’s borders, leading to a worldwide selloff in the crypto market. Bitcoin fell at first around 3.2%, after which it fell later 10%.
By keeping track of news and sentiment related to cryptocurrency, you can know when to make your day trading moves. Not sure where to find this news? Don’t worry; even if you don’t have a financial advisor like Pitbull or Johnny Depp might, you can keep track of this news by taking a look at what’s going on on Twitter. Generally speaking, if Tweets about crypto are positive, your strategy should be more bullish. Conversely, if Tweets are negative leaning, they should be more bearish. (According to theories).
Technical Analysis
Technical Analysis, also known as TA, involves the use of chart patterns and mathematical indicators to attempt to predict in which way prices will next move. Sometimes, you can get technical indicators by using a computer program that generates them, such as Trading View (RSI). Other times, humans have to identify technical indicators by looking at charts (for example, the cup-and-handle pattern).The RSI, or relative strength index, is one of the most popular technical indicators. When it appears, this indicator is a single line beneath a chart with a value between 0 and 100.The closer this technical indicator gets to the value of 100, the more conditions are presumed to be overbought, signaling that prices could end up falling. The closer this technical indicator approaches the value of 0, the more conditions are presumed oversold, indicating that prices could rise.
By having this information, you can make better decisions regarding crypto day trading.
Scalping
The scalping strategy involves attempting to profit from price moves that are very small over short periods. These are often market inefficiencies, for example, gaps in liquidity or the bid-ask spread. Scalpers often trade leverage like futures contracts or margin to amplify gains, taking advantage of these tiny price movements. However, this strategy amplifies possible losses. For this reason, it’s crucial, when using this strategy, to manage risk. Scalpers might use strategies like order book analysis, volume heatmaps, or a variety of technical indicators so they can determine their trades’ exit and entry positions. Because of this strategy’s high-risk and fast-paced nature, scalping is best suited for experienced traders.
Range Trading
This strategy assumes that their movement tends to occur within a specific range regarding prices. Using range trading involves looking at resistance, support, and candlestick charts. It usually works like this. When prices reach the support level, traders may buy. They also may close out their shorts. When prices get the resistance level, traders may sell. They also may go short.
Bot Trading
Bot trading, also referred to as HFT or high-frequency trading, involves trading bots and algorithms. One can program these trading bots to execute many trades and do so very quickly. However, one must know programming and advanced trading strategies to use this method. Even though crypto trading bots do the trading itself, traders of the high-frequency type don’t just sit back and allow the bots to do all the work for them. Using this strategy involves creating a specific process and developing a program appropriate for executing that strategy. Then, the trader must constantly monitor, backtest, and update the algorithms to keep up with the market’s changing conditions. While it is the case that there are trading bots that are pre-made out there for sale from specific dealers, it’s worth it because only some use this strategy. If it’s so easy to use, there must be a reason why traders don’t use bot trading.
Additional Crypto Trading Strategies
Additional crypto trading strategies include building a balanced portfolio, dollar-cost averaging, being careful about the hype, arbitrage, and betting on the volatility of Bitcoin. In this section, we’ll cover each of these in detail.
Building A Balanced Portfolio
An easy crypto trading strategy that can help offset the challenge presented by the fact that crypto trading is in a stage that’s still evolving. In addition, even though many people are trading cryptocurrencies, some countries are skeptical about them. Additionally, globally, central banks are looking for ways to regulate cryptocurrencies. Because of this evolution, there can be the problem of extreme volatility with specific cryptocurrencies.
Fortunately, by building a balanced portfolio with multiple cryptocurrencies, you can go a long way when it comes to beating volatility. In your portfolio, some cryptocurrencies to consider; include Bitcoin, Ethereum, and Dogecoin. Additionally, by doing this, you can maintain a number of your regular investments fixed in various cryptos. Systemically, this will increase risk appetite—helping your portfolio to yield favorable returns in the long term.
Dollar-Cost Averaging
One of the problems with figuring out the crypto market’s perfect exit or entry point is that it’s almost impossible to time the market. So if you want a way to invest in cryptos that’s more sound, you can use dollar-cost averaging or DCA. Dollar-cost averaging is a strategy that refers to, in regular intervals, investing an amount that’s fixed. This strategy makes it possible for investors not to have to complete the difficult task of timing markets—while still, in the long-term, building wealth. However, doing DCA makes an exit strategy a bit tricky because having an exit strategy requires you to understand the market cycle and study the market trend. However, you can exit at an appropriate time by reading technical charts.
When doing this, ensure that you’re monitoring overbought and oversold regions before deciding whether to exit. In addition, wazirX live charts can help you better understand various cryptos’ technical charts.
Be Careful About The Hype
Even though it’s wise to study sentiment and news analysis, as we recommended above, it’s essential to be careful about the hype. While paying attention to the right people and taking important news items related to cryptocurrency can be informative, sometimes hype is just that: hype.
For this reason, if you’re a beginner, you should be careful to make critical trades based only on what you hear, especially on social media. Watch out for hype and false information, as this could quickly spread, even when it’s fake news. Once you have a better idea of what information you can trust, you can more safely invest based on what you read about cryptocurrency.
Arbitrage
Arbitrage is a trader’s strategy to buy crypto in a specific market and sell it in another. The “spread” is the difference between these prices—the sell and buy price—is the “spread.” Because of the difference between trading volume and liquidity, traders can book profit.
To use arbitrage, you need to open accounts on different exchanges. Additionally, these exchanges must show a big difference between the crypto prices you’re trading.
Betting On The Volatility Of Bitcoin
Currently, Bitcoin is one of the asset classes that is most volatile. Recently, this volatility was so extreme that the price of Bitcoin fluctuated by almost 30% in one session. To bet on this volatility, you have to trade in futures of the Bitcoin type. To do this, buy, at the same time, a put and call option. (Both expiration dates need to be similar when you do this). Then, when it comes to exiting—when the prices of Bitcoin rise or fall vigorously—you need to sell, at the same time, the put and call option.
Whatever you consider the ultimate crypto trading strategy, this is one you can use right now while Bitcoin is volatile.
Need More Information?
You might need more information now that you’ve learned about the best crypto trading strategies for beginners. For example, you may want to know more about specific cryptocurrencies mentioned in this article or about one of these strategies in more detail.
Whatever information you need, we can help. At Byte Federal, we’re experts when it comes to cryptocurrencies. We also have the best ATM network for Bitcoins. Our ATMs are nationwide and can help you take control of your cryptocurrency-related finances. To learn more about how we can help you, contact us now.
